Coca Cola Amatil Case Study
The investment opportunity of the company has also been evaluated in the report. In this report, last 5 year’s stock price of company has been evaluated. And further, the WACC process has been conducted. This report also takes the concern of various cost of the company such as cost of equity and cost of debt. Gearing ratio calculations have also been done to identify the performance of the company. The organization is the backup organization of Coca cola. As indicated by the yearly report, 2017 organization has utilized around 14,700 representatives. In the report, money related execution of the organization has been assessed and the yearly report (2017) of the organization depicts that the aggregate income of the organization in 2017 was $ 4. 881 billion. The yearly report of the organization clarifies about the different changes into the capital structure and the monetary articulation of the organization in most recent couple of years.
The hazard free rate of the organization is 2. 41% (Bloomberg, 2018). Further, the market premium of the organization having been assessed based on file return of the organization which is 6%, the beta estimations have been done based on most recent 5 year stock cost of the organization which is 0. 721 (Yahoo back, 2018). Based on the above information, it has been discovered that the cost of value of the organization is 5% (Morningstar, 2018). 50% Tax rate 30. 0% Kd 5. 25% (Annual report, 2018) Weighted average cost of capital Based on the above evaluation, it has been recognized that the WACC estimations of COCA COLA AMATIL express about cost of equity and cost of capital. In current situation, the cost of obligation of the organization is 5. 25% and the aggregate part of obligation assets of the organization is 55%.
43% (Annual report, 2018) At the time of evaluating the gearing ratio of the organization, not huge issues have been faced. However, small issues such as which figures must be considered as long term liabilities etc has been faced. All the amount of current liabilities, total assets and the long term liabilities were given in the annual report of the company. And the gearing ratio formula was easily available in books (Strebulaev, 2007). The calculations of gearing ratio were quite easy. Figure 1: Capital structure Recommendation and conclusion Based on the above application and evaluation on the coca cola Amatil, it has been perceived that the cost of capital of the organization is 5. 14% and the outfitting proportion of the organization is 0. It clarifies that both the situation of the organization (hazard and cost position) is in the support of the organization.
The organization has dealt with the ideal capital structure and additionally the cost of the organization is likewise lower. In any case, it has been discovered that the cost of obligation is higher than the cost of capital of the organization. Further, the risk free rate of 5 years has been taken into concern and the rate has been identified at Bloomberg. The risk free rate of different time is different. The beta amount has been calculated on the basis of historical data of the company. And the market premium has been chosen 6% on the basis of requirements. The indicator rate has been taken from the annual report of the company. (Online). Retrieved on 12 May 2018 from: https://www. bloomberg. com/markets/rates-bonds/government-bonds/australia.
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