Valuing Coca Cola Stock Essay
Andrew Burgoyne, James Desimone, Bailey Fowble,
Hewei Huang, Ryan Leist, Maria Sandoval University of South Florida
Taking the role as Jessie Jones, we will analyze whether to recommend the Coca Cola stock to potential clients or current clients that do not have it in their portfolio. By using the Capital Asset Price Model (CAPM), Dividends Discount Model (DDM) and the Price/Earnings (P/E) ratio we will come to a conclusion.
The Coca Cola Company, which is based out of Atlanta, Georgia, is a leader in the global soft drink market. It owns subsidiaries in over 195 countries around the world but has always remained local. According to the most recent …show more content…
P0 is the current price, or value of stock.
D1 is the expected dividends in the next period: which was obtained from exhibit 4, which is the estimate of what the dividends per share will be in 1998. r is the investor’s required rate of return: calculated from CAPM. g is the expected dividend growth rate: which was predicted by an equity analyst who followed Coca Cola.
D1= .62 r = .1941 g = .12
P0 = .62 / (.1941-.12)
P0 = $8.37
Price/ Earnings Ratio or P/E ratio is a ratio that is widely