Coca-Cola Corp. needs to purchase new plastic moulding machines to meet the demand for its product. The cost of the equipment is $3,028,000. It is estimated that the firm will increase after tax cash flow (ATCF) by $611,671 annually for the next 5 years. The firm is financed with 40% debt and 60% equity, both based on current market values, though the firm has announced that it wants to quickly change its debt to equity ratio to 1.5. The firm's beta is 1.24, the risk free rate is 3.82% and the expected market return is 7.23%. Coca-Cola Corp.'s semi-annual bonds have 11.80% coupons, 22 years to maturity, and a quoted price of 91.547. Assume the firm's tax rate is 34%. The firm's last 5 dividends (the last in the list is D0) are 1.23, 1.60, 2.04, 2.51, and 2.87. Its current market price is $107.06.

Question 3, Short Answer E: Coca-Cola Corp. is changing its capital structure (target debt to equity ratio). In calculating WACC, we assume this only changes the weights used in the calculation. However, in our discussions (videos), we discussed how this change might affect other parts of the WACC calculation. What else might change in the WACC calculation, why would it change, and what factors would influence this? (10 marks)