Can you help me with these questions?

Instructions for the Next Two Questions For Questions 14 and 15, please either upload a pdf file containing your answers or use the text entry box in Question 16 to enter your answer in text form. Scanned files of handwritten answers are acceptable. Be sure to show your work! We will not grade Excel files! If you do the problems in Excel, create a PDF of your workbook with text boxes that explain the formulas that you use. 14 20 points The CEO of the ESG Corp has hired you to advise her and her company about whether or not to acquire Greenerton, a privately held company with no outstanding debt. If ESG Corp moves forward with the acquisition, it will finance the deal with equity and no debt. You have produced the following projections (in $ million) for Greenerton's revenues, costs (which include both cost of goods sold and SG&A), and depreciation over the next two years (assume that today is 2020). Revenues Costs Depreciation Today (in 2020), Greenerton's net working capital (NWC) is $26 million. For 2021 and 2022, you estimate that Greenerton's net working capital will be 10% of revenues. You can also assume capital expenditure (CAPEX) is 0. a. (8 pts) What are Greenerton's free cash flows for 2021 and 2022? Because neither ESG or Greenerton are publicly traded, you have gathered data about BlueSky, a publicly traded firm whose operations are similar in risk to Greenerton's. BlueSky has 200,000 shares outstanding, and they are currently trading at $42 a share. It also has $2.8 million in debt. BlueSky has an equity beta (8) of 1.8, and the firm borrows at a rate of 5.6%. The corporate tax rate is 40%, the market risk premium (E[Rm]-rf) is 8%, and the risk-free rate is 4%. 2021 240 205 15 b. (6 pts) What is the unlevered cost of capital (ru) for BlueSky? c. (2 pts) You can use unlevered cost of capital (ru) for BlueSky as the weighted average cost of capital (WACC) for the Greenerton acquisition. Write one to two sentences explaining why. .pdf files only! d. (4 pts) You estimate that Greenerton's free cash flows will grow at 5% forever after 2022. Calculate the terminal value of Greenerton at the end of 2022, and the maximum value that ESG should be willing to pay to acquire Greenerton. Drag n' Drop here or Browse 15 20 points Suppose there are only two stocks in the entire market, Stock A and Stock B. Stock A has an expected return of 8% and a standard deviation, OA, of 15%. Stock B has an expected return of 14% and a standard deviation, og of 20%. Their market capitalizations are both exactly the same at $1,000,000. The correlation between Stock A and Stock B, p, is 0.3. The risk free rate, rf, is 4.5%. 2022 280 230 20 a) (5 points) What are the Sharpe ratios of Stock A and Stock B? b) (3 points) If you could only invest in either Stock A or Stock B (combined with the risk-free asset) which one would you choose and why? c) (6 points) What is the expected return on the market portfolio? d) (6 points) Show that the CAPM does not hold in this example given the numbers above. Recall that for the CAPM to hold implies that the market is equal to the tangent portfolio. T v Drag n' Drop here or Browse 16 0 points If you do not want to upload your answers in .pdf format, please use this text entry box to enter your responses to Questions 15 and 16. You do not need to enter a response here if you have already uploaded your responses above. Edit View Insert Format Tools Table 12pt Paragraph B I U Av Dv * v Ev To 8