Mayo Motor's (MM) market capitalization is 210 billion pesos. Next years free cash flow is 9.5 billion pesos. Security analysts are forecasting that free cash flow will grow by 8% per year for the next five years. a. Assume that the 8% growth rate is expected to continue forever

a. What rate of return are expected?

b.they earned about 13% on book equity (ROE=13%) and reinvested 50% of earnings. The remaining 50% of earnings has gone to free cash flow. Suppose the company maintains the same ROE and investment rate for the long run.

What is the implication for the growth rate of earnings and free cash flow?

For the cost of equity?

Should you revise your answer to part a. of this question about Mayo Motor's?