Question

Consider buying Coca-Cola stock. Calculate the fundamental value of Coca-Cola using the following information. Quarterly dividend of $0.33/share (assume a dividend was just paid) Coca-Cola plans to keep the dividend fixed for the next 4quarters Projected price in1 2-months = $48 Quarterly discount rate of 2%

Answer 1

Answer:

Present Vlaue of the stock  = $45.60

Explanation:

The question is primarily to determine the present value of the investment in Coc-Cola Stock based on the information provided as follows

The Stock Price ast the end = $48 (this will be added at the end with the last dividend)

The Quarterly dividend per year = $0.3

The period = 4 quarters (in a 12 month period) = n

Discount rate = 2% = r

The present value = Dividend per share / (1+r)∧1 + Dividend per share / (1+r)∧2 + Dividend per share / (1+r)∧3 + Stock Price given + Dividend per share / (1+r)∧4

= 0.33 / 1.02∧1 + 0.33 / 1.02∧2 + 0.33 / 1.02∧3 + (48 + 0.33) / 1.02∧4

= $45.60