You are told to value a private business with the following information: EBIT: $350,000, it will grow at 2% forever. - 50% of EBIT is attributed to the owner who will not stay on if the business is sold. - D/E ratio: 0.5 - Pre-tax cost of debt: 10% Equity beta: 1.5 Risk-free rate: 4%; market risk premium: 6% Tax rate: 30% Net capital expenditure: 30,000, it will grow at 2% forever. a) Estimate the value of the firm, assuming that the business will be sold to a diversified investor. (8 marks) b) How would your answer be different if the owner offered to stay on for one year, assuming that she will receive an annual salary of 50,000 from the firm. (6 marks)