Compute the required return

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Assume that last year, Coca-Cola paid a dividend of 1.10 and it currently trades for $41.00. Assume the dividend continues to grow at 10% annually. Write a one page paper explaining the following: 1) Compute the required return (formula 10-10, p. 302) and explain what this formula is calculating and why it might be used. 2) Using the dividend valuation model (formula 10-9, p. 300) what is the current value of KO based on the dividend valuation model? Explain this form of valuation and how does this calculated price compare to the current price of $41.00? 3) Based on the calculations and the actual trading price, would you suggest that the company is overvalued, undervalued or appropriately valued? Explain your reasoning in detail. 4) Based on the current dividend ($1.10), what is the dividend yield? How does the dividend yield relate to the growth of the stock?

Reference no: EM131185381

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