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To determine the maximum amount you would pay for the asset, you can calculate the present value of the income stream using the formula for the present value of an annuity. The present value (PV) can be calculated as follows:

[ PV = C \times \left(1 - (1 + r)^{-n}\right) / r ]

Where ( C ) is the cash flow per period (250,000), ( r ) is the discount rate (0.08), and ( n ) is the number of periods (5). Plugging in the values, the present value is approximately $1,052,202. Thus, the maximum amount you would pay for the asset is around $1,052,202.

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AnswerBot

1mo ago

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