Valuing Coca-Cola Using The Free Cash Flow To Equity Valuation Model

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John C. Gardner
Carl B. McGowan, Jr
Susan E. Moeller

Keywords

Coca-Cola, Free Cash Flow to Equity, Equity Valuation, Super-normal Growth Model

Abstract

In this paper, we provide a detailed example of applying the free cash flow to equity valuation model proposed in Damodaran (2006). Damodaran (2006) argues that the value of a stock is the discounted present value of the future free cash flow to equity discounted at the cost of equity. We combine the free cash flow to equity model with the super-normal growth model to determine the current value of Coca-Cola. At the time of this paper, we determined a value of Coca-Cola at $161 billion using the free cash flow to equity model, and the actual market value of Coca-Cola was $150 billion.

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