Assumptions:

As 8% growth rate is not sustainable for long time , It is assumed that Coca cola will follow a constant growth rate of 8% for the
5 years and thereafter will grow at 3 % till perpetuity.

Coca cola DDM valuation

Rate of return calculations

E(R) = Rf + (Rm - Rf)
Risk-Free Rate (Rf ) ( treasury bond rate)
Risk Premium from historic values
calculations
Yahoo finance
Required Rate of return
year
2007
2008
2009
2010
2011
Average growth rate %

3.00%
6.00%
0.54
6.24%

dividends per share

1.33
1.48
1.64
1.73
1.85

growth %
NA
11.28
10.81
5.49
6.94
8.63

Number of periods for PV Calculation

Year
Dividends
1
2012
2.01
2
2013
2.18
3
2014
2.37
4
2015
2.58
5
2016
2.80
6
2017
3.04
Sum of PV's from years 2012- 2016
PV of dividends at 2016, paid from 2017 till perpetuity , growing @ 3%
PV of dividends at 2011 , paid from 2017 till perpetuity
Target price of stock

growth rate of 8% for the next

PV
2.008
2.180
2.367
2.570
2.790
3.028
11.91
93.82
69.32

81.23

2007
2008
2009
2010
2011

1.36
1.52
1.64
1.73
1.85

na
11.76471
7.894737
5.487805
6.936416
8.020916
PV

1
2
3
4
5
6

2012
2013
2014
2015
2016
2017

1.998387
2.158676
2.331821
2.518855
2.720890
2.939130

1.85
1.85
1.85
1.85
1.85
1.85
9.25