In early 2018, Coca-Cola Company (KO) had a share price of

$42.47,

and had paid a dividend of

$1.46

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

8.1%,

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?