Expect based on your estimate of the dividend growth rate

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Reference no: EM131048160

In mid-2015, Coca-Cola Company (KO) had a share price of $39. Its dividend was $1.00 per 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?

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Reference no: EM131048160

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