Coca Cola Inc. bought back stock between 2006 and 2010. The following table shows information about net income, dividends and stock buybacks of Coca Cola from 2006 t0 2010

	2006	2007	2008	2009	2010	Aggregate
Net income	$5080	$5981	$5807	$6824	$11809	$35501
Dividends	2911	3149	3521	3800	4056	17449
Stock buybacks	2268	219	493	856	1295	5131

Required:

1. Calculate both dividend payout ratio and augmented dividend payout ratio.
2. Assume that Coca Cola would achieve a return on equity of 25%. What will be the expected growth in dividends for next five years?
3. Assume that the cost of capital for Coca Cola is 8.5%, estimated based on a stock beta of 0.90, a risk free rate of 3.5% and a risk premium of 5.5%, estimate the forecast dividends for the next five years.
4. After year 5, assume that Coca Cola would enter into a stable growth with the following changes:
   • Expected growth rate will decrease to 3% forever.
   • A return on equity of 15%.
   • A stable payout ratio of 80%.
   • Cost of equity capital of 9.0%, based an assumption that the stock beta would rise to 1.0.

Estimate the market capitalization of Coca-Cola at the end of 2010.