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The Coca-Cola Company Message Board

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  • Novalis_97 Novalis_97 Apr 4, 1998 12:08 AM Flag

    Value = present value of cash flows, not

    PVP (PV of a growing perpetuity) = C/(1+r) + C(1+g)/(1+r)^2 + C(1+g)/(1+r)^3 + ...

    Let a = "C/(1+r)" and b = "(1+g)/(1+r)."

    Then, PVP = a(1 + b + b^2 + b^3 + ...) (Equation 1)

    Then, multiply through the entire equation by b:

    bPVP = ab + ab^2 + ab^3 + ... (Equation 2)

    Then, subtract Equation 2 from Equation 1:

    PVP (1 - b) = a

    PVP = a / (1 - b) = [C/(1+r)] / [1 - (1+g)/(1+r)]
    = C / [(1+r)(1 - (1+g)/1+r))] = C / [1+r - (1+g)]
    = C / (r-g)

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    • I have been reading the last few posts, and was amazed of the formulas and explainations that was involved.

      I myself am not an Analyst, nor a broker, or any other financial related position. I am Network Engineer that supports LANs & WANs as well as designing web pages.

      My point is all this hard core stock analysis does not really matter when buying a company such as KO. It is what I call a no brainer.

      What is there to analyze, we all know what they (KO) do. I personally think such analysis can be more appropriately used in penny stocks. Not stocks like GE, KO, etc...

      regards, ODN1

    • Oh, I get it.

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