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In early 2018, Coca-Cola Company (KO) had a share price of $44, and had paid...

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Accounting

In early 2018, Coca-Cola Company (KO) had a share price of $44, and had paid a dividend of $1.48 for the prior year. Suppose you expect Coca-Cola to raise this dividend by approximately 7% per year in perpetuity.

  1. If Coca-Colas equity cost of capital is 8%, what share price would you expect based on your estimate of the dividend growth rate?
  2. Given Coca-Colas share price, what would you conclude about your assessment of Coca-Colas future dividend growth?

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