Compute the company effective interest rate

Question

Problem: The following information is from Coca-Cola Company's 2006 annual report:

Long-term Debt: 

($ in millions)				2006	2005
5 3/4 % U.S. dollar notes due 2009				399	399
5 3/4 % U.S. dollar notes due 2011				499	499
7 3/8 % U.S. dollar notes due 2093				116	116
Other , due 2002 to 2013				333	168
				1347	1182
Less current portion				33	28
				1314	1154

The principal amount of our long-term debt tat had fixed and variable interest rates, respectively, was $1,346 million and $1 million on December 31, 2006…and $1,181 million and $1 million on December 31, 2005. The weighted-average interest rate on long-term debt was 6 percent for both years ended December 31, 2006 and 2005, respectively. Total interest paid was approximately $212 million, $233 million, and $188 million in 2006, 2005, 2004, respectively. Maturities of long-term debt for the five years succeeding December 31, 2006, are as follows (in millions): 2007- $33, 2008-$175, 2009-$436, 2010-$55, and 2011-$522.   

Question 1. How much of Coca-Cola's long-term debt is due in 2007?

Question 2. How much of Coca-Cola's long term debt is due in each of the next 4 years (2008-2011)?                                                       
Question 3. Why might financial analysts be interested in these scheduled debt payments? What options does the company have with regard to making its payments?

Question 4. Compute the company's effective interest rate for 2006 using the reported cash interest payments and the average amount of debt outstanding during the year. In addition to long-term debt stated in the report, the company had $3,877 million in average short-term debt outstanding.                                                        
                                                       
Question 5. what will the company's interest expense be for 2007?

Question 6. why might the effective interest rate calculation described in requirement 4 misstate a company's true interest cost when debt is issued at a premium or discount?

Question 7. Approximately $436 million of long-term debt is due in 2009. Describe how the company might obtain the cash needed to make this payment.

Question 8. Approximately $116 million of long-term debt is due in 2093 because Coca-Cola is one of those companies that has issued "century bonds". Describe the accounting and income tax issues raised by this maturity date.