You are the owner of a privately$-$owned paper company with net debt of zero and an expected

after$-$tax cash flow of $$10$ million next year, anticipated to grow $3\%$ a year in perpetuity. You have

been approached by a venture capitalist, offering you $$25$ million for a $25\%$ stake in the firm. You

know that the venture capitalist has holdings primarily in manufacturing companies and that the

correlation of the VC$$s portfolio with the market is $0\mathrm{.}60.$ If you believe that the VC$$s offer is a fair

one, estimate what the company would be worth if you decided to go public instead. $($The risk$-$free

rate is $3\%$ and the market equity risk premium is $5\%).$