Financial Statement Analysis Package (FSAP): Version 7.

0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 7th Edition
By James Wahlen, Steve Baginski and Mark Bradshaw

The FSAP User Guides appear in column I to the right.

Analyst Name: Wahlen, Baginski & Bradshaw

Company Name: PepsiCo
Year (Most recent in far right column.) 2003 2004 2005 2006 2007

BALANCE SHEET DATA

Assets:
Cash and Cash Equivalents 820 1,280 1,716 1,651 910
Marketable Securities 1,181 2,165 3,166 1,171 1,571
Accounts Receivable - Net 2,830 2,999 3,261 3,725 4,389
Inventories 1,412 1,541 1,693 1,926 2,290
Prepaid Expenses and Other Current Assets 687 654 618 657 991
Deferred Tax Assets - Current
Other Current Assets (1)
Other Current Assets (2)
Current Assets 6,930 8,639 10,454 9,130 10,151
Long Term Investments 2,920 3,284 3,485 3,690 4,354
Property, Plant & Equipment - at cost 14,755 15,930 17,145 19,058 21,896
<Accumulated Depreciation> -6,927 -7,781 -8,464 -9,371 -10,668
Amortizable Intangible Assets (net) 718 598 530 637 796
Goodwill and Nonamortizable Intangibles 4,665 4,842 5,174 5,806 6,417
Deferred Tax Assets - Noncurrent
Other Non-Current Assets (1) 2,266 2,475 3,403 980 1,682
Other Non-Current Assets (2)
Total Assets 25,327 27,987 31,727 29,930 34,628
Liabilities and Equities:
Accounts Payable - Trade 1,638 1,731 1,799 2,102 2,562
Current Accrued Liabilities 3,575 3,868 4,172 4,394 5,040
Notes Payable and Short Term Debt 145 894 2,746 274 0
Current Maturities of Long Term Debt 446 160 143 0 0
Deferred Tax Liabilities - Current
Income Taxes Payable 611 99 546 90 151
Other Current Liabilities (1)
Other Current Liabilities (2)
Current Liabilities 6,415 6,752 9,406 6,860 7,753
Long Term Debt 1,702 2,397 2,313 2,550 4,203
Long Term Accrued Liabilities 4,075 4,099 4,323 4,624 4,792
Deferred Tax Liabilities - Noncurrent 1,261 1,216 1,434 528 646
Other Non-Current Liabilities (1)
Other Non-Current Liabilities (2)
Total Liabilities 13,453 14,464 17,476 14,562 17,394
Minority Interest
Preferred Stock -22 -49 -69 -79 -91

Common Stock + Paid in Capital 578 648 644 614 480

Retained Earnings <Deficit> 15,961 18,730 21,116 24,837 28,184
Accum. Other Comprehensive Income <Loss> -1,267 -886 -1,053 -2,246 -952
Other Equity Adjustments
<Treasury Stock> -3,376 -4,920 -6,387 -7,758 -10,387
Common Shareholders' Equity 11,896 13,572 14,320 15,447 17,325
Total Liabilities and Equities 25,327 27,987 31,727 29,930 34,628
INCOME STATEMENT DATA 2003 2004 2005 2006 2007

Revenues 26,971 29,261 32,562 35,137 39,474

<Cost of Goods Sold> -11,691 -12,674 -14,176 -15,762 -18,038
Gross Profit 15,280 16,587 18,386 19,375 21,436
<Selling, General and Administrative Expenses> -10,148 -11,031 -12,252 -12,711 -14,208
<Research and Development Expenses>
<Amortization of Intangible Assets> -145 -147 -150 -162 -58
<Other Operating Expenses (1)>
<Other Operating Expenses (2)>
Other Operating Income (1)
Other Operating Income (2)
Non-Recurring Operating Gains
<Non-Recurring Operating Losses> -206 -150
Operating Profit 4,781 5,259 5,984 6,502 7,170
Interest Income 51 74 159 173 125
<Interest Expense> -163 -167 -256 -239 -224
Income <Loss> from Equity Affiliates 323 380 495 553 560
Other Income or Gains
<Other Expenses or Losses>
Income before Tax 4,992 5,546 6,382 6,989 7,631
<Income Tax Expense> -1,424 -1,372 -2,304 -1,347 -1,973
<Minority Interest in Earnings>
Income <Loss> from Discontinued Operations 38
Extraordinary Gains <Losses>
Changes in Acctg. Principles
Net Income (computed) 3,568 4,212 4,078 5,642 5,658
Net Income (enter reported amount as a check) 3,568 4,212 4,078 5,642 5,658

