Mexican Motors’ market cap is 600 billion pesos. Next year’s free cash flow is 15.0 billion pesos. Mexican Motors has generally earned about 14% on book equity (ROE = 14%) and reinvested 30% of...

Mexican Motors’ market cap is 600 billion pesos. Next year’s free cash flow is 15.0 billion pesos.

Mexican Motors has generally earned about 14% on book equity (ROE = 14%) and reinvested 30% of earnings. The remaining 70% of earnings has gone to free cash

flow. Suppose the company maintains the same ROE and investment rate for the long run.

What would be the rate of return?