23. Assume that Cola Co. has a share price of $43. The firm will pay a dividend...

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23. Assume that Cola Co. has a share price of $43. The firm will pay a dividend of $1.24 in one year, and you expect Cola Co. to raise this dividend by approximately 7% per year in perpetuity.

a. If Cola Co.’s equity cost of capital is 8%, what share price would you expect based on your estimate of the dividend growth rate?

b. Given Cola Co.’s share price, what would you conclude about your assessment of Cola Co.’s future dividend growth?

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Fundamentals Of Corporate Finance

ISBN: 9780134475561

4th Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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