Other Comprehensive Income Items 405 381 -167 456 1,294

Comprehensive Income 3,973 4,593 3,911 6,098 6,952
STATEMENT OF CASH FLOWS DATA 2003 2004 2005 2006 2007

Net Income 3,568 4,212 4,078 5,642 5,658

Add back Depreciation and Amortization Expenses 1,221 1,264 1,308 1,406 1,426
Add back Stock-Based Compensation Expense 407 368 311 270 260
Deferred Income Taxes -323 17 440 -510 118
<Income from Equity Affiliates, net of Dividends> -276 -297 -414 -442 -441
<Increase> Decrease in Accounts Receivable -220 -130 -272 -330 -405
<Increase> Decrease in Inventories -49 -100 -132 -186 -204
<Increase> Decrease in Prepaid Expenses 23 -31 -56 -37 -16
<Increase> Decrease in Other Current Assets (1)
<Increase> Decrease in Other Current Assets (2)
Increase <Decrease> in Accounts Payable -11 216 188 223 500
Increase <Decrease> in Other Current Liabilities (1)
Increase <Decrease> in Other Current Liabilities (2)
Increase <Decrease> in Other Non-Current Liabilities ( 182 -268 609 -295 128
Increase <Decrease> in Other Non-Current Liabilities ( -171 -100 227 64 -107
Other Addbacks to Net Income 621 491 464 544 535
<Other Subtractions from Net Income> -644 -588 -899 -265 -518
Other Operating Cash Flows
Net CF from Operations 4,328 5,054 5,852 6,084 6,934
Proceeds from Sales of Property, Plant, and Equipmen 49 38 88 49 47
<Property, Plant, and Equipment Acquired> -1,345 -1,387 -1,736 -2,068 -2,430
<Increase> Decrease in Marketable Securities -950 -969 -991 2,017 -383
Investments Sold 46 52 3 37 27
<Investments Acquired> -71 -64 -1,095 -547 -1,320
Other Investment Transactions (1) 214 318 315
Other Investment Transactions (2)
Net CF from Investing Activities -2,271 -2,330 -3,517 -194 -3,744
Increase in Short-Term Borrowing 128 1,272 1,933 185 83
<Decrease in Short-Term Borrowing> -115 -160 -85 -2,526 -478
Increase in Long-Term Borrowing 52 504 25 51 2,168
<Decrease in Long-Term Borrowing> -641 -512 -177 -157 -579
Issue of Capital Stock
Proceeds from Stock Option Exercises 689 965 1,099 1,194 1,108
<Share Repurchases - Treasury Stock> -1,945 -3,055 -3,031 -3,010 -4,312
<Dividend Payments> -1,070 -1,329 -1,642 -1,854 -2,204
Other Financing Transactions (1) 134 208
Other Financing Transactions (2)
Net CF from Financing Activities -2,902 -2,315 -1,878 -5,983 -4,006
Effects of exchange rate changes on cash 27 51 -21 28 75
Net Change in Cash -818 460 436 -65 -741
Cash and Cash Equivalents, Beginning of Year 820 1,280 1,716 1,651
Cash and Cash Equivalents, End of Year 1,280 1,716 1,651 910
SUPPLEMENTAL DATA 2003 2004 2005 2006 2007

