In mid-2015, Coca-Cola Company (KO) had a share price of $39. Its dividend was $1.00 per year, and you expect Coca-Cola to raise this dividend by approximately 7% per year in perpetuity. If Coca-Cola’s equity cost of capital is 8%, what share price would you expect based on your estimate of the dividend growth rate? Given Coca-Cola’s share price, what would you conclude about your assessment of Coca-Cola’s future dividend growth?
In mid-2015, Coca-Cola Company (KO) had a share price of $39. Its dividend was $1.00 per year, and you expect Coca-Cola to raise this dividend by approximately 7% per year in perpetuity. If Coca-Cola’s equity cost of capital is 8%, what share price would you expect based on your estimate of the dividend growth rate? Given Coca-Cola’s share price, what would you conclude about your assessment of Coca-Cola’s future dividend growth?
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 15P
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In mid-2015, Coca-Cola Company (KO) had a share price of $39. Its dividend was $1.00 per year, and you expect Coca-Cola to raise this dividend by approximately 7% per year in perpetuity.
If Coca-Cola’s equity cost of capital is 8%, what share price would you expect based on your estimate of the
Given Coca-Cola’s share price, what would you conclude about your assessment of Coca-Cola’s future dividend growth?
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