The rights to Frederico Fellini’s film “La Strada” are to be auctioned. You forecast that you can collect annual cash flows in the form of royalties, net of taxes, as shown in the table below. At the end of the forecast horizon, you plan to sell the rights in a future auction. You forecast you can get $2,4000,000 for the rights, after taxes, at the end of year 5. If your target rate of return is 8.50%, what is the maximum price you should offer for the rights [round to the last dollar]?

Year	1	2	3	4	5
Annual Cash Flow	$340,000	$370,000	$400,000	$420,000	$450,000
Auction Proceeds					$2,400,000

Maximum Price:

Answer rating: 100% (QA)

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