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PepsiCo

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Finance Document – Company Western Union

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PepsiCo is a U.S based company that dals with the production and manufacture of carbonated soft drinks dubbed pepsi. The company that as incepted in 1893 with a soft drink referred to as Brad’s Drink has since grown to become one of the formidable soft drink manufacturers in the United States. With over $66 Billion in revenues in 2014, Pepsi as established itself as a market mover in the soft……………..

Pepsi has positive net cash flows and its going concern is assured. With the 5 year expected growth rate being 9.04, there is a level of certainty on the perpetuity of the firm, unless certain contingencies work against its operations. Some of the important inputs in using this mode of valuation are the Current EPS of the Company, the Dividend Payout Ratio, Cost of Equity, and the Expected Growth Rate of the company…………..

From the third Quarter results of PepsiCo. In 2015, the Earnings Per Share stood at $0.36. The stability of growth of Pepsi is assured by the fact that its estimated 9.04% 5 year growth estimate is not significantly higher than the industry’s 7.7% growth rate (YahooFinance, 2015). This third quarter’s payout ratio of 194.44% will be effected in the subsequent period, therefore the previous quarter’s payout of 0.67 is the most appropriate in calculating the company’s………

The analysis of the above table is such that Pepsi indicates an increasingly negative value with decreasing growth rate. From the Gordon’s valuation model with the parameters used to calculate the company’s valuation, Pepsi is intimated to have a negative value to the acquiring firm. The FCFE of the company that is calculated by factoring in the Net Income, Capital Spending and Depreciation…….