By Carl McGowan
The worth of an organization is the discounted current price of destiny money flows supplied by means of the corporate to the shareholders. The valuation method calls for that the company monetary choice maker be certain the longer term loose money circulation to fairness, the temporary development fee, the long term development expense, and the mandatory expense of go back according to industry beta. The publication discusses the Black-Scholes alternative pricing version and the weighted typical expense of capital. the target of this publication is to supply a template for demonstrating company monetary administration utilizing a true corporation - Coca-Cola. the information utilized in this booklet comes from the monetary statements of Coca-Cola to be had on EDGAR. different information are from SBBI, Yahoo! Finance, the U. S. Bureau of financial research, shares, Bonds, debts, and Inflation, industry effects for 1926 -2010, 2011 Yearbook, vintage version, Morningstar, and US division of the Treasury
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Additional resources for Corporate valuation using the free cash flow method applied to Coca-Cola
Beta coefficient lines are calculated using a 60-month regression. In this example, the beta coefficient for CocaCola is calculated using 60 monthly observations of returns for CocaCola from January 1, 2004 to December 31, 2013, and returns for the S&P 500 Index for the same time period. Beta is the covariance between returns for Coca-Cola and returns for the S&P 500 divided by the variance for the S&P 500. 3) 22 CORPORATE VALUATION USING THE FREE CASH FLOW METHOD BetaKO =the slope of the regression line between returns for the market and returns for Coca-Cola AlphaKO = the intercept coefficient for the regression line between returns for the market and returns for Coca-Cola (Rm) =the return on the S&P 500 stock market index (Rm − RF) =the market risk premium is the additional return that stockholders receive for the additional risk of holding stocks rather than the risk-free asset, long-term government bonds.
This is the value that is used as the estimate of long-term growth for Coca-Cola. 1 shows GDP for the 10-year time period. The change in GDP is positive for 9 of the 10 years. The only year with negative growth is 2009. 2 shows the change in GDP for each of the 10 years. 88 GDP in billions of current dollars *GDP, gross domestic product. 2 Change in gross domestic product (GDP), 2004–2013 CHAPTER 4 Calculating the Beta Coefficient and Required Rate of Return for Coca-Cola In Chapter 4, we demonstrate how to compute the required rate of return for Coca-Cola using modern portfolio theory (MPT) with data downloaded from the Internet.
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