Question: Exercise 8A: Perform an EPS/EBIT Analysis for Coca-Cola Instructions Amount Coca-Cola needs: $5,000 million to build four new manufacturing plants outside the United States Interest

Exercise 8A: Perform an EPS/EBIT Analysis for Coca-Cola

Instructions

Amount Coca-Cola needs: $5,000 million to build four new manufacturing plants outside the United States

  • Interest rate: 5%

  • Tax rate: 21%

  • Stock price: $45.54 as of January 2, 2018

  • Number of shares outstanding: 4,255 million

  • EBIT: Pessimistic: $7,000 million, Realistic: $9,000 million, Optimistic: $11,000 million

Steps

  1. Prepare an EPS/EBIT analysis for Coca-Cola. Determine whether the company should use all debt, all stock, or a 50-50 combination of debt and stock to finance this market-development strategy.

  2. Develop an EPS/EBIT chart after completing the EPS/EBIT table.

  3. Next, give a three-sentence recommendation for Coca-Colas CFO.

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