Coca-Cola Company

DCF to market -39.3% (tolerance 15.0%). the discount rate: the common beta of 1 in the cost of equity (Valuation / Cost of equity / Beta), with the steady state's terminal growth of 3.7 per cent: the DCF's equity value over the market capitalisation, less one: about 39 per cent below it. The cause is the discount rate: the market's enterprise value implies a steady-state WACC of about 6.7 per cent, 2.4 points under the model's 9.03 at the common beta of 1; KO's own regression beta of 0.33 would give a cost of equity near 6.4 per cent and close most of the gap. Equivalently the market prices residual operating income growing about 6.6 per cent a year after FY2036 against the model's 3.7, where revenue grew about 7.7 per cent a year over FY2020 to FY2025 (5.5 per cent over FY2021 to FY20

Residual income to market -39.5% (tolerance 15.0%). the discount rate: the common beta of 1 in the cost of equity (Valuation / Cost of equity / Beta), with residual operating income persisting at the long-run nominal growth of 3.7 per cent: the residual-income equity value over the market capitalisation, less one: about 40 per cent below it. Residual income lands 0.2 per cent from the DCF, so the gap has the DCF's cause: the market's steady-state WACC of about 6.7 per cent against the model's 9.03, or residual operating income growing about 6.6 per cent a year after FY2036 against 3.7, where revenue grew about 7.7 per cent a year over FY2020 to FY2025 (5.5 per cent over FY2021 to FY2025, after the 2021 rebound) and ROIC ran 26 to 32 per cent over FY2021 to FY2025.