126
Table 8.1
The Coca-Cola Company Discounted Owner Earnings Using a T
wo-Stage “Dividend” Discount Model (first stage is ten years)
Ye a r
123456789
10
Prior year cash flow
$828
$0,952
$ 1,095
$1,259
$ 1,448
$1,665
$1,915
$2,202
$2,532
$2,912
Growth rate (add)
15%
15%
15%
15%
15%
15%
15%
15%
15%
15%
Cash flow
$952
$1,095
$ 1,259
$1,448
$ 1,665
$1,915
$2,202
$2,532
$2,912
$3,349
Discount factor (multiply)
0.9174
0.8417
0.7722
0.7084
0.6499
0.5963
0.5470
0.5019
0.4604
0.4224
Discounted value per annum
$873
$ 922
$
972
$1,026
$ 1,082
$1,142
$1,204
$1,271
$1,341
$1,415
Sum of present value of cash flows
$11,248
Residual Value
Cash flow in year 10
$ 3,349
Growth rate (
g) (add)
5%
Cash flow in year 11
$ 3,516
Capitalization rate (
k-g
)4
%
Value at end of year 10
$87,900
Discount factor at end of year 10 (multiply)
0.4224
Present Value of Residual
37,129
Market Value of Company
$48,377
Notes:
Assumed first-stage growth rate
=
15.0%; assumed second-stage growth rate
=
5.0%;
k=
discount rate
=
9.0%.
Dollar amounts are in millions.