(l) (5 points) How would you evaluate the capital budgeting method (12% rule) used historically by ABS? Discuss your thoughts in light of the past business situation and the current business situation of ABS. (2) (5 points) Given AES's pyramid ownership structure, does the 12% discount rate (applied to dividends at the parent company level) properly reflect the overall group leverage? In particular, does the 12% discount rate result in the projects' hurdle rates that are likely too high or too low? Explain briey. (3) (l 0 points) If Venerus implements the suggested methodology, what would be the range of discount rates that AES would use around the world? Note the following steps: (i) adjust the costs of debt and the costs of equity to reect country risk, (ii) calculate WACC using the adjusted costs of debt and costs of equity from (i), and (iii) add additional idiosyncratic risk adders to obtain adjusted WACC. (4) (5 points) Conceptually, does the suggested methodology make sense as a way to incorporate country and political risks into capital budgeting? Does this methodology double or triple count some of the risks? From ABS (or any MNC for that matter)'s perspective, should idiosyncratic risk be compensated for? (5) (5 points) What is the value of the Pakistani project using the cost of capital derived from the new methodology? If this project were located in the U.S., what would its value be? What explains the difference? anus (total 5 points) (6) (5 points) What does the difference between the two costs of capital in Question (5) imply about the probability of real adverse events in a 5-year period? Do you think this implied probability is a good reflection of reality? Try to be as concrete as you can here