Simple model - pipeline - lifespan 2 periods - payment at the end of each period

Assumed rate of return 12%

Number of periods
(payment at the end of
each period)
Assumed cost building
pipeline
Annual required return
2
$100
(note we chose this -so that the
discounted return equals the cost
$59.17 of the pipeline

Payment Discounted
time Discount factor return

1 0.892857142857143 $52.83
2 0.79719387755102 $47.17

Total discounted return $100.00 (note that this is a check!)

Capital employed -
second year

Starting $ 50.00
Ending $ -
Average $ 25.00

Recorded profit $9.17

Return on average equity 36.7%

Return 12%
Capital cost 100
Annual return 12.0416663498534
Note the 35th year - and its ROE is highlighted in yellow

discount factor annual return discounted return equity Profit

1 0.892857142857143 12.04 10.75 98 10.04
2 0.79719387755102 12.04 9.60 96 10.04
3 0.711780247813411 12.04 8.57 94 10.04
4 0.635518078404831 12.04 7.65 92 10.04
5 0.567426855718599 12.04 6.83 90 10.04
6 0.506631121177321 12.04 6.10 88 10.04
7 0.452349215336893 12.04 5.45 86 10.04
8 0.403883227979369 12.04 4.86 84 10.04
9 0.360610024981579 12.04 4.34 82 10.04
10 0.321973236590696 12.04 3.88 80 10.04
11 0.287476104098836 12.04 3.46 78 10.04
12 0.256675092945389 12.04 3.09 76 10.04
13 0.229174190129811 12.04 2.76 74 10.04
14 0.204619812615903 12.04 2.46 72 10.04
15 0.182696261264199 12.04 2.20 70 10.04
16 0.163121661843035 12.04 1.96 68 10.04
17 0.145644340931281 12.04 1.75 66 10.04
18 0.130039590117215 12.04 1.57 64 10.04
19 0.116106776890371 12.04 1.40 62 10.04
20 0.103666765080688 12.04 1.25 60 10.04
21 0.092559611679186 12.04 1.11 58 10.04
22 0.082642510427845 12.04 1.00 56 10.04
23 0.073787955739147 12.04 0.89 54 10.04
24 0.065882103338524 12.04 0.79 52 10.04
25 0.058823306552254 12.04 0.71 50 10.04
26 0.052520809421655 12.04 0.63 48 10.04
27 0.046893579840763 12.04 0.56 46 10.04
28 0.041869267714967 12.04 0.50 44 10.04
29 0.037383274745507 12.04 0.45 42 10.04
30 0.033377923879917 12.04 0.40 40 10.04
31 0.029801717749926 12.04 0.36 38 10.04
32 0.026608676562434 12.04 0.32 36 10.04
33 0.023757746930744 12.04 0.29 34 10.04
34 0.021212274045307 12.04 0.26 32 10.04
35 0.018939530397596 12.04 0.23 30 10.04
36 0.016910294997853 12.04 0.20 28 10.04
37 0.015098477676655 12.04 0.18 26 10.04
38 0.01348078363987 12.04 0.16 24 10.04
39 0.01203641396417 12.04 0.14 22 10.04
40 0.010746798182295 12.04 0.13 20 10.04
41 0.009595355519906 12.04 0.12 18 10.04
42 0.008567281714202 12.04 0.10 16 10.04
43 0.007649358673394 12.04 0.09 14 10.04
44 0.006829784529816 12.04 0.08 12 10.04
45 0.006098021901622 12.04 0.07 10 10.04
46 0.005444662412162 12.04 0.07 8 10.04
47 0.004861305725145 12.04 0.06 6 10.04
48 0.004340451540308 12.04 0.05 4 10.04
49 0.003875403160989 12.04 0.05 2 10.04
50 0.00346018139374 12.04 0.04 0 10.04

sum discounted
return 100
 ROE
10.25%
10.46%
10.68%
10.91%
11.16%
11.41%
11.68%
11.95%
12.25%
12.55%
12.87%
13.21%
13.57%
13.95%
14.35%
14.77%
15.21%
15.69%
16.20%
16.74%
17.31%
17.93%
18.60%
19.31%
20.08%
20.92%
21.83%
22.82%
23.91%
25.10%
26.43%
27.89%
29.53%
31.38%
33.47%
35.86%
38.62%
41.84%
45.64%
50.21%
55.79%
62.76%
71.73%
 83.68%
100.42%
125.52%
167.36%
251.04%
502.08%
#DIV/0!