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You have just been offered a contract worth $1.15 million per year for 5 years. However, to take the contract, you will need
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Answer #1

The most that can be paid is equal to the present value of inflows

= 1.15 million*PVAF(12.5%, 5 years)

= 1.15*3.5606

= $4.09469 million

i.e. $4.09 million

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