Answer: $193,896.38
Explanation:
The maximum value that the company will pay is one that equals the present value of the cashflows of this project because anything higher will lead to losses.
The maximum value is therefore the present value of the cashflow here.
Annual rate to periodic rate = 10%/2 = 5%
No. of periods = 4 * 2 = 8 semi annual periods
Payment is fixed so is an annuity.
Present value of annuity = Annuity * ( 1 - (1 + rate) ^ -n) / rate
= 30,000 * (1 - ( 1 + 5%)⁸) / 5%
= $193,896.38
The company should not pay anything more than this amount because that would lead to a loss.
