Assume that Coca-Cola Company has a share price of $43. The firm will pay a dividend of
Question:
Assume that Coca-Cola Company has a share price of $43. The firm will pay a dividend of $1.24 in one year, and you expect Coca-Cola to raise this dividend by approximately 7% per year in perpetuity.
a. If Coca-Cola’s equity cost of capital is 8%, 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?
Cost Of CapitalCost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-0321818171
2nd Canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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