4. Recall the Value of the Firm₀ = FCF_t / [1 + WACC]^t with t from 1 to . The owners of Martial Arts Inc. [the owner/operator of a chain of karate dojos] are considering selling their business to a private equity firm. Next years end-of-year free cash flow (FCF₁) is expected to be $1.25 million, lower than recent years due to a major expansion. Free Cash Flow is expected to grow at the rates shown in the table below thereafter. Beginning in year 7 a constant growth rate of 4% is forecast. The company's WACC is 6.50%. What is the estimated intrinsic value of the firm in millions of dollars? Round to two decimals.

Year	0	1	2	3	4	5	6	7
Growth Rates			20.00%	15.00%	10.00%	8.00%	6.00%	4.00%

a. $54.57

b. $68.15

c. $70.31

d. $83.63

e. $98.28

5. Refer to the previous question about Martial Arts Inc. The company has $27 million of long-term debt plus preferred stock outstanding and there are 2.1 million shares of common stock outstanding. The $27 million is the combined market value of the debt and preferred stock. The firm does not hold excess cash. Some believe, with some justification, the book value should be used but that is not consistent with the WACC calculation so theoretically market values should be used. What is the firm's estimated intrinsic value per share of common stock? Round to one cent.

a. $17.57

b. $18.25

c. $18.86

d. $20.63

e. $21.47