Recalculate the intrinsic value of Rio Tinto in each of the following scenarios by using the three-stage growth model of Spreadsheet 18.1 (picture attached). Treat each scenario independently.

1. The terminal growth rate will be 6%.
2. Rio Tintos actual beta is 1.2.
3. The market risk premium is 7.5%.

B A 1 Inputs for Rio Tinto 2 beta 3 mkt prem 4 rf 5 k_equity 6 term_gwth 7 8 9 10 11 12 Value line 13 forecasts of 14 annual dividends 15 16 17 Transitional period 18 with slowing dividend 19 growth 20 21 22 23 24 25 1.3 0.08 0.029 0.1330 0.050 C Beginning of constant growth period Year D 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 E F Dividend Div growth 3.12 3.38 3.64 3.9 4.19 0.0740 4.49 0.0716 4.80 0.0692 5.12 0.0668 5.45 0.0644 5.79 0.0620 6.13 0.0596 6.48 0.0572 6.84 0.0548 7.20 0.0524 7.56 0.0500 7.93 0.0500 E17*(1+F17)/(B5-F17) G Term value 100.37 H Investor CF 3.12 3.38 3.64 3.90 4.19 4.49 4.80 5.12 5.45 5.79 6.13 6.48 6.84 7.20 7.56 108.31 43.39 PV of CF I NPV(B5, H2:H17) J K 0.07722 L M N B A 1 Inputs for Rio Tinto 2 beta 3 mkt prem 4 rf 5 k_equity 6 term_gwth 7 8 9 10 11 12 Value line 13 forecasts of 14 annual dividends 15 16 17 Transitional period 18 with slowing dividend 19 growth 20 21 22 23 24 25 1.3 0.08 0.029 0.1330 0.050 C Beginning of constant growth period Year D 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 E F Dividend Div growth 3.12 3.38 3.64 3.9 4.19 0.0740 4.49 0.0716 4.80 0.0692 5.12 0.0668 5.45 0.0644 5.79 0.0620 6.13 0.0596 6.48 0.0572 6.84 0.0548 7.20 0.0524 7.56 0.0500 7.93 0.0500 E17*(1+F17)/(B5-F17) G Term value 100.37 H Investor CF 3.12 3.38 3.64 3.90 4.19 4.49 4.80 5.12 5.45 5.79 6.13 6.48 6.84 7.20 7.56 108.31 43.39 PV of CF I NPV(B5, H2:H17) J K 0.07722 L M N