A petroleum engineering firm manager is planning on investing in land so the firm would be able to expand its drilling operations. By investing in the drilling operation, the firm will realize a profit of $20,000,000.00 each year for 20years. The firm will also sell part of the land at year four for $10,000,000.00 and at year 16 for $15,000,000.00. If the interest rate is 6%, what should the firm pay for the land and setting up the drilling operations to justify the investment?

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1 Calculate the present value of the annual profit We need to consider the time value of money 20 mi... View the full answer