Statutory Tax Rate 35.0% 35.0% 35.0% 35.0% 35.0%

Average Tax Rate Implied from Income Statement Data 28.5% 24.7% 36.1% 19.3% 25.9%
After-tax Effects of Nonrecurring and Unusual Items
on Net Income -206 -112 0 0 0
Total Deferred Tax Assets (from above) 0 0 0 0 0
Deferred Tax Asset Valuation Allowance 438 564 532 624 695
Allowance for Uncollectible Accounts Receivable 105 97 75 64 69
Depreciation Expense 1,020 1,062 1,103 1,182 1,304
Preferred Stock Dividends (total, if any) 3 3 3 1 2
Common Shares Outstanding 1,705 1,679 1,656 1,638 1,605
Earnings per Share (basic) 2.07 2.45 2.43 3.42 3.48
Common Dividends per Share 0.63 0.79 0.99 1.13 1.37
Market Price per Share at Fiscal Year End 46.47 51.94 55.80 60.18 75.67

FINANCIAL DATA CHECKS

Assets - Liabilities - Equities 0 0 0 0 0
Net Income (computed) - Net Income (reported) 0 0 0 0 0
Cash Changes 0 0 0 0
 2008

2,064
213
4,683
2,522
1,324

10,806
3,883
22,552
-10,889
732
6,252

2,658

35,994

2,846
5,427
369
0

145

8,787
7,858
7,017
226

23,888

-97

381
30,638
-4,694

-14,122
12,203
35,994
 2008

43,251
-20,351
22,900
-15,901

-64

6,935
41
-329
374

7,021
-1,879

5,142
5,142

-3,793
1,349
 2008

5,142
1,543
238
573
-202
-549
-345
-68

718

-180
-367
1,002
-506

6,999
98
-2,446
1,282
364
-1,925
-40

-2,667
714
-269
3,719
-649

620
-4,726
-2,541
107

-3,025
-153
1,154
910
2,064
 2008

35.0%
26.8%

0
0
657
70
1,422
1
1,553
3.26
1.64
54.77

0
0
0
Financial Statement Analysis Package (FSAP): Version 7.0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 7th Edition
By James Wahlen, Steve Baginski and Mark Bradshaw

The FSAP User Guides appear in column J to the right.

Analyst Name: Wahlen, Baginski & Bradshaw

Company Name: PepsiCo

DATA CHECKS
Assets - Liabilities - Equities 0 0 0 0 0
Net Income (computed) - Net Income (reported) 0 0 0 0 0
Cash Changes 0 0 0 0
In the computations below, a #DIV/0! message indicates that a ratio denominator is zero.

PROFITABILITY FACTORS:
Year 2004 2005 2006 2007 2008

RETURN ON ASSETS (based on reported amounts):

Profit Margin for ROA 14.8% 13.0% 16.5% 14.7% 12.4%
x Asset Turnover 1.1 1.1 1.1 1.2 1.2
= Return on Assets 16.2% 14.2% 18.8% 18.0% 15.2%

RETURN ON ASSETS (excluding the effects of nonrecurring items):

Profit Margin for ROA 15.1% 13.0% 16.5% 14.7% 12.4%
x Asset Turnover 1.1 1.1 1.1 1.2 1.2
= Return on Assets 16.6% 14.2% 18.8% 18.0% 15.2%

RETURN ON COMMON EQUITY (based on reported amounts):

Profit Margin for ROCE 14.4% 12.5% 16.1% 14.3% 11.9%
x Asset Turnover 1.1 1.1 1.1 1.2 1.2
x Capital Structure Leverage 2.1 2.1 2.1 2.0 2.4
= Return on Common Equity 33.1% 29.2% 37.9% 34.5% 34.8%

RETURN ON COMMON EQUITY (excluding the effects of nonrecurring items):

Profit Margin for ROCE 14.8% 12.5% 16.1% 14.3% 11.9%
x Asset Turnover 1.1 1.1 1.1 1.2 1.2
x Capital Structure Leverage 2.1 2.1 2.1 2.0 2.4
= Return on Common Equity 33.9% 29.2% 37.9% 34.5% 34.8%

OPERATING PERFORMANCE:
Gross Profit / Revenues 56.7% 56.5% 55.1% 54.3% 52.9%
Operating Profit / Revenues 18.0% 18.4% 18.5% 18.2% 16.0%
Net Income / Revenues 14.4% 12.5% 16.1% 14.3% 11.9%
Comprehensive Income / Revenues 15.7% 12.0% 17.4% 17.6% 3.1%

