1. Forecast the expected cash flow for Nextel Peru for the next year (2013). Make sure to use free cash flow (FCF) rather than net income or other measures.

2. Nextel Peru is considered to be a mature company and therefore its future cash flows are expected to grow at a relatively low rate forever. Estimate this growth rate.

3. Decide on a model for the cost of capital. Pay attention to the the locale and the portfolio of the investor and the locale of Nextel Peru. Estimate the risk(s) and the risk premium(s). Calculate the cost of capital.

4. Determine the value of Nextel Peru. Based on this value, conclude whether to pay $400 million for Nextel Peru or not.

5. Projected growth rate in the expected cash flows, the model for cost of capital, the risk-free rate, the value(s) of measure(s) of risk and the value(s) of the risk premium(s), do some sensitivity analysis to determine the scenarios in which paying $400 million for Nextel Peru would be a good idea, and scenarios in which it wont be.

He assumed that Nextel Peru earned 100% of its revenues domestically, while the average Peruvian firm derived 75% of its revenue locally As d'Anconia sized up the tasks at hand, he considered his objectives. Ultimately, he wanted to understand whether the $400 million purchase price for Nextel Peru was reasonable. Further, he believed that the valuation would be driven primarily by the timing, growth, and riskiness of expected cash flows. To simplify the exercise, he wanted to employ ACA's assumption for the market risk premium, which was 5.0%. However, he was uncertain if this assumption was appropriate for Peru He knew that a number of analysts were using a 7.0% risk premium for Latin America. As a final simplification, d'Anconia decided to treat the Peruvian wireless market as mature, and then estimate the expected cash flows as the function of a growing perpetuity Ultimately, d'Anconia's immediate concern was the cost of capital. He felt that once this was determined, the rest of the analysis would fall into place. In turn, this meant he needed to decide on an appropriate methodology. On the one hand, there was the portfolio improvement rule, which d'Anconia recalled from his days in school as the foundation of CAPM. On the other hand, there were the various practitioners' methodologies to consider He assumed that Nextel Peru earned 100% of its revenues domestically, while the average Peruvian firm derived 75% of its revenue locally As d'Anconia sized up the tasks at hand, he considered his objectives. Ultimately, he wanted to understand whether the $400 million purchase price for Nextel Peru was reasonable. Further, he believed that the valuation would be driven primarily by the timing, growth, and riskiness of expected cash flows. To simplify the exercise, he wanted to employ ACA's assumption for the market risk premium, which was 5.0%. However, he was uncertain if this assumption was appropriate for Peru He knew that a number of analysts were using a 7.0% risk premium for Latin America. As a final simplification, d'Anconia decided to treat the Peruvian wireless market as mature, and then estimate the expected cash flows as the function of a growing perpetuity Ultimately, d'Anconia's immediate concern was the cost of capital. He felt that once this was determined, the rest of the analysis would fall into place. In turn, this meant he needed to decide on an appropriate methodology. On the one hand, there was the portfolio improvement rule, which d'Anconia recalled from his days in school as the foundation of CAPM. On the other hand, there were the various practitioners' methodologies to consider