Estimate of the dividend growth rate

Assignment Help Financial Management
Reference no: EM131607751

Assume that Coca-Cola Company has a share price today of $43.81. The firm will pay a dividend of $1.38 in one year, and you expect Coca-Cola to raise this dividend by approximately 6.4% per year in perpetuity.

a. If Coca-Cola's equity cost of capital is 8.4% what share price would you expect based on your estimate of the dividend growth rate? Coca-Cola's price per share should be $ (Round to the nearest cent)

b. Given Coca-Cola's share price, what would you conclude about your assessment of Coca-Cola's future dividend growth? Given Coca-Cola's share price today, its dividend growth rate should be %. (Round to two decimal places.)

Reference no: EM131607751

Questions Cloud

What would be your monthly payment : If you want a 30-year mortgage, and the borrowing rate is 8 6% APR, what would be your monthly payment?
Proponents of tax simplification argue : Proponents of tax simplification argue that a flat tax would be fairer.
Expects earnings before interest and taxes : Victoria Enterprises expects earnings before interest and taxes (EBIT) next year of $2.5 million. what is its enterprise value?
At what price should the bonds sell : Randall, inc. is planning to issue bonds that will have mature in 25 years. At what price should the bonds sell?
Estimate of the dividend growth rate : If Coca-Cola's equity cost of capital is 8.4% what share price would you expect based on your estimate of the dividend growth rate?
What should the price of portage bay stock be : what should the price of Portage Bay's stock be?
What is yield to maturity if interest is paid semiannually : What is the yield to maturity if interest is paid semiannually?
Finance its expansion into new markets : The Valhalla Corporation needs to raise $80 million to finance its expansion into new markets.
Retirement savings goal : each month must you deposit into the account through your 70th birthday in order to reach your retirement savings goal on your 70th birthday?

Reviews

Write a Review

Financial Management Questions & Answers

  Retirement plan-future value of multiple annuities

Assume that you contribute $180 per month to a retirement plan for 15 years. What is the value of your retirement plan after the 40 years?

  What is the company unlevered cost of equity capital

Williamson, Inc., has a debt–equity ratio of 2.45. The company's weighted average cost of capital is 10 percent, and its pretax cost of debt is 6 percent. The corporate tax rate is 35 percent. What is the company's cost of equity capital? What is the..

  Calculate the yield to maturity of the bond

calculate the yield to maturity of the bond (assume annual interest payments).

  What is the companys total book value of debt

The book value of the debt issue is $70 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value of this issue is $100 million and the bonds sell for 61 percent of par...

  Scenarios may a loan be taken from a traditional ira

In which of the following scenarios may a loan be taken from a Traditional IRA?

  A company needs certain type of machine

A company needs a certain type of machine for the next 5 years. They presently own such a machine, which is now worth $6,000 but will lose $2,000 in value in each of the next 3 years, after which it will be worthless and unusable.

  What is required rate of return

Holtzman Clothiers’s stock currently sells for $38.00 a share. It just paid a dividend of $2.00 a share (i.e., D(0) = $2.00). The dividend is expected to grow at a constant rate of 5% a year. What stock price is expected 1 year from now? What is requ..

  What is the percentage change in the bond price

what is the percentage change in the bond's price as predicted by the duration formula?

  What was his total return for the year on this? investment

At the beginning of last year Thomas purchased 100 shares of the Web.com Fund at an NAV of ?$ 15.07 and automatically reinvested all distributions. As a result of? reinvesting, Thomas ended the year with 116 shares of the fund with an NAV of $17.79. ..

  What is the total cost of training

The average turnover rate was 23% percent per year. The cost to recruit and train one new employee was $56,625. To address the turnover problem, the company developed a skills training program that averaged 80 hours per year per employee. What is the..

  Bond is an annual-coupon bond

Assume that today's date is February 15, 2015. Robin Hood Inc. bond is an annual-coupon bond.

  Discount rate and cash flows at the end of period

How much more is a perpetuity of $100,000 worth than an annuity of the same amount for 50 years? Assume a 10% discount rate and cash flows at the end of period.

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd