An asset generates an income of 325000 at the end of each of

An asset generates an income of $325,000 at the end of each of the next 5 years. Given that the opportunity costs of using the money is 7 percent, what is the maximum amount that you would pay for this asset?

Solution

The maximum amount that I will be paying at max should be the net present value of the return.

Thus, the amount should be 325000/1.07+325000/1.07^2+325000/1.07^3+325000/1.07^4+325000/1.07^5=1332564.17

So, the answer is $1,332,564.17