I do not recommend to anyone relying on the PowerPoint slides for making any decision on whether to invest on Coca-Cola stock. These slides were published for potential employers to gain information about my educational background, not for financial advice. *Update / Correction: Pepsi was stated as a substitute under the discussion of Porter's Five Forces. This cannot be true because Porter's Five Forces clearly states that a substitute cannot be competitors' similar products. Instead, a substitute is considered an entirely different product groups. So, in this case, Pepsi is not considered a substitute for Coke but Gatorade, Budweiser, coffee and tea.

1. The Coca-Cola Company Corporate Valuation

2. Overview
 The Coca-Cola Company
 SWOT & Porter’s 5 Forces
 DuPont Analysis
 Ratio Analysis
 Analysis of Firm Risk
 WACC
 Gordon Dividend Model
 Recommendations

3. The Coca-Cola Company
From 1886 to 2011

4. CSD Market Share - 2010

5. SWOT Analysis: Strengths
 Strong brand identity
 Highest Market Share in CSD
 Large distribution network
 Various product lines
 Globalization

6. SWOT Analysis: Weaknesses
 Brand failures
 Product recalls
 Destocking of products

7. SWOT Analysis: Opportunities
 Potential growth outside US
 Increased bottled water
consumption
 Acquisition of CCE
 New product penetration
 NARTD market growth
(Non-alcoholic ready-to-drink)

8. SWOT Analysis: Threats
Porter’s Five Forces

9. Porter’s 5 Forces: New Entrants
 Brand Loyalty
 Advertising Ability
 Access to Distribution Channels
 Supplier Availability

10. Porter’s 5 Forces: Substitute
Products
 Pepsi
 Gatorade
 Budweiser
 Coffee/ Tea Brands

11. Porter’s 5 Forces:
Bargaining Power of Buyers
 Fast Food Chains
 Vending Machines
 Convenience Stores
 Super Markets

12. Porter’s 5 Forces: Bargaining
Power of Suppliers
 Low Cost of Raw Materials
 High Volumes of Raw Materials
 Low Switching Costs

13. Porter’s 5 Forces: Competitor
Rivalry
 Advertising/ Marketing Strategies
 Differentiated Products
 Consumer Control
 Expansion Opportunities

14. Ratio Analysis - DuPont
 Helps to determine the financial strength of
a company
 Examines trends and causes of ROE
 ROE is calculated as:
Net Profit Margin (NPM) × Asset Turnover Ratio
(AT) × Equity Multiplier Ratio (EM)

15. Ratio Analysis - DuPont

16. Ratio Analysis - DuPont
 The components of ROE:
 Net Profit Margin – operating efficiency
 Net Income ÷ Sales
 Asset Turnover – asset use efficiency
 Sales ÷ Total Assets
 Equity Multiplier – financial leverage
 Total Assets ÷Total Equity

17. Ratio Analysis - DuPont

18. Ratio Analysis - DuPont

19. Ratio Analysis - DuPont

20. Total Debt Ratio & D/E Ratio

21. Net Working Capital &
Current Ratio

22. Analysis of Firm Risk
 Calculation of Altman Z-Score
Z > 2.99= Strong
 2.99 > Z > 1.81= “Grey Zone”
 Z < 1.81= Weak
Z = 1.2( WC÷TA) + 1.4(RE÷TA) + 3.3(EBIT÷TA) + 0.6(MVE÷TL) + 0.999(Sales÷TA)
4.07 1.2(3,071,000÷ 1.4(49,278,000÷ 3.3(8,449,000÷ 0.6(153,043,480÷ 0.999(35,119,000÷
72,921,000) + 72,921,000) + 72,921,000) + 41,604,000) + 72,921,000)

23. Analysis of Firm Risk


24. WACC (Weighted Average Cost of Capital)


25. WACC Variables


26. WACC Calculation


27. Gordon Dividend Model
Stock Price (Constant required rate of return)
Lower than expected growth (5.4%) ������������ = ������0 = 1.88 1 + 0.054 / 0.0899 − 0.054 = $55.20
Lower than expected growth (6.0%) ������������ = ������0 = 1.88 1 + 0.060 / 0.0899 − 0.060 = $66.64
Expected growth (6.4%) ������������ = ������0 = 1.88 1 + 0.064 / 0.0899 − 0.064 = $77.23
Higher than expected growth (7.4%) ������������ = ������0 = 1.88 1 + 0.074 / 0.0899 − 0.074 = $126.99
Stock Price (Constant growth rate at 6.4%)
Lower cost of capital (7.99%) ������������ = ������0 = 1.88 1 + 0.064 / 0.0799 − 0.064 = $125.81
Expected cost of capital (8.99%) ������������ = ������0 = 1.88 1 + 0.064 / 0.0899 − 0.064 = $77.23
Higher cost of capital (9.40%) ������������ = ������0 = 1.88 1 + 0.064 / 0.0940 − 0.064 = $66.68
Higher cost of capital (9.99%) ������������ = ������0 = 1.88 1 + 0.064 / 0.0999 − 0.064 = $55.72

28. Conclusion/ Recommendations
 Risks: Emerging Competition, Changing
Consumer Preferences, Exchange Rate
Fluctuations
 Buy Coca-Cola Stock at Current Market
Value ($66.31)
 Hold Coca-Cola Stock if GR lower than 6%
or Expected Cost of Capital is above 9.45%
 Coca-Cola is fairly stable and would be an
excellent Long-Term Investment

29. Questions?
The Coca-Cola Company Corporate Valuation