Calculate the cost of equity and cost of preferred stock

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Question

A firm's optimal capital structure report depends on its balance sheet's debt and equity mix.

A firm's cost of capital is based on the rates of its sources of capital. Propose the optimal capital structure Coca-Cola's and PepsiCo's optimal capital structure report depends on both firm's balance sheet's debt and equity mix.

for both firms, Coca-Cola and PepsiCo. by calculating their mathematical effect of the proposal on the weighted average cost of capital (WAAC). Complete the following:

1. Calculate the cost of equity, the cost of preferred stock, and the cost of debt for Coca-Cola and PepsiCo.

2. Compute the weighted average cost of capital for each company Coca-Cola and PepsiCo.

3. Evaluate whether Coca-Cola's and PepsiCo's rates calculated are too high or too low based on the financial statements.

4. Determine if Coca-Cola and PepsiCo firms' is operating at an optimal capital structure.

Reference no: EM133674242

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