Company selection is Coca Cola

Part I: Estimate Cost of Equity using discounted cash flow (DCF) model (5 points)

Please calculate the cost of equity using the DCF model: R_S = D_1/P₀ + g.

So, you need to collect or calculate D₁, P₀ and g to calculate the cost of equity: R_S

How to get D₁, P₀, and g?

Go to Yahoo Finance or Google Finance (https://www.google.com/financeLinks to an external site. ) and get the stock price (P₀) and quarterly dividend (Div multiply it by 4 to get annual dividend - D₁) for your stocks.

Use Dividend Yield - 5 Year Avg, which can be found from several finance sites, including http://www.reuters.com/finance/stocks .Links to an external site. Please check under financial to find Dividend Yield - 5 Year Avg. If you do not find the dividend yield, use the analysts forecast of earnings growth rate (EPS - 5 Yr. Growth Rate) as g.

How to calculate the cost of equity? Now you have D₁, P₀ and g. Put them in the following formula to get R

Put them in the following equation to get R_S for your companies: r_S = D_1/P₀ + g.

Part II: Estimate the Weighted Average Cost of Capital (WACC) (15 points)

Again, you may continue working with the same company you picked in your Project Part I. Gather necessary information (cost of equity, cost of preferred stock if any, cost of debt, and weights on each component, and tax rates) for your companies and calculate the Weighted Average Cost of Capital (WACC). You can find capital structure information from the most recent consolidated balance sheet (annual) of your company.

Finding the cost of debt is difficult. I would start with companys latest annual 10-k and search for the most recent senior notes. Similarly, tax rates may be found in 10-K. For example, if I want to find the cost of debt for United Steel Corporation, I find 6.875% under Capital Structure and Liability. Similarly, I find 35% tax rate under 8. Income Taxes. For more information, check the following link:

http://www.sec.gov/Archives/edgar/data/1163302/000116330214000010/x2013123110-k.htm Links to an external site.

Links to an external site.You may use the following link to find your companies filling including 10-k.

http://www.sec.gov/edgar/searchedgar/companysearch.html Links to an external site.

Note: Please feel free to use data from other resources. However, you must provide appropriate references.

Please document all your sources of information and any assumptions you made in developing the WACC. Please use the sample solution sent to you at the beginning of the week via email as a guide: