E4.8. 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 actual reported cash flows but are adjusted for interest and investments in interest-bearing securities (in millions of dollars). Pretend that you are sitting at the beginning of 2004 , trying to value Coke, given these numbers 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 chapter, Minicase M5.2 in Chapter 5, Minicase M6.1 in Chapter 6, and Exercises E12.7, E15.7, E16.12,E17.7, and E20.4. Chapter 4 Cash Accounting, Accrual Accotnting, and Discounted Cash Flow Valuation 117 EXHIBIT 4.1 Discounted Cash Flow Valuation for The Coca-Cola Company. (In millions of dollars except share and per- share numbers.) Required return for the firm is 9 percent. CV=1.091.055.3111.05=139.414PresentvalueofCV=1.5386139,414=90,611 E4.8. 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 actual reported cash flows but are adjusted for interest and investments in interest-bearing securities (in millions of dollars). Pretend that you are sitting at the beginning of 2004 , trying to value Coke, given these numbers 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 chapter, Minicase M5.2 in Chapter 5, Minicase M6.1 in Chapter 6, and Exercises E12.7, E15.7, E16.12,E17.7, and E20.4. Chapter 4 Cash Accounting, Accrual Accotnting, and Discounted Cash Flow Valuation 117 EXHIBIT 4.1 Discounted Cash Flow Valuation for The Coca-Cola Company. (In millions of dollars except share and per- share numbers.) Required return for the firm is 9 percent. CV=1.091.055.3111.05=139.414PresentvalueofCV=1.5386139,414=90,611