Coca-Cola WACC - Weighted Average Cost of Capital
The WACC of Coca-Cola Co (KO) is 6.4%.
| Range | Selected | |
| Cost of equity | 5.8% - 7.7% | 6.75% |
| Tax rate | 18.4% - 19.3% | 18.85% |
| Cost of debt | 4.0% - 4.9% | 4.45% |
| WACC | 5.5% - 7.2% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.42 | 0.51 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.8% | 7.7% |
| Tax rate | 18.4% | 19.3% |
| Debt/Equity ratio | 0.14 | 0.14 |
| Cost of debt | 4.0% | 4.9% |
| After-tax WACC | 5.5% | 7.2% |
| Selected WACC | 6.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| KO | Coca-Cola Co | 0.14 | 0.15 | 0.13 |
| CCEP | Coca-Cola European Partners PLC | 0.3 | 0.33 | 0.27 |
| CELH | Celsius Holdings Inc | 0 | 0.58 | 0.58 |
| COKE | Coca-Cola Consolidated Inc | 0.18 | 0.3 | 0.26 |
| KDP | Keurig Dr Pepper Inc | 0.36 | 0.15 | 0.11 |
| MNST | Monster Beverage Corp | 0.01 | 0.23 | 0.23 |
| NBEV | Newage Inc | 2.3 | 1.41 | 0.49 |
| PEP | PepsiCo Inc | 0.24 | 0.03 | 0.03 |
| PRMW.TO | Primo Water Corp (MISSISSAUGA) | 0.29 | -0.25 | -0.2 |
| REED | Reed's Inc | 0.19 | -0.3 | -0.26 |
| Low | High | |
| Unlevered beta | 0.13 | 0.24 |
| Relevered beta | 0.13 | 0.27 |
| Adjusted relevered beta | 0.42 | 0.51 |
Coca-Cola's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for Coca-Cola:
cost_of_equity (6.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.42) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.