Alpha Geek

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Category > Accounting Posted 03 May 2017 My Price 7.00

You are reading an analyst report suggesting

You are reading an analyst report suggesting that Coca Cola stock is substantially undervalued. The analyst is using a two-stage FCFE model, with high growth at 10% for 7 years and stable growth at 4% thereafter. The analyst assumes that net capital expenditures and changes in working capital increase at the same rate as earnings during the high growth period and drop to zero during stable growth. The analyst also assumes that the firm’s cost of equity equals 8.3% during the high growth period and drops to the Treasury Bond rate of 4.5% once the firm reaches stable growth.
Briefly describe the two most significant flaws in this analyst’s reasoning and how you would fix them.

May 13 2015 10:02 PM

 

 

Answers

Alpha Geek
(8)
Status NEW Posted 03 May 2017 03:05 PM My Price 7.00

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file 1493824874-answer1.docx preview (201 words )
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