Question 3 (P13.37) Tree Fellows Ltd is a forestry company and has three divisions: retail plantations, pine forests and large growth forests. The company obtains its capital from debt and equity. The interest rate on Tree Fellows' $400 million debt is 9 per cent per annum, and the company pays 30 per cent income tax. The cost of Tree Fellows' equity capital is 10 per cent, and the market value of the equity is $600 million. The book value of the equity is only $430 million, but this does not reflect the current value of the company assets, which include some unrecorded intangibles. The following data (in millions) relate to the three divisions: Operating profit before tax ($ millions) Current liabilities ($ millions) Total assets ($ millions) Retail plantations division $14 $6 $ 70 Pine forests division 45 5 300 Large growth forests division 48 9 480 Required: 1. Calculate Tree Fellows' weighted average cost of capital. Assume that the market value of the debt is equal to the book value of the debt. 2. Calculate the EVA for each division, as well as the ROI. 3. Write a brief report evaluating the company's performance and the relative performance of each division.