1. Cementics is a large manufacturing firm that reported earnings before interest and taxes of - $ 400 million (i.e., a loss of $ 400 million) on revenues of $ 8 billion in the current year. The firm expects its pre-tax operating margin to improve next year to the industry average of 5%. The average cost of capital for the industry is 10%, the average return on capital for the industry is 12.5% and the industry is mature, with all firms in it expecting to report growth of 5% in revenues over the long term. The marginal tax rate for all firms is 40%