E4.7. Converting Forecasts of Free Cash Flow to a Valuation: Coca-Cola Company (Medium) After reviewing the discounted cash flow valuation of Coca-Cola in Exhibit 4.1, consider the free cash flows below that were reported by Coke for 2004-2007. They are based on the achial reported cash flows but are adjusted for interest and investments in interest-bearing securities (in millions of dollars). 2004 2005 2006 2007 Cash flow from operations $5,929 $6,421 $5,969 $7,258 Cash investments 618 1,496 2,258 7,068 Free cash flow 5,311 4,925 3,711 190 Pretend that you are sitting at the beginning of 2004, trying to value Coke, given these num- bers as forecasts. What difficulties would you encounter in trying to value the firm at the beginning of 2004? What do you make of the declining free cash flows over the four years? Real World Connection Other material on Coca-Cola can be found in Exhibit 4.1 and Minicase M4.1 in this chap- ter, Minicase M5.2 in Chapter 5, Minicase M6.2 in Chapter 6, and Exercises B11.7, E12.7, E14.9, E15.12, E16.7, and E19.4.