You are considering to join a fast-food chain shops either now or in two years. The cost to open a shop is $4 million according to the contract. If you open the shop immediately, you expect it to generate $1 million in free cash flow the first year, and these cash flows are expected to grow at a rate of 2.0% per year, based on your prediction of the product market. Given the cost of capital is 13%, risk-free rate is 3%, and appropriate business volatility is 30%, the value of the project is closest to:

a.

$3.7 million

b.

$2.5 million

c.

$3.4 million

d.

$2.2 million

e.

$3.1 million

f.

$2.8 million