Assume you are conducting a discounted cash flow valuation of Family Health Associates. You have assembled the following financial information (all numbers are in millions). The after tax-cost of debt is 7 percent, the cost of equity is 19 percent, and the weighted average cost of capital is 14.2 percent.

Year 1Year 2Year 3Year 4Net profit$3.0$3.2$4.0$5.2Depreciation6.06.07.07.0Equity retentions3.04.05.06.0Terminal value60.0

Now suppose you determine that it is not necessary to retain any of the operating income in the business. Relative to the scenario where retentions are required, what would be the effect of not retaining income on the estimated equity value of the company?

Group of answer choices

It is impossible to tell from the information provided.

Estimated value would decrease.

Estimated value would increase.

Estimated value would be more uncertain.

Estimated value would be unchanged.