The Coca-Cola Co (KO) traded at $43 per share at the close of trading on September 25, 2003. Coke had reported earnings per share (eps) of $1.23 for the year ending December 31, 2002, along with an annual dividend per share (dps) of 0.88. Analysts were estimating consensus eps of $1.90 for 2003 and $2.06 for 2004, and dividends of $0.90 each year. Use a cost of equity capital of 9% in calculations.

1. (5 points) Calculate the forward traded P/E ratio. What is the normal forward P/E for this stock?

2. (5 points) Calculate the trailing P/E. What is the normal trailing P/E for this stock?
3. (5 points) The analysts forecasts indicate a growth rate for eps of 8.42% in 2004. What is the 2004 cum-dividend growth rate implied by the forecasts, and what is the abnormal earnings growth?
4. (5 points) Calculate the forecasts of eps for 2005 and 2006 that are implicit in the market price of $43.
5. (5 points) Calculate the forecasted cum-dividend eps growth rates for 2005 and 2006.