A private manufacturing company is considering selling itself to your private equity firm.

Assumptions:

• The company is a 30-year old company and has built a business based on a large number of loyal industrial customers.
• The company currently generates $1,000,000 in free cash flow each year and is expected to grow at an average rate of 5% for the next twenty years.
• Your firm's investment portfolio has averaged an 18% annual return for the past ten years.

- What is the most money that your team should be willing to offer to purchase this company? (Assume an all-cash transaction).