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In early 2018, Coca-Cola Company (KO) had a share price of $45.3, and had paid a dividend of $1.52 for the prior year. Suppose you
In early 2018, Coca-Cola Company (KO) had a share price of
$45.3,
and had paid a dividend of
$1.52
for the prior year. Suppose you expect Coca-Cola to raise this dividend by approximately
6.2%
per year in perpetuity.
a. If Coca-Cola's equity cost of capital is
8.3%,
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?
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