What is the intrinsic value of a share of Coke

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Question 1 - The risk-free interest rate is 4%, the expected rate of return on the market portfolio is 11% and a share of Coke, an American shipping firm, has a beta coefficient of 0.8. Coke pays out 80% of its earnings as dividends, and the latest earnings announced were $10 per share. Dividends were just paid and are expected to be paid annually. You expect that Coke will earn a return on equity (ROE) of 24% per annum on all reinvested earnings forever. What is the intrinsic value of a share of Coke?

Question 2 - Using the information from Question 1, if the share price is currently R42, and you expect the share price to be equal to the intrinsic value one year from now, what is the expected one-year holding period return on a Margate share?

Reference no: EM132831658

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