E14.9. Simple Valuation for the Coca-Cola Company (Medium) In early 2006, the 2,369 million outstanding shares of the Coca Cola Company traded at $48.91 each. The price-to-book ratio was 6.3 and the forward P/E was 19.3 based on ana- lysts' consensus EPS forecast for 2007. An analyst extracted the following numbers from Coke's financial statements (in millions of dollars): 2005 2004 2003 2002 Sales 23,104 21,742 20,857 19,564 Core operating income, after tax 4,944 4,870 4,443 4,324 Net operating assets (average for year) 17,184 16,563 15,735 14,932

a. Calculate the core operating profit margin and asset turnover for each year 2002-2005.

b. Calculate the average sales growth rate over the years 2003-2005.

c. The firm reported common shareholders' equity at the end of 2005 of $16,945 mil- lion, along with $1,010 billion in net financial obligations. Using the numbers you calculated, estimate Coke's enterprise value at the end of 2005 and also the value per share. Use a required return for operations of 10 percent. Box 14.3 will help. you. Real World Connection See Exercises E4.5, E46, E4.7, E11.7, E12.12, E15.12, E16.7 and E19.4. Also see Minicases M4.1, M5.2 and M6.2 for coverage of Coke.