In early 2018, Coca-Cola Company (KO) had a share price of $42.42, and had paid a dividend
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In early 2018, Coca-Cola Company (KO) had a share price of $42.42, and had paid a dividend of $1.01 for the prior year. Suppose you expect Coca-Cola to raise this dividend by approximately 6.6% per year in perpetuity.
a. If Coca-Cola’s equity cost of capital is 8.3%, what share price would you expect based on your estimate of the dividend growth rate?
b. Given Coca-Cola’s share price, what would you conclude about your assessment of Coca-
Cola’s future dividend growth?
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