Assuming a risk-free rate of 1% and a 3% yield to maturity on its bonds, what is coca-cola company’s cost of capital? assume a 7.5% market risk premium (mrp). book value of debt is 47.75 billion, stock price is 42.32, and there are 4255.2 million shares outstanding. tax rate is 20%. coca-cola’s beta is 0.57.

4.67%

Explanation:

Data provided in the question:

Risk-free rate = 1% = 0.01

yield to maturity on bonds = 3% = 0.03

Market Risk Premium = 7.5% = 0.075

Book value of debt = 47.75 Billion

Stock price = $42.32

shares outstanding = 4255.2 million

Tax rate = 20%

Beta = 0.57

Now,

Weighted average cost of capital  

= ( Weight of debt × after tax cost of debt ) + ( weight of equity × cost of equity  )

also,

Expected return = Risk free rate + beta × market risk premium

= 1% + ( 0.57 × 7.5% )

= 5.275%

Total value of equity = Stock price × Shares outstanding

= $42.32 × 4255.2 million

= $180.08 billion

Therefore,

WACC

= [47.75 ÷(180.08 + 47.75)] × 3% × (1 - 20%) + [180.08 ÷ (180.08 + 47.75)] × 5.275%

= ( 0.209 × 0.03 × 0.8 ) + ( 0.79 × 0.05275 )

= 0.005016 + 0.0417

= 0.0467

or

= 0.0467 × 100%

= 4.67%

ans.

heterothermic organisms include those organisms that can switch between homeothermic (having body temperature higher than environment) and poikilothermic (having variation in internal body temperature) strategies.

some migratory birds show heterothermy as they decrease their metabolic rate during cold nights to keep their body temperature low. drop in metabolic rate allows increase in production efficiency of birds that reduces the internal body temperature to make it equal to external cold temperature during cold nights.

thus, the correct answer is 'birds allow their temperature drop in order to increase their production efficiency.'