Kingbird, Inc. owns 25% of the common shares of Pina Colada Corp. The other 75% of the shares are owned by the Pina family. Kingbird acquired the shares eight years ago through a financing transaction. Each year, Kingbird has received a dividend from Pina. Pina has been in business for 60 years and continues to have strong operations and cash flows. Kingbird must determine the fair value of this investment at its year-end. Since there is no market on which the shares are traded, Kingbird must use a discounted cash flow model to determine fair value. Kingbird management intends to hold the shares for 5 more years, at which time they will sell the shares to the Pina family under an existing agreement for $1 million. There is no uncertainty in this amount. Management expects to receive dividends of $86,000 for each of the five years, although there is a 20% chance that dividends could be $45,000 each year. The risk-free rate is 3% and the risk-adjusted rate is 5%.