PERSISTENT OPERATING PERFORMANCE (excluding the effects of nonrecurring items):

Persistent Operating Profit / Revenues 18.5% 18.4% 18.5% 18.2% 16.0%
Persistent Net Income / Revenues 14.8% 12.5% 16.1% 14.3% 11.9%

GROWTH:
Revenue Growth 8.5% 11.3% 7.9% 12.3% 9.6%
Net Income Growth 18.0% -3.2% 38.4% 0.3% -9.1%
Persistent Net Income Growth 14.6% -5.7% 38.4% 0.3% -9.1%

OPERATING CONTROL:
Gross Profit Control Index 100.1% 99.6% 97.7% 98.5% 97.5%
Operating Profit Contol Index 101.4% 102.3% 100.7% 98.2% 88.3%
Profit Margin Decomposition:
Gross Profit Margin 56.7% 56.5% 55.1% 54.3% 52.9%
Operating Profit Index 31.7% 32.5% 33.6% 33.4% 30.3%
Leverage Index 105.5% 106.7% 107.5% 106.4% 101.2%
Tax Index 75.9% 63.9% 80.7% 74.1% 73.2%
Net Profit Margin 14.4% 12.5% 16.1% 14.3% 11.9%
Comprehensive Income Performance:
Comprehensive Income Index 109.0% 95.9% 108.1% 122.9% 26.2%
Comprehensive Income Margin 15.7% 12.0% 17.4% 17.6% 3.1%

RISK FACTORS:
Year 2004 2005 2006 2007 2008

LIQUIDITY:
Current Ratio 1.28 1.11 1.33 1.31 1.23
Quick Ratio 0.95 0.87 0.95 0.89 0.79
Operating Cash Flow to Current Liabilities 76.8% 72.4% 74.8% 94.9% 84.6%

ASSET TURNOVER:
Accounts Receivable Turnover 10.0 10.4 10.1 9.7 9.5
Days Receivables Held 36 35 36 38 38
Inventory Turnover 8.6 8.8 8.7 8.56 8.46
Days Inventory Held 43 42 42 42.66 43.15
Accounts Payable Turnover 7.6 8.1 8.2 7.9 7.6
Days Payables Held 48 45 45 46 48
Net Working Capital Days 31 32 34 34 33
Revenues / Average Net Fixed Assets 3.66 3.87 3.83 3.77 3.78
Cash Turnover 27.9 21.7 20.9 30.8 29.1
Days Sales Held in Cash 13.1 16.8 17.5 11.8 12.5

SOLVENCY:
Total Liabilities / Total Assets 51.7% 55.1% 48.7% 50.2% 66.4%
Total Liabilities / Shareholders' Equity 106.6% 122.0% 94.3% 100.4% 195.8%
LT Debt / LT Capital 15.0% 13.9% 14.2% 19.5% 39.2%
LT Debt / Shareholders' Equity 17.7% 16.2% 16.5% 24.3% 64.4%
Operating Cash Flow to Total Liabilities 36.2% 36.6% 38.0% 43.4% 33.9%
Interest Coverage Ratio (reported amounts) 34.4 25.9 30.2 35.1 22.3
Interest Coverage ratio (recurring amounts) 35.1 25.9 30.2 35.1 22.3

RISK FACTORS:
Bankruptcy Predictors:
Altman Z Score 6.35 5.86 7.29 7.30 5.27
Bankruptcy Probability 0.00% 0.00% 0.00% 0.00% 0.00%
Earnings Manipulation Predictors:
Beneish Earnings Manipulation Score -2.60 -2.69 -2.41 -2.49 -2.75
Earnings Manipulation Probability 0.46% 0.35% 0.80% 0.64% 0.30%

STOCK MARKET-BASED RATIOS:

Stock Returns 13.5% 9.3% 9.9% 28.0% -25.5%
Price-Earnings Ratio (reported amounts) 21.20 22.96 17.60 21.74 16.80
Price-Earnings Ratio (recurring amounts) 20.64 22.96 17.60 21.74 16.80
Market Value to Book Value Ratio 6.4 6.5 6.4 7.0 7.0
INCOME STATEMENT ITEMS AS A PERCENT OF REVENUES:
Year 2004 2005 2006 2007 2008

