Problem 1. Required of all students.

I have posted in a separate file, the 2018 consolidated financial statements of General Motors. You will be valuing one share of General Motors Common Stock as of December 31, 2018. The following information is available at December 31, 2018:

One year US Treasury T Bill discount rate: 1.5%

Ten year US Treasury Note yield : 2.75%

General Motors stock Beta: 105% of the level of historic volatility of the S&P 500 index

General Motors stock price- December 31, 2018: $33.45

2018 increase in S&P index: 10.25%

50 year annualized return on S& P index: 9%

Annualized long term growth rate in perpetuity: 3.5%

You are to answer problems a., b. c, and d in your Blue Book.

a. Using the residual income model, value one share of General Motors stock at of December 31, 2018. (15 points)

b. Using the dividend discount model, calculate dividends for this model at December 31, 2018. Label each of your inputs and how you have calculated them, where necessary. (5 points )

c. Using the free cash flow model, calculate free cash flow for General Motors at December 31, 2018 . Label each of your inputs and how you have calculated them, where necessary. (5 points).

d. Using the Warren Buffet secret value formula, determine whether investors who own the stock should buy, sell or hold General Motors common shares at December 31, 2018. Show the Buffet formula and label each input. (5 points)