ou are valuing a restaurant with the following formation: - The restaurant had a pretax operating income of 100,000 in the most recent year. This income has grown 5% a year for the past two years, and is expected to continue growing at that rate for the foreseeable future. - About 40% of this operating income can be attributed to the fact that the owner is a master chef. He does not plan to stay on if the business is sold. - The restaurant is financed equally with debt and equity. The pretax cost of borrowing is 6%. The beta for publicly traded firms in this industry is 1.10, and the average debtto-equity ratio is similar to that of the restaurant. The treasury bond rate is 5%, the market risk premium is 5.5% and the tax rate is 40%. - The capital maintenance expenditure, net of depreciation, was 10,000 in the most recent year and it is expected to grow at the same rate as operating income. - The restaurant is expected to have an operating life of 10 years, after which the building will be sold for 500,000 , net of capital gain taxes. a) Value the restaurant for sale. b) How much would the value change if the owner offered to stay on for the next three years