Question
Inmid-2015, Coca-Cola Company(KO) had a share price of $ 42.75, and had paid a dividend of $ 1.45 for the prior year. Suppose you expectCoca-Cola
Inmid-2015, Coca-Cola Company(KO) had a share price of $ 42.75, and had paid a dividend of $ 1.45 for the prior year. Suppose you expectCoca-Cola to raise this dividend by approximately 6.9 % per year in perpetuity.
a. IfCoca-Cola's equity cost of capital is 8.5 % what share price would you expect based on your estimate of the dividend growthrate?
b. GivenCoca-Cola's shareprice, what would you conclude about your assessment ofCoca-Cola's future dividendgrowth?
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
