Capital Structure Decisions and Coca Cola Co.
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All the questions are about Coca Cola Co. answer all questions about information that you find in the internet website.
The company that choose is Coca Cola Co.
1-Select a publicly traded company and obtain their financial statements, from these financial statements determine how the company is financed. What is the mix of the debt and equity financing? What type and mix of financing would you recommend for the company? Why?
2-"Given the objectives and capital structure of a firm, evaluate the mix of debt and equity financing needs of the firm."
3-Using the company that you are analyzing for your Group Project, let's look at the equity sections and liability sections of the balance sheet for a recent year-end or quarter. Since some of these questions may require a glance at the notes to the financial statements, it may in fact be best if you use an annual report and thus answer the questions with respect to the fiscal year-end. And the answers to some of these questions might be found elsewhere including on the financial web sites such as Yahoo or MSN.
4-
PREFERRED STOCK - Does the corporation have any outstanding preferred stock?
If so, is the amount significant? (Compared to the total equity and compared to the total debt and equity, that is.)
Briefly, what are the preferences on those shares?
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Solution Summary
This explains the concept of capital structure by taking the case study of CocaCola
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All this questions is about Coca Cola Co. answer all questions about information that you find in the internet website.
The company that chooses is Coca Cola Co.
1-Select a publicly traded company and obtain their financial statements, from these financial statements determine how the company is financed. What is the mix of the debt and equity financing? What type and mix of financing would you recommend for the company? Why?
Capital structure
Capital structure means mix composition of debt and equity in the organization. It affects the cost of capital of the organization. A firm's long-term success depends upon the firm's investments earning a sufficient rate of return. This sufficient or minimum rate of return necessary for a firm to succeed is called the cost of capital. The WACC is the weighted average of the cost of equity and the cost of debt based on the proportion of debt and equity in the company's capital structure. Following assumptions are important:
The estimation of the WACC is based on several key assumptions:
? It is market driven. It is the expected rate of return that the market requires to commit capital to an investment.
? It is a function of the investment, not the investor.
? It is forward looking, based on expected returns.
? The base against which the WACC is measured is market value, not book value.
? It is usually measured in nominal terms, which includes expected inflation.
? It is the link, called a discount rate, which equates expected future returns for the life of the investment with the present value of the investment at a given date.
Comments:
? Increase in cost of capital because externally ...
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