1. [10 points] In the melded country risk premium approach, you estimate the country risk premium by multiplying the country default spread by the volatility of equity markets, relative to the volatility in government bonds in that market (see slide 7, entitled "A Third Approach", in Lecture Note 6). Assume that your estimate for a mature market equity risk premium is 6%, that the default spread for Indonesia is 2% and that the standard deviation of Indonesian equities is 24% (while the standard deviation of the Indonesian government bond is 12% ). Estimate the total equity risk premium for Indonesia. 2. [10 points] Which two of the following are likely to vary the most among companies within an industry? i. Tax rates. ii. Growth. iii. ROIC. iv. WACC. 3. [10 points] Given a price-to-earnings ratio of 15 and projected earnings growth of 5 percent, what is the PEG ratio? What are the deficiencies of this multiple? 4. [10 points] Given the following inputs, compute the enterprise value-to-EBIT ratio: - tax rate =34%, - growth rate =4%, - ROIC=10%, - WACC=9%