Royal Dutch Shell is a petroleum and petrochemicals company. It engages primarily in the exploration, production, and sale of crude oil and natural gas and the manufacture, transportation, and sale of petroleum and petrochemical products. The company operates in approximately 200 countries worldwide'in countries in North America, Europe, Asia-Pacific, Africa, South America, and the Middle East. During 2006–2008, Royal Dutch Shell generated the following total dividends to common equity shareholders (in USD millions):

Analysts project 5 percent growth in earnings over the next five years. Assuming concurrent 5 percent growth in dividends, the following table provides the amounts that analysts project for Royal Dutch Shell's total dividends for each of the next five years. In Year _6, total dividends are projected for Royal Dutch Shell assuming that its income statement and balance sheet will grow at a long-term growth rate of 3 percent.

At the end of 2008, Royal Dutch Shell had a market beta of 0.71. At that time, yields on intermediate-term U.S. Treasuries were roughly 3.5 percent. Assume that the market required a 5.0 percent risk premium. Royal Dutch Shell had 6,241 million shares outstanding at the end of 2008 that traded at a share price of $24.87.

Required
a. Calculate the required rate of return on equity for Royal Dutch Shell as of the beginning of Year +1.
b. Calculate the sum of the present value of total dividends for Year +1 through +5.
c. Calculate the continuing value of Royal Dutch Shell at the start of Year +6 using the perpetuity-with-growth model with Year +6 total dividends. Also compute the present value of continuing value as of the beginning of Year +1.
d. Compute the total present value of dividends for Royal Dutch Shell as of the beginning of Year +1. Remember to adjust the present value for midyear discounting.
e. Compute the value per share of Royal Dutch Shell as of the beginning of Year +1.
f. Given the share price at the start of Year +1, do Royal Dutch Shell shares appear underpriced, overpriced, or correctlypriced?

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2006 2007 2008 Common Dividend Payments Stock Repurchases $8,142 8,047 $16,189 $9,001 4,387 $13,388 $ 9,516 3,573 $13,089 Total Dividends Year 1 Year 2 Year 3 Year +4 Year +5 Year Projected Growth Projected Total Dividends to Common Equity 5% 5% 5% 590 596 396 $13,743 $14,431 $15,152 $15,910 $16,705 $17,206