• Mr Riches has inherited a commercial building that is expected to yield the following cash flows for the next 5 years:

Year 1 $1,250,000

Year 2 $1,300,000

Year 3 $2,450,000

Year 4 $3,560,000

Year 5 $5,820,000

However, Mr Riches would rather receive the same cash flow each year and he approached CDM Bank Ltd to sell the building in return for a fixed cash flow each year for 5 years. CDM Bank Ltd has agreed to this arrangement. If CDM Bank Ltd is using an interest rate of 10% pa compounded monthly to value the building how much would they be willing to pay Mr Riches each year?