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The Coda-Coka Company is a mature beverage company and since it has businesses in more than 200 countries, it is expected that it can distribute
The Coda-Coka Company is a mature beverage company and since it has businesses in more than 200 countries, it is expected that it can distribute stable dividends with a growth rate of 2.5% every year and the market expects it can generate 8.4% return on the common stock. The dividends of the common stock just distributed were $0.41 per share. (a) What is the common stock price today and what is the theoretical common stock price 7 years later? (b) Now suppose Coda-Coka planned to invest in new capital and decided not to distribute dividends in the next 4 years. The company will distribute a $0.41 per share dividend in 5 years with a growth rate of 2.5% every year thereafter and the market expects it can generate 8.4% return on the common stock. What is the common stock price today? (c) Coda-Coka also issued preferred shares (constant dividends paid every year forever) with a stated value of $83.4 each with 4.72% dividends 6 years ago. The next dividend will be paid today and you will receive the next dividend. The required return on the preferred stock is 5.3%. What is the price of the preferred stock today
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