You have just started working at a boutique corporate finance house that has tasked you with valuing three

shares in the automotive industry. In-house analysis has indicated that the shares are all expected long-term

growth rates equal to inflation. Using the dividend discount model and the information provided in the table

below, calculate the value of each share.

The risk free rate is 9.13%, the expected inflation rate is 6% and the expected market risk premium is 3.5%.

The market standard deviation is 17.3205%

Shares Covariance/with Market Dividend 0 Growth (years 1-2) Growth (years 3-6)

A 0.0103 R13 18.7% 8.1%

B 0.0113 R35 14.3% 5.5%

C 0.0154 R39 15.5% 7.1%