PLEASE GIVE ME ANSWER FOR Q6 THE DETAILS ARE GIVEN WHICH HAVE TO BE USED FROM Q5!!

5. (2 points) How does the cost of equity of NII Holdings compare to two of its competitors America Movil and Telefonica de Peru? Assume investors are globally diversified. Discuss.

American Movil

K_e = 0.0308 + 1.01 (0.05) = 0.813 or 8.13%

Telefonica de Peru

K_e = 0.0308 + 0.35 (0.05) = 0.0483 or 4.83%

As we can see from the calculations, American Movil has a bigger number on cost of equity compared to NII Holding, this means that American Movil will have more risk on investment. On the other hand, Telefonica de Peru is safer on investment due to the fact that their cost of equity is less than NII Holding company. The lower the cost of equity the safer on investment.

Q6 What do you think the appropriate growth rate of expected cash flows should be for Nextel Peru. Explain your choice.