Question 3 (12 marks) Assume that the cost of capital is 20% for all companies (which are highly similar to each other). Firm X Firm Y Firm Z Reinvestment Rate 20.00% 0.00% 200.00% ROC on new investment 100.00% 20.00% 10.00% ROC on existing investments (last year) ROC on existing investments (next year) *ROC: Return on Capital 20.00% 20.00% 20.00% 24.00% 20.00% 20.00% a) Calculate the expected operating income growth rate for firm X, Y and Z. (3 marks) b) Rank these firms in the order of least value growth to most value growth. (3 marks) c) Explain your answer in (b). (6 marks) Question 4 18 marks Question 3 (12 marks) Assume that the cost of capital is 20% for all companies (which are highly similar to each other). Firm X Firm Y Firm Z Reinvestment Rate 20.00% 0.00% 200.00% ROC on new investment 100.00% 20.00% 10.00% ROC on existing investments (last year) ROC on existing investments (next year) *ROC: Return on Capital 20.00% 20.00% 20.00% 24.00% 20.00% 20.00% a) Calculate the expected operating income growth rate for firm X, Y and Z. (3 marks) b) Rank these firms in the order of least value growth to most value growth. (3 marks) c) Explain your answer in (b). (6 marks) Question 4 18 marks