Permian Partners $($PP$)$ produces from aging oil fields in west Texas. Production is currently $1\mathrm{.}96$ million barrels per year, but is declining at $8\%$ per year for the foreseeable future. Costs of production, transportation, and administration add up to $$26\mathrm{.}60$ per barrel. The current oil price is $$66\mathrm{.}60$ per barrel.

PP has $8\mathrm{.}6$ million shares outstanding. The cost of equity is $10\%.$ All of PP$$s net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $$26\mathrm{.}60.$ Also, ignore taxes.

a$.$Assume that oil prices are expected to fall to $$61\mathrm{.}60$ per barrel next year, and to $$56\mathrm{.}60$ and $$51\mathrm{.}60$ per barrel in the two years following. After that decrease, assume a long$-$term trend of oil$-$price increases at $6\%$ per year. What is the value of one PP share?

b$-1.$What is PP$$s E$/$P ratio?

b$-2.$Is it equal to the $10\%$ cost of capital?