Based on the information below on the Coca Cola Company (obtained from Value Line online), answer the following questions.

Data for Coca-Cola:

D = $1.36; D = $1.52; D = $1.64; P = $42.88; Average stock price = 2007 2008 2009 2008

$54.5; EPS = $13.8; P/E = 3.06; beta = 0.55

a. From the data on dividends (past, for 2008, and expected, for 2009) derive the dividend growth rate.

b. Based on the above information and the company’s current stock price, derive the firm’s required rate of return

c. Using the current stock price and expected dividend figure, verify that the stock’s dividend yield is 3.8%

d. Using equation (11), re-compute the firm’s required rate of return (Hints: Compute the growth rate of dividends for years 2007 and 2008 and then determine the 2008 price using equation (10). Use an average price for 2007 based on the upper and lower prices reported on the sheet). Does the new number resemble the one obtained in question (b)?

e. Using an alternative methodology, can you derive Coca Cola’s current (2008) stock price? (Hint: multiply EPS by the P/E ratio)

f. Given that the S&P 500 index returned –1.97% during the year from March 2008 to March 2009 (according to Yahoo!Finance) and the 10-year Treasury bond (alternative proxy for the risk-free rate) yielded an average of 2.65% during the same period, recompute the company’s required rate of return using the beta information found on the company’s information sheet above. What conclusion can be drawn from this number?