Answer all questions and show necessary work. Please be brief. This is an open books, open notes exam. 1. You have been asked to review the valuation of Santiago Cement, a small Peruvian cement company, by an M&A analyst, for acquisition by a US cement company. The analyst has estimated a value of 1 billion Peruvian Sol for the equity, based upon the expectation that the firm will generate 50 million Peruvian sol in cash flows (to equity) next year, growing at 5% (in sol) a year forever; mistakenly, he used the US company's dollar cost of equity in the valuation. To correct the valuation, you have been provided with the following information: The US treasury bond rate is 3% and Peruvian dollar denominated bond rate is 5%; Peruvian equities are 1.5 times more volatile than the Peruvian dollar bond. The expected inflation rate in Peruvian sol is 6% and the expected inflation rate in US dollars is 2%. The typical Peruvian company generates 80% of its revenues in Peru, but Santiago Cement generates all of its revenues in Peru. Estimate the correct value of equity in Santiago Cement. (4 points)