Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Calculate the intrinsic value of Rio Tinto in each of the following scenarios by using the three-stage growth model of Spreadsheet 18.1. Treat each scenario
Calculate the intrinsic value of Rio Tinto in each of the following scenarios by using the three-stage growth model of Spreadsheet 18.1. Treat each scenario independently. a. The terminal growth rate will be 10.00%. (Round your answer to 2 decimal places.) * Answer is complete but not entirely correct. Intrinsic value 79.54 (x b. Rio Tinto's actual beta is 1.02. (Round your answer to 2 decimal places.) Answer is complete and correct. Intrinsic value 142.71 c. The market risk premium is 9.20%. (Round your answer to 2 decimal places.) * Answer is complete but not entirely correct. Intrinsic value 48.79 xA B C D E F G H L K 1 Inputs for GE Year Dividend |Div growth Term value Investor CF 2 beta 1.2 2019 3.12 3.12 3 mkt prem 0.08 2020 3.38 3.38 4 rf 0.029 2021 3.64 3.64 5 k equity 0.1250 2022 3.90 3.90 6 term gwth 0.091 2023 4.19 0.0740 4.19 7 2024 4.51 0.0757 4.51 8 2025 4.85 0.0774 4.85 9 2026 5.24 0.0791 5.24 10 2027 5.66 0.0808 5.66 11 2028 6.13 0.0825 6.13 12 Value line 2029 6.64 0.0842 6.64 13 forecasts of 2030 7.22 0.0859 7.22 14 annual dividends 2031 7.85 0.0876 7.85 15 2032 8.55 0.0893 8.55 16 2033 9.33 0.0910 9.33 17 Transitional period 2034 10.18 0.0910 326.50 336.68 18 with slowing dividend 19 growth 82.65 = PV of CF 20 Beginning of constant E17 * (1+ F17)/(B5 - F17) 21 growth period NPV (B5, H2:H17)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started