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Suppose that Coca-Cola wants to build a new production facility in Bloomington, Indiana. The project will require $100.00 million to get started. Coke will finance the $100.00 million using debt and common stock. Coke’s management desires the following long term financing mix for projects: 42.00% debt and 58.00% common equity.

Some additional information about the capital components for Coke:

DEBT: The project will use bonds with 10-year maturities. Coke has a bond issue currently trading on the market that pays an 7.25% annual coupon (with $1000 face) that is selling for $1,021.00.

COMMON STOCK: The current dividend for Coke is $2.20 and the price of the stock is $53.50. Dividends are expected to grow by 7.00% into the foreseeable future.

The tax rate facing the firm is 36.00%.

If we raise the capital proportionally, how much new debt will we need for the project? (express in terms of millions)

Answer Format: Currency: Round to: 2 decimal places.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92865657

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