cost of capital

| April 27, 2015

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The company I choose which is Coca Cola company.

  1. Cost of Capital

As a CFO of the company, you want to estimate the cost of capital for the firm you choose. The following

questions will lead you through the steps to calculate this estimate. (Hint: it might be useful to read the

section “Calculating the WACC for Eastman Chemical” in the textbook page 459-462.)

Applying Chapter 6, 8, 9, and 14:

1) Look on the balance sheet of 2013 that you used for the previous case to find the book value of

debt and the book value of equity. If you look further down the financial report (10-K or 10-Q),

you should find a section titled “Long-term Debt and Interest Rate Risk Management” that will

provide a breakdown of the company’s long-term debt. What is the book value of debt and the

book value of equity of the firm? What kind of long-term debt they have?

2) To estimate the cost of equity, go to http://finance.yahoo.com/ and enter the ticker symbol of

your company. Follow the links to answer the following questions (Hint: look up a stock, then

click on “key statistics” on the right):

  • What is the most recent stock price listed for your company?
  • How many shares of stock does your company have outstanding?
  • What is the market value of equity, or market capitalization?
  • What is the most recent “annual” dividend?
  • What is the beta for your company?

Additional information and thoughts on the project:

  • Please read each questions carefully and make sure that you answer all the questions above.
  • Please note that you can quote existing analyst reports or news articles in constructing this

report. However, I expect you to properly cite any sources that you use, and the majority of

your analysis in this report should be original work (based on your own research into the firm

and your examinations of their financial statements). If a group tries to pass off the work of

other authors or analysts as original work, that group will receive a zero on the assignment.

  • If you quote any information from other sources, you should cite the sources of the information

as an appendix.

  • Including any (original) graphs, charts, and tables that you think would help illustrate your points

is a plus.

  • There is no “right” or “wrong” answers to many parts of this assignment, such as making

future projections of firm trends, creating your own valuation of the firm’s stock price,

estimating the cost of capital, etc. However, I expect you to explain and justify the choices you

make, especially if those choices produce results that are far out of pattern with existing firm

trends. Failure to adequately explain and justify your choices will result in a lower grade.

  • Groups that show extra creativity and attention to detail and go “above and beyond” the

requirements listed above will receive higher grades. Be creative!

  • If you have question on any of the requirements above or in general, feel free to ask.

 

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2018DISC
Recognition of Revenue
Business Combination

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Category: Finance and Accounting

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