Revenues 100.0% 100.0% 100.0% 100.0% 100.0%

<Cost of Goods Sold> -43.3% -43.5% -44.9% -45.7% -47.1%
Gross Profit 56.7% 56.5% 55.1% 54.3% 52.9%
<Selling, General and Administrative Expenses> -37.7% -37.6% -36.2% -36.0% -36.8%
<Research and Development Expenses> 0.0% 0.0% 0.0% 0.0% 0.0%
<Amortization of Intangible Assets> -0.5% -0.5% -0.5% -0.1% -0.1%
<Other Operating Expenses (1)> 0.0% 0.0% 0.0% 0.0% 0.0%
<Other Operating Expenses (2)> 0.0% 0.0% 0.0% 0.0% 0.0%
Other Operating Income (1) 0.0% 0.0% 0.0% 0.0% 0.0%
Other Operating Income (2) 0.0% 0.0% 0.0% 0.0% 0.0%
Non-Recurring Operating Gains 0.0% 0.0% 0.0% 0.0% 0.0%
<Non-Recurring Operating Losses> -0.5% 0.0% 0.0% 0.0% 0.0%
Operating Profit 18.0% 18.4% 18.5% 18.2% 16.0%
Interest Income 0.3% 0.5% 0.5% 0.3% 0.1%
<Interest Expense> -0.6% -0.8% -0.7% -0.6% -0.8%
Income <Loss> from Equity Affiliates 1.3% 1.5% 1.6% 1.4% 0.9%
Other Income or Gains 0.0% 0.0% 0.0% 0.0% 0.0%
<Other Expenses or Losses> 0.0% 0.0% 0.0% 0.0% 0.0%
Income before Tax 19.0% 19.6% 19.9% 19.3% 16.2%
<Income Tax Expense> -4.7% -7.1% -3.8% -5.0% -4.3%
<Minority Interest in Earnings> 0.0% 0.0% 0.0% 0.0% 0.0%
Income <Loss> from Discontinued Operations 0.1% 0.0% 0.0% 0.0% 0.0%
Extraordinary Gains <Losses> 0.0% 0.0% 0.0% 0.0% 0.0%
Changes in Acctg. Principles 0.0% 0.0% 0.0% 0.0% 0.0%
Net Income (computed) 14.4% 12.5% 16.1% 14.3% 11.9%

Other Comprehensive Income Items 1.3% -0.5% 1.3% 3.3% -8.8%

Comprehensive Income 15.7% 12.0% 17.4% 17.6% 3.1%

INCOME STATEMENT ITEMS: GROWTH RATES

Year 2004 2005 2006 2007 2008
COMPOUND
GROWTH
YEAR TO YEAR GROWTH RATES: RATE
Revenues 8.5% 11.3% 7.9% 12.3% 9.6% 9.9%
<Cost of Goods Sold> 8.4% 11.9% 11.2% 14.4% 12.8% 11.7%
Gross Profit 8.6% 10.8% 5.4% 10.6% 6.8% 8.4%
<Selling, General and Administrative Expenses> 8.7% 11.1% 3.7% 11.8% 11.9% 9.4%
<Research and Development Expenses> #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
<Amortization of Intangible Assets> 1.4% 2.0% 8.0% -64.2% 10.3% -15.1%
<Other Operating Expenses (1)> #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
<Other Operating Expenses (2)> #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Operating Income (1) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Operating Income (2) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Non-Recurring Operating Gains #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
<Non-Recurring Operating Losses> -27.2% -100.0% #DIV/0! #DIV/0! #DIV/0! -100.0%
Operating Profit 10.0% 13.8% 8.7% 10.3% -3.3% 7.7%
Interest Income 45.1% 114.9% 8.8% -27.7% -67.2% -4.3%
<Interest Expense> 2.5% 53.3% -6.6% -6.3% 46.9% 15.1%
Income <Loss> from Equity Affiliates 17.6% 30.3% 11.7% 1.3% -33.2% 3.0%
Other Income or Gains #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
<Other Expenses or Losses> #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income before Tax 11.1% 15.1% 9.5% 9.2% -8.0% 7.1%
<Income Tax Expense> -3.7% 67.9% -41.5% 46.5% -4.8% 5.7%
<Minority Interest in Earnings> #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income <Loss> from Discontinued Operations #DIV/0! -100.0% #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Extraordinary Gains <Losses> #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Changes in Acctg. Principles #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Net Income (computed) 18.0% -3.2% 38.4% 0.3% -9.1% 7.6%

