Firm Valuation Project
COCA-COLA
ALAN WEN
Beta and WACC
There are three types of valuation used in this project, which include dividend-discount model, Discount
Cash Flow Model and Comparable. Before start on these models, We obtain 5 years weekly stock quotes of Coca-
Cola and S & P 500 from Yahoo Finance. We put these data in excel and used Beta function to calculate the beta. We chose
the 5yr weekly beta because it had a beta of 0.66, which was the highest estimated beta from historical data. This beta is our
“best” because the discount retail store industry is cyclical and the stock is sensitive to economic events. The Beta we
calculated is very close to the Beta from Yahoo Finance is 0.67. Therefore, 0.66 is the best Bate to use for this project.
Before calculated WACC, we need to calculate the required of return (Ke). The Market Risk Premium we
used is 7.5%,the Risk Free Rate use from 10 years of Treasury Bonds is 2.35%.To compute Ke, we then use
the SML formula and plug the numbers in:
Ke = rF +B (MRP)
Ke= 0.0235 + (0.075).066
Ke =0.0728 or 7.28%
