Melissa's Kitchen is considering acquiring Takeshi's Takeout orp, a small local restaurant chain. Expected net cash flows from the acquisition for the first four years of post-merger period are:

Year 1 - $350,000

Year 2 - $400,000

Year 3 - $475,000

Year 4- $550,000

QUESTION: After four years, the net cash flows are expected to grow at a constant rate of 3 percent per year. If we know the following information, what is the most Melissa's kitchen should pay for Takeshi's takeout?

Melissa Kitchen:

Borrowing costs - 5% above the current long-term Treasury Bond rate

10 year T - Bond Rate - 2/8/23 = 3.64%

Beta - 2.4

Debt- $4 million

Stock - 500,000 shares outstanding - $20 per share on 2/8/23

Tax Rate - 21 percent