The information below shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8% discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4% perpetual growth rate.

Free Cash Flows

Year 1 -800

Year 2 -400

Year 3 0

Year 4 200

Year 5 700

a. Estimate the target's maximum acquisition price.

b. Estimate the targets maximum acquisition price when the discount rate is 7% and the perpetual growth rate is 5%.

c. Consider your answers to parts a) and b) of this question, what is the percentage change in the maximum acquisition price when the discount rate is reduced on percentage point and the perpetual growth rate is increased on percentage point?