On January 1, 2019, Harris Company acquired a patent on a particular oil extraction technique for $6.25 million. The patent was expected to have a 10-year life and no residual value. On December 31, 2020, Harris determined its expected future cash flows from the patent were $750,000 per year for each of the next eight years. The present value of these flows, discounted at Harris market interest rate, is $3.5 million. Note that Harris uses straight-line amortization for patents. Given this information, the oil-extraction patent should be carried on the firms December 31, 2020, balance sheet at an amount of

$3.5 million.

$6 million.

$5 million.

$6.25 million.