Dean and Edwards, Inc. (D&E) is a fi rm that provides temporary employees to businesses. D&E’s client base has grown rapidly in recent years, and the fi rm has been quite profi table. The fi rm’s...

Dean and Edwards, Inc. (D&E) is a fi rm that provides temporary employees to businesses. D&E’s client base has grown rapidly in recent years, and the fi rm has been quite profi table. The fi rm’s cofounders, Mr. Dean and Mr. Edwards, believe in a conservative approach to fi nancial management and therefore have not borrowed any money to fi nance their business. A larger company in the industry has approached D&E about buying them out. In the most recent year, 2009, D&E generated free cash fl ow of $1.4 million. Suppose that D&E projects that these cash fl ows will grow at 15 percent per year for the next four years, and then will settle down to a long-run growth rate of 7 percent per year. The cofounders want a 14 percent return on their investment. What should be their minimum asking price from the potential acquirer?