Question
Assume that the Coca-Cola Company is planning to expand more in the Indian market by opening another Coca-Cola plant which will generate $20,000,000 free cash
Assume that the Coca-Cola Company is planning to expand more in the Indian market by opening another Coca-Cola plant which will generate $20,000,000 free cash flow per year for the next 5 years and you are provided the following information:
New debt(bond sales) = $20MM Time to maturity 15years Coupon rate (Rd) = 6% Face Value = $100,000 Current bond yield = 4.42%
New Common equity capital = $50MM Expected dividend per share after one year of operation D1 = $2 Re=cost of capital = 4.33% corporate taxes = 35%
What is the WACC of Coca-Cola Company?
What is the net present value (NPV) of the project that the Coca-Cola Company is planning to start? Based on NPV, what would you recommend to Coca-Cola Company?
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