Essay about Valuing Coca Cola Stock - 1214 Words

Valuing of Coca Cola Stock and Analysis Andrew Burgoyne, James Desimone, Bailey Fowble, Hewei Huang, Ryan Leist, Maria Sandoval University of South Florida FIN 4414 Abstract 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. Background 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†¦The market rate of return for 1996 was 22.96%, however we averaged the previous 5 years to get a better picture of the market rate of return. This averaging put the rate of return 15.91% which is more manageable than 22.96%. We also assumed that the dividend growth rate was 12% and that the shares of Coca-Cola were trading at $58 per share at the time. Capital Asset Pricing Model The Capital Asset Pricing Model or CAPM is one of the most popular methods for estimating an equity investor’s required return by finding the discount rate. From the information provided in the case, we were informed that the current government bond yields were 5.09% on 90-day treasury bills, 5.79% on 5-year bonds, 5.91% on 10-year bonds and 6.22% on 30-year bonds. We were also given that by definition the market had a ÃŽ ² of 1.0, less risky stocks have ÃŽ ² lt; 1.0 and more risky stocks have ÃŽ ² gt; 1.0. Lastly, we were told that Jessie noted that the historical market risk premium (Rm – Rf) was in the 6% range. The equation used to approximate the investors required rate of return is: r = Rf+ ÃŽ ² (Rm-Rf) Rf represents the risk-free return, which U.S Treasury bills are usually the proxy used. ÃŽ ² represents the beta, which is used to measure risk associated with stocks: The adjusted ÃŽ ² of 1.24 was used because it takes into consideration an estimation of future ÃŽ ²Ã¢â‚¬â„¢s rather than just historical which is what the raw ÃŽ ² is based on. Rm representsShow MoreRelatedThe Price Of A Coca Cola1414 Words   |  6 PagesThe graph below represents the price of a Coca-Cola stock from 1988 onwards (the availability of the data is from 1988). Over the past three or four years from 2012 onwards, the price of the stock has fallen from around $14 to around $9. A reasonable growth rate for the company in the future would be around 1 to 2%, taking into account of macroeconomic conditions and changes in consumer preferences. However, since Coca-Cola is a global brand with relatively large market share, the duration of declineRead MoreComparative Human Resource Analysis : Coca Cola And Pepsico1465 Words   |  6 PagesAnalysis: Coca-Cola and PepsiCo. Abhiram Satyadev Goldey Beacom College Course Name 02/16/2017 Table of Contents 1. Competition for Employees†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.3 2. Compensation of Employees†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..4 3. Legislation Concerning Employees.†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦...5 4. Human Relations Discussion†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..6 5. Conclusions†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦7 6. References†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦8 Comparative Human Resource Analysis: Coca-Cola v/sRead MoreFinancial Ratio Analysis : Coca Cola Company1608 Words   |  7 Pagescase â€Å"numerical† obtained from a firm’s financial statement. They are basis of valuing a company hence it’s a complex task that requires a critical analysis of various components of financial ratio such as profitability ratio, debt ratio, investment valuation ratio, operating performance ratio, cash flow indicator ratio and liquidity measurement ratio. Therefore, the following financial ratio analysis shall value Coca-Cola consolidated company and PepsiCo Inc. (PEP) through a critical comparison basedRead MoreCase Study PepsiCo1737 Words   |  7 Pagesin which Pepsi operates in is quite competitive and has global brands such as Coca-Cola Inc. Pepsi has however managed to cut a niche for itself through targeting specific demographic groups and advertising directly to them. The two American companies have been rivals for quite a while now, with each trying to exert dominance over the other in varied markets. In the US, Pepsi controls 30% market share while Coca-cola holds about 42%. Pepsi is heavily involved in sponsorship activities for sportsRead MoreEconomic Theory Suggests That Markets Are Efficient and Security Prices Are Determined on the Basis of Fundamental Value2720 Words   |  11 PagesDetermined on the Basis of Fundamental Value ¡Ã‚ ¨ Market efficiency requires that security prices react immediately in an unbiased way to the receipt of new information (Robert Shiller S1998). In other words, an efficient capital market is one in which stock prices fully reflect available information. In addition, there are three conditions for market efficiency; information flows freely, market is composed of rational investors where all competing against each other with the objective of maximizing wealthRead MoreCapital Structure Policies1538 Words   |  7 Pagesmodel results for PepsiCo Inc. and Coca-Cola Co., over the past three year period the company with the higher amount of leverage, which indicates a higher amount of debt, the ROE is consistently higher. In 2013, for example, PepsiCo had a leverage of 3.19 and ROE of 27.76%, compared with Coca Cola’s leverage of 2.71 and ROE of 25.88%. Going back to 2012 results, the value of the DuPont analysis is evidenced as both companies had similar ROE returns, however; Coc a-Cola’s leverage was only 2.63 comparedRead MoreJob Cost Of Job Costing1267 Words   |  6 Pagesguide to short-run decision making, provided that the unit costs are analysed into fixed and variable elements. 3. As a guide to price determination, in firms which use cost-plus pricing (probably a majority – see Skinner [13]). 4. As a basis for valuing stocks of finished units† (Skinner 1978) Process costing takes into consideration the items which are currently in the process of being manufactured by calculating what is known as conversion costs. Conversion costs are values assigned to the itemsRead MoreEssay about Analysis of the Coca Cola Company4607 Words   |  19 PagesAnalysis of the Coca Cola Company History Coca-Cola enterprises Incorporated, employees 66,199 operates, 444 facilities, 47,235 vehicles, 1.9 million pieces of cold drink equipment and sold 3.8billion unit cases in 46 states in the united states, all 10 provinces of Canada and portions of Europe including Belgium, France, Great Britain, Luxembourg and the Netherlands (Coca-Cola facts 99). An, Atlanta Pharmacist Dr. John Slyth Pemberton founded Coca-Cola on May 8, 1886. The carmel colored ingredientsRead MorePepsico vs. Coca-Cola Essay3692 Words   |  15 PagesPepsiCo vs. Coca-Cola – A Financial Comparison June 13, 2007 AC550 May 2007 Executive Summary The purpose of this comparative analysis is to provide a summary of financial and accounting information to a potential investor who is looking to invest in either Coca-Cola or PepsiCo. This research will cover some facts from the financial statements of both companies for the year of 2004. There are many factors to review when comparing these two companies. They are two of the top manufacturersRead MoreEssay Case Study 13539 Words   |  15 Pagesequity can be thought of any assets after all its debts associated with that asset have been paid off. For example, a car or house with no outstanding debt is considered the owner’s equity because he or she can readily sell the items for cash. Even stocks are equity because they represent ownership in a company (Walther et al, 2012). So in conclusion, if we show equity under asset in the balance sheet, it will not only be unbalanced but because equity is what forms the assets along with its liabilities