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Managerial Economics & Business Strategy 7th Edition by Michael Baye, Stanley Brue, David MacPherson
Edition 7ISBN: 978-0073375960Managerial Economics & Business Strategy 7th Edition by Michael Baye, Stanley Brue, David MacPherson
Edition 7ISBN: 978-0073375960 Exercise 2
What is the maximum amount you would pay for an asset that generates an income of $150,000 at the end of each of five years if the opportunity cost of using funds is 9 percent
Explanation
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In order to find the maximum amount one would pay for the given cash flow series, calculate PV of the cash flow series as below: 
Thus, the maximum amount one can pay = $583,447.68
Thus, the maximum amount one can pay = $583,447.68
Managerial Economics & Business Strategy 7th Edition by Michael Baye, Stanley Brue, David MacPherson
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