(a) Arisato, a Japanese machinery firm, recently reported the following results (in \ billions): Sales 2.065.1 Working Capital 516.3 Capex 450.0 Depreciation 275.0 Invested capital 2,450.0 Arisato also reported earnings before interest and taxes (EBIT) of 45.0 billion. However the company had a bad year, and this performance is considered non- representative and temporary. Arisato's five-year average return on invested capital (ROIC) is 12.6%. Arisato's invested capital includes 125.0 billion is marketable securities which, when marked to market is valued at 645.0 billion. Japan's corporate tax rate is 32.0%. You are attempting to estimate the market value of Arisato's equity and have made the following assumptions: EBIT growth will be 8.5% next year and will decline linearly before reaching a stable 3.5% in year 6. Revenue growth will be 5.0% in each of the next 5 years before reaching stable growth. Capital expenditure and depreciation are expected to grow at 4.0% and 12.0%, respectively, for the next five years; thereafter, capital expenditure will be offset by depreciation. The Company's current cost of debt is 4.0% (pre-tax), its beta is 0.9 and its debt ratio is 14.0%. Once the Company reaches stable growth the Company's pre-tax cost of debt, beta, and debt ratio are expected to be 3.5%, 0.8, and 20.0%, respectively. The risk-free rate is 3.0% and the market risk premium is 5.0%. Value Arisato's equity. State your assumptions. (b) (20 marks) Explain why valuing Japanese companies is potentially more difficult than valuing western companies. Note: your answer should also discuss the historical reasons for why this is the case. (15 marks)