I had an artist ask to use one of my photographs as a basis for a painting in exchange for a small fee. In my case, a look at her portfolio made it clear that her painting was extremely stylised and not at all photorealistic and so sales of her painting (and any prints derived from it) would be extremely unlikely to impact on my own sales of the photograph. As she also agreed to make a donation to a favourite wildlife conservation charity of mine I sold her the rights to base one or more paintings on my photograph for £50.
In your case, I'd definitely establish how closely her art work would resemble the original and use that to help you make your decision.
Should you decide to go ahead and grant her permission, you'll obviously need to take into account her answers about usage (painting, prints and so on) in order to set a price.
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