An owner recently offered to sell you her manufacturing business for $10 million. She has provided some basic financial information, described below. You need to analyze this business and decide whether you should buy it. The companys only product sells for around $80. Prices have been growing slowly over the past few years and you expect prices to rise on average 5% yearly into the future. Sales volume is now about 120,000 units per year. Your friend expects that to grow 7.5% annually. Variable production cost per unit is $50, and she expects you can hold costs to a 2% annual increase. Fixed production costs are $32,000 a year and should remain steady.Under these assumptions, the total production costs will be $6,032,000 in year 1and Gross Margin (total revenue from sales minus production costs) will be $3,568,000. We expect Selling, General and Administrative (SG&A) expenses will run about 8% of the total production costs, so our pre-tax net cash flow (Gross Margin minus SG&A) will be $3,085,440 in year 1. The tax rate is currently 34%, so after-tax cash flow in year 1 will be $2,036,390. Assume that you intend to run the business for five years and (to be conservative) that it will be worthless thereafter. Your annual discount rate for future cash is 10%. What should you do? How much is this business worth?