To determine the price of the asset today, we need to calculate the present value (PV) of the expected cash flows. The cash flows are divided into two phases:

1. Growth phase (Years 1 to 25): Cash flows grow at 3.68% annually.
2. Perpetual phase (Year 26 onward): Cash flows remain constant.

Step 1: Calculate the present value of cash flows during the growth phase

The cash flow for year $t$ can be calculated as: $CF_t = CF_0 \times (1 + g)^{t}$ where:

• $CF_0 = 2.18$ million (initial cash flow)
• $g = 0.0368$ (growth rate)
• $t$ is the year number

The present value of these cash flows is the sum of the discounted cash flows from year 1 to 25: $PV_{\text{growth}} = \sum_{t=1}^{25} \frac{CF_0 \times (1 + g)^t}{(1 + r)^t}$ where $r = 0.14$ is the required rate of return.

Step 2: Calculate the present value of the perpetuity starting from year 26

The cash flow from year 26 onward will remain constant at the level of $CF_{26} = CF_0 \times (1 + g)^{25}$. The present value of this perpetuity as of year 25 is: $PV_{\text{perpetuity\ as\ of\ year\ 25}} = \frac{CF_{26}}{r}$

Then, discount this value back to today (year 0): $PV_{\text{perpetuity\ today}} = \frac{CF_0 \times (1 + g)^{25}}{r \times (1 + r)^{25}}$

Step 3: Calculate the total present value

The total price of the asset today is the sum of the present values of the two phases: $\text{Price today} = PV_{\text{growth}} + PV_{\text{perpetuity\ today}}$

Now let's compute this.The calculated price of the asset today is approximately $21.31 million.

Thus, the correct answer is $21.31 million.

Would you like further details or have any questions? Here are some related questions you might find interesting:

1. How would the asset's price change if the required rate of return were lower?
2. What would be the effect of a higher growth rate on the asset's price?
3. How do perpetual cash flows impact the valuation of long-term assets?
4. How is the present value of a growing annuity calculated?
5. What are the risks associated with assuming a constant growth rate in asset valuation?

Tip: When valuing financial assets, small changes in the discount rate can have a significant impact on the asset's price, especially over long periods.