Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Coca-Cola (KO) is the world's largest producer of soft-drink concentrates, syrups, and juices. Its soft-drink brands include Coke, Diet Coke, Cherry Coke, Sprite, Tab, Nestea, and Barq's. The firm sells about 59% of its concentrates and syrups to company-owned and independent bottlers in the United States and abroad, who distribute them to end users. Coca-Cola also makes fruit juices sold under names like Minute Maid. Follow the Two-Stage DDM method presented in class in order to answer the following question. You MUST show all of your calculation in the question below is order to receive credit for any numerical answers. All six questions are worth 16 points each (6 x 16 = 96 points + 3 free point for turning in A2). Two-Stage Dividend Discount Model (DDM) Q1. The first step in using the Two-Stage DDM is to estimate a first-stage growth rate in dividends (g1) and the period that you expect the g1 level of growth to persist. One way to estimate g1 is to base your estimate on the most recent historic growth in dividends over the past five (5) years. You can use most recent 5-year growth rate in dividends as your estimate for g1 OR you may revise it based on any other information you feel is relevant (new products, increased competition, etc.). LIST your estimate for g1, the period (number of years) you expect it to persist and EXPLAIN your reasoning. An important learning point here is that any estimate of future growth will generally NEVER equal the actual growth that results after time passes. All financial valuation estimates are subject to forecast error, which is also referred to as estimation risk. Q2. The second step is to estimate a required return on equity, Re, for use in the Two-Stage DDM. While not absolutely necessary, most analysts assume that Re remains constant in stage 1 and stage 2. Two often used methods for estimating Re is use 1) the CAPM and 2) by adding a 3-5% equity risk premium to the YTM on bond that has at least 20 years to maturity. If KO does not have a 20 year bond outstanding, then add 3-5% to the YTM on a 20 year corporate bond with the same bond rating (i.e. A, AA, or AAA). You must find the YTM on a KO 20-year bond or the YTM on a comparable corporate 20-year bond. Realize that a risky 20-year corporate bond must have a YTM that is greater than a risk-free 20-year Treasury bond. Again, keep in mind that Re estimates are nothing more than estimates and subject to forecast error. LIST your estimates for Re then select the estimate that YOU believe is the most appropriate for use in the DDM and EXPLAIN your reasoning. Websites for bond information: FINRA Bond Market Data www.finra.org/marketdata Yahoo Finance: https://finance.yahoo.com/bonds Q3. The third step is to estimate a second stage (also called the stable stage) growth rate in dividends, g2, for use in the Two-Stage DDM. Your estimate for g2 should not be greater than the expected future growth in the overall economy (expected growth in GDP). Why? LIST your estimate for g2 and EXPLAIN your reasoning. Q4. LIST KO's current dividend (dividend just paid) and use this value as D(0) in the Two-Stage DDM. Q5. SHOW your calculations and LIST your value (price per share) estimate for KO using the Two-Stage DDM. Q6. Perform Sensitivity Analysis (SA) on your estimated price per share in by varying both your expected growth rates and discount rates by +/- 2.0 percent in .5 percent increments while holding one of the two parameters (growth or discount rate) constant. DISCUSS your results. That is, describe in words how your value estimates change as you change your growth and discount rate estimates.
The other way around: you invest $60 into stocks of L. By combining a stock purchase of U and deposit/loan, provide a optional strategy that provides the same profits.
Given what you currently konw of derivatives...If you were a regulatory what would you push to see happen in the derivative market?
The bonds mature on 3/24/2023 and the yield to maturity (rd) on the bonds is currently 9 percent. Based on this information, what is the total market value of this firm's debt in dollars?
Assuming the strike price is $30, stock price is $30, the risk free rate is 2%, and it is a 6 month option, the call premium is $3.59, determine the price of implementing a straddle position and explain when the option position will make money and..
Explain what concerns would you have in structuring the deal and the post-merger integration that would be different from the concerns you would have when buying physical capital?
Assume that the Euro is selling for US$1.10 per 1 Euro or "120 Yen per Euro", and the yen is 100 Yen per $US1. Demonstrate the particular trades which you would use to make money, and compute how much money you would make.
Suppose the risk-free asset has expected return of 0.05, and the market portfolio has expected return 0.15 and standard deviation 0.18. What is the minimum standard deviation you can achieve if you desire an expected return of 10%?
based on these estimates, determine Seduak's optimal capital structure.
If the required rate of return on the firm's stock is 22% and its marginal tax rate is 35%, compute the firm's cost of capital.
Which bond suffers the greatest percentage price decline? Why? Which suffers the least percentage price decline? Why?
For discussion purposes counter statement that it is worse for auditors to incorrectly predict bankruptcy than when auditors fail to predict bankruptcy.
It appears the annual payment required to reach your target is more than you can afford. If the most you can afford to invest each year is $1,200 what average annual rate of return must you earn in order to reach your target?
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd