Mr. Zhu is selling his business for retirement. It is expected that the cash flows from his business in each of next 5 years will be $500,000. At the end of the 5 years, the residual value of the business is expected to be $8 million. Mr. Zhu has his expected rate of return of 12.0%. What could be the closest estimate to his fair market value (of similar business) at which he would be willing to sell his business?

1. $6.34 million
2. $6.00 million
3. $5.80 million
4. $6.50 million