8.10 Consider entry into a business that, if made at the present point in time, would have a first-year revenue of $5 million. Revenue is expected to grow at a continuous-time real rate of 7% per year but growth can vary from −26% to 40% with 95% confidence. The volatility of revenue, that is, the standard deviation of the growth rate of revenue is expected to remain fairly constant over time. In addition, free cash flow as a function of revenue is estimated as having a fixed component of − $2 million plus 25% of revenue, both in real dollars. The continuous-time real risk-free rate, after-tax cost of debt, and applicable WACC are 3%, 5%, and 9%, respectively.