Final answer:
The beta of Coca-Cola's operating assets is estimated to be approximately 1.01 after adjustment for financial leverage, using the unlevered beta formula and given that the company's debt is risk-free.
Step-by-step explanation:
To estimate the beta of Coca-Cola's operating assets, also known as asset beta, we use the unlevered beta formula. This formula corrects the company's equity beta to account for financial leverage (debt). The equity beta (1.33) is affected by the company's debt-to-equity ratio (0.32). Given that the debt is risk-free, its beta is zero, and it does not contribute to the asset beta.
Therefore, the formula to find the unlevered (asset) beta is: Betaassets = Betaequity / (1 + (1 - Tax rate) * (Debt/Equity)) However, we do not have the tax rate available in the given information. Assuming a tax rate is not necessary since the debt is risk-free and its beta is zero, we can simplify the formula as: Betaassets = Betaequity / (1 + (Debt/Equity)) = 1.33 / (1 + 0.32) = 1.01 Therefore, the estimated beta of Coca-Cola's operating assets, not influenced by debt, is approximately 1.01.