[ASADULLAH345]

Company B: B is an unquoted shoe manufacturer. It has also suffered in the recent recession but the directors are confident that the company is past the worst and growth lies ahead:

– Earnings are expected to be 12.5 million € next year and expected to grow at 2% p.a.

– Dividends will be 5 million € for each of the next three years and then expected to grow at 3% thereafter.

Daniels has located a similar listed company that has an earnings yield of 12% and a cost of equity of 14%.
Calculate the value of Company B using the dividend valuation model:

Select one:

a.
42.3 m €

b.
43.2 m €

c.
46.8 m €

d.
47.3 m €

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