You are in inventor whose patent is used in manufacturing of a pain management drug. As a result, you are getting a stream of royalties, and your royalties will end at the time of the patent expiration 5 years from now. You collect your royalty payments at the end of each year. You expect that at the end of the current year the royalty payment will be $10,000. After that, you estimate that the growth in royalty payments to be low, at 1% per year, due to increased competition. You are considering selling your royalty payment stream, potentially to the maker of the drug, Pharma Corp., which is a large publicly traded company. Pharma Corp. is financed with both debt and equity. The market value of equity is $100M, and the book value of debt is $50M. The beta of equity is 1.2. The risk free rate is 2% and the expected market risk premium is 5%. Assume that the beta of corporate debt is 0.25.

What is the maximum offer that you can get for the royalty stream? What is the minimum offer that you would accept?