Coca-Cola Co. (NYSE:KO) said on Thursday (21st February 2019) that it will raise its dividend by 2.6% and set a new program to repurchase up to 150 million shares. The beverage giant's stock rose 0.8% in morning trade. Coke's stock has lost 6.7% over the past three months, while the consumer staples ETF has slipped 0.1% and the Dow has gained 5.7%.

There are currently 4.268 billion shares outstanding. The last trading price of Coca-Cola's stock is $45.10, which is the offer price in the share repurchase. The cost of debt can be estimated based on the yield to maturity of an outstanding bond, which is 2.727%. Assume that debt beta is 0.0171. The risk-free rate is based on the 10-year Treasury bond yield (2.625%). 2 The market premium is 5.96%.3 Corporate tax rate is 21%. Coca-Cola's balance sheet is presented in Exhibit 1.

Leveraged recapitalization can have positive or negative consequences for the existing shareholders. As the Chief Executive Officer (CEO) of Coca-Cola, you will be presenting to the board of directors (BOD) of Coca-Cola as to how the company value can be affected by the leveraged recapitalization.

EXHIBIT I Coca-cola Co | Balance Sheet | Thomson Reuters Eikon* Balance Sheet Annual Standardised in Millions of LI.S. Dollars* 2014 2015 2016 2017 2018 31 - Der- Period End Date* 2114 31 - Der- 31 - Dec 31 - Der - 31 - Der - 21:115 20110 2017 2018 Assets ( $ Millions )\ Cash and Short "Term Investments 21 , 675 22, 201 20, 075 15,0 014 Accounts Receivable -"Trade , Net 4 , 4^ 3, 041 3, 8:50 3, 607 3, 3.90 " Total Inventory* 3 , 1010 2,0 012 2 , 675 2 , 655 2 , TO` I'VEpaid Expenses 2, 0102 2 , 135 1 , 76` 1 , 202 1, 8:49 Other Current Assets ,"Total* 1 , 683 3.512 9+9' L 1 19 ' t "Total Current Assets 32.08 0 3.3, 395 34, 1910 30 , 545 Property / Plant /" Equipment , "Total - Net 14 , 613.3 12, 571 101, 635 8, 203 8, 2.32 Goodwill , Net 12 , 1010 1 1 , 289 10, 029 9, 401 10, 203 Intangibles , Net 14 , 272 12, 8:43 10,49 9 7 . 235 TOOT Long Term Investments* 13, 6127 15 , 791 17 , 250 21 , 952 201 , 274 Other Long I'emm Assets ,"Total 4 , 4015 4, 107 4 , 247 4. 5^ "Total ASSETS 72,1123 80,090 $7, 270 $3, 210 Liabilities ( 5 Millions ) Accounts Payable 2, 0189 2 , 618.2 2, 248 2, 498 Payable / Accrued ( 10.3) Accrued Expenses 7 , 145 6, 1 10 6, 28:4 6, 205 Notes Payable / Short Term Debt* 19, 130 13, 129 12 , 498 13 , 205 13, 194 Current Part . of L ' T' Debt /' Capital Leases 3. 552 2, 670 3, 527 3 , 208 4,197 Other Current liabilities ."Intal 45% 1 , 780 1, 872 2, 119 2, 209 " Total Current Liabilities 32, 374 20, 029 201, 5.32 27 , 194 29, 223 "Total Long, "I'emm Debt 10,010.3 28, 31 1 20, 0184 31 , 182 25, 3.04 Deferred Income Tax 5, 630 4 , 6:21 3. 753 2, 522 1, 93.3 Minority Interest 241 210 158 1,005 2, 0177 Other Liabilities , Total 4. 3^ 4, 3.011 $, (121 7, 638 " Total Liabilities 6 1. 703 64, 442\ 6 4, 2018 70, $:24 60, 2:35 Shareholders Equity 15 Millions* " Total Equity 301, 320 25, 554 23, 0101 2 17 , 172 10.981 "Total Liabilities & Shareholders' Equity* 12.0123 `, 210