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COKE
HRL
Payout Ratio
(%)
COKE
Payout
Ratio
EPS ($) DPS ($) (%)
HRL
Payout
Ratio (%)
27
Year
1998
EPS
($) DPS ($)
1.75
1.00
0.52
29
1997
1.79
1.00
56
0.72
0.39
54
1.65
0.45
27
1996
1.73
1.00
58
0.52
0.30
58
29
1.33
0.42
32
1995
1.67
1.00
60
0.79
0.29
37
1.00
39
1.35
0.39
29
1994
1.52
1.00
66
0.77
0.25
32
1.00
93
1.30
0.37
28
1993
1.60
0.88
55
0.66
0.22
33
0.71
1.00
141
1.20
0.35
29
1992 (0.23)
0.88
NM*
0.62
0.18
29
0.37
1.00
270
1.11
0.33
30
Year
EPS ($)
DPS ($)
2006
2.55
1.00
39
2.05
0.56
2005
2.53
1.00
40
1.82
2004
2.41
1.00
41
2003
3.40
1.00
2002
2.56
2001
1.07
2000
1999
57
EPS
Payout
($) DPS ($) Ratio (%)
0.93
0.32
34
19801989
19901999
20002006
Australia
3.4%
3.3%
3.1%
Canada
3.0
2.4
3.0
Denmark
2.2
2.3
2.0
France
2.1
1.8
2.0
Germany
1.9
1.3
1.3
Italy
2.4
1.5
1.3
Japan
3.9
1.7
1.6
Netherlands
2.0
3.0
1.9
Sweden
2.4
1.8
2.9
Switzerland
1.8
1.1
1.9
United Kingdom
2.4
2.1
2.7
United States
3.1
3.1
2.6
g = 5.75%
g = 6.00%
g = 6.25%
r = 9.00%
$22.13
$24.03
$26.27
r = 9.25%
$20.55
$22.18
$24.08
r = 9.50%
$19.18
$20.59
$22.23
Company
r*
E1
Price
E1/r
PVGO
PVGO/Price
Google, Inc.
2.09
13.7%
$15.88
$332.0
115.91
216.09
65.1%
McDonalds
Corp.
1.04
9.0
3.45
53.35
38.33
15.02
28.2
Macys Inc.
1.28
10.1
1.30
10.50
12.87
2.37
22.6
*The required rate of return is estimated using the CAPM with the following inputs: the beta
from the Standard & Poors Stock Reports, 4.3 percent (30-year U.S. T-bond rate) for the
risk-free rate of return, and 4.5 percent for the equity risk premium.
Source: Standard & Poors Stock Reports for beta, earnings estimate, and price of each.
Time
Value
Calculation
Dt or Vt
Present Values
Dt/(1.097)t or
Vt/(1.097)t
D1
0.14(1.15)
0.1610
0.1468
D2
0.14(1.15)2
0.1852
0.1539
D3
0.14(1.15)3
0.2129
0.1613
D4
0.14(1.15)4
0.2449
0.1691
D5
0.14(1.15)5
0.2816
0.1772
D6
0.14(1.15)6
0.3238
0.1858
D7
0.14(1.15)7
0.3724
0.1948
D8
0.14(1.15)8
0.4283
0.2042
D9
0.14(1.15)9
0.4925
0.2141
10
D10
0.14(1.15)10
0.5664
0.2244
10
V10
0.14(1.15)10(1.08)/(0.097
0.08)
35.9817
14.2566
Total
16.0882
Time
Value
Calculation
Dt or Vt
Present Values
Dt/(1.105)t or
Vt/(1.105)t
D1
$1.48(1.10)1
$1.6280
$1.4733
D2
1.48(1.10)2
1.7908
1.4666
D3
1.48(1.10)3
1.9699
1.4600
D4
1.48(1.10)4
2.1669
1.4534
V4
14 [1.48(1.10)4/0.40]
= 14 [2.1669/0.40]
= 14 5.4172
75.8404
50.8688
Total
$56.72
Time
Value
Calculation
Dt or Vt
Present
Values
Dt/(1.12)t or
Vt/(1.12)t
D1
1.60(1.14)
$1.8240
$1.6286
D2
1.60(1.14)2
2.0794
1.6577
D3
1.60(1.14)2(1.12)
2.3289
1.6577
D4
1.60(1.14)2(1.12)2
2.6083
1.6577
D5
1.60(1.14)2(1.12)3
2.9214
1.6577
D6
1.60(1.14)2(1.12)4
3.2719
1.6577
D7
1.60(1.14)2(1.12)5
3.6645
1.6577
V7
1.60(1.14)2(1.12)5(1.102)/(0.12 0.102)
$224.3515
101.4852
Total
$113.0600
Time
Dt or Vt
Explanation of Dt or Value of Dt or
Vt
Vt
PV at 10%
D1
0.46(1.12)1
$0.5152
$0.4684
D2
0.46(1.12)2
0.5770
0.4769
D3
0.46(1.12)3
0.6463
0.4855
D4
0.46(1.12)4
0.7238
0.4944
D5
0.46(1.12)5
0.8107
0.5034
V5
H-model explained
above
$42.1564
26.1758
Total
$28.6044
Time
Dt or Vt
Explanation of Dt or Vt Value of Dt or Vt PV at
10%
D1
0.46(1.12)1
D2
$0.5152
$0.4684
No growth in Year 2
0.5152
0.4258
D3
0.46(1.12)2
0.5770
0.4335
D4
0.46(1.12)3
0.6463
0.4414
D5
0.46(1.12)4
0.7238
0.4494
V5
$37.6376
23.3700
Total
$25.5885
Year
Dt or Vt
Value of Dt or Vt
Explanation of Dt or Vt
D1
$21.00
$18.75
D2
18.90
15.07
D3
17.01
12.11
D4
15.31
9.73
D5
60.00
34.05
Set at $60
D6
40.00
20.27
Set at $40
D7
40.00
18.09
Set at $40
V7
600.00
271.41
V7 = D8/(r g)
V7 = (40.00 1.05)/(0.12 0.05)
Total
$399.48
Time
Dt
$1.8094
$1.6497
$1.6449
1.9722
1.6394
1.6300
2.1497
1.6293
1.6151
2.3432
1.6192
1.6005
2.5541
1.6092
1.5859
2.7840
1.5992
1.5715
2.9789
Subtotal 1
(t = 1 to 6)
$9.75
$9.65
Subtotal 2
(t = 7 to `)
$63.85
$56.05
Total
$73.60
$65.70
Market Price
$66.19
$66.19
Year
ROE (%)
Financial
Leverage
2006
30.6 =
10.30
0.821
3.62
2005
24.7 =
8.77
0.880
3.20
2004
29.3 =
8.77
0.910
3.67
2003
30.1 =
8.54
0.940
3.75
Year 2
Year 3
Year 4
Year 5
Income statement
Sales
$100.00
$120.00
$138.00
EBIT
20.00
24.00
24.84
24.29
26.72
4.00
4.83
5.35
5.64
6.18
16.00
19.17
19.49
18.65
20.54
Taxes
6.40
7.67
7.80
7.46
8.22
Net income
9.60
11.50
11.69
11.19
12.32
Dividends
1.92
2.30
3.51
4.48
6.16
Total assets
$80.00
$96.00
$110.40
$121.44 $133.58
Total debt
$40.00
$48.32
$53.52
$56.38 $61.81
Equity
$40.00
$47.68
$56.88
$65.06 $71.77
Interest
EBT
$151.80 $166.98
Balance sheet