Other Comprehensive Income Items -5.9% -143.8% -373.1% 183.8% -393.1% -256.4%
Comprehensive Income 15.6% -14.8% 55.9% 14.0% -80.6% -19.4%

COMMON SIZE BALANCE SHEET - AS A PERCENT OF TOTAL ASSETS

Year 2004 2005 2006 2007 2008

Assets:
Cash and Cash Equivalents 4.6% 5.4% 5.5% 2.6% 5.7%
Marketable Securities 7.7% 10.0% 3.9% 4.5% 0.6%
Accounts Receivable - Net 10.7% 10.3% 12.4% 12.7% 13.0%
Inventories 5.5% 5.3% 6.4% 6.6% 7.0%
Prepaid Expenses and Other Current Assets 2.3% 1.9% 2.2% 2.9% 3.7%
Deferred Tax Assets - Current 0.0% 0.0% 0.0% 0.0% 0.0%
Other Current Assets (1) 0.0% 0.0% 0.0% 0.0% 0.0%
Other Current Assets (2) 0.0% 0.0% 0.0% 0.0% 0.0%
Current Assets 30.9% 32.9% 30.5% 29.3% 30.0%
Long Term Investments 11.7% 11.0% 12.3% 12.6% 10.8%
Property, Plant & Equipment - at cost 56.9% 54.0% 63.7% 63.2% 62.7%
<Accumulated Depreciation> -27.8% -26.7% -31.3% -30.8% -30.3%
Amortizable Intangible Assets (net) 2.1% 1.7% 2.1% 2.3% 2.0%
Goodwill and Nonamortizable Intangibles 17.3% 16.3% 19.4% 18.5% 17.4%
Deferred Tax Assets - Noncurrent 0.0% 0.0% 0.0% 0.0% 0.0%
Other Non-Current Assets (1) 8.8% 10.7% 3.3% 4.9% 7.4%
Other Non-Current Assets (2) 0.0% 0.0% 0.0% 0.0% 0.0%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0%

Liabilities and Equities:

Accounts Payable - Trade 6.2% 5.7% 7.0% 7.4% 7.9%
Current Accrued Liabilities 13.8% 13.1% 14.7% 14.6% 15.1%
Notes Payable and Short Term Debt 3.2% 8.7% 0.9% 0.0% 1.0%
Current Maturities of Long Term Debt 0.6% 0.5% 0.0% 0.0% 0.0%
Deferred Tax Liabilities - Current 0.0% 0.0% 0.0% 0.0% 0.0%
Income Taxes Payable 0.4% 1.7% 0.3% 0.4% 0.4%
Other Current Liabilities (1) 0.0% 0.0% 0.0% 0.0% 0.0%
Other Current Liabilities (2) 0.0% 0.0% 0.0% 0.0% 0.0%
Current Liabilities 24.1% 29.6% 22.9% 22.4% 24.4%
Long Term Debt 8.6% 7.3% 8.5% 12.1% 21.8%
Long Term Accrued Liabilities 14.6% 13.6% 15.4% 13.8% 19.5%
Deferred Tax Liabilities - Noncurrent 4.3% 4.5% 1.8% 1.9% 0.6%
Other Non-Current Liabilities (1) 0.0% 0.0% 0.0% 0.0% 0.0%
Other Non-Current Liabilities (2) 0.0% 0.0% 0.0% 0.0% 0.0%
Total Liabilities 51.7% 55.1% 48.7% 50.2% 66.4%
Minority Interest 0.0% 0.0% 0.0% 0.0% 0.0%
Preferred Stock -0.2% -0.2% -0.3% -0.3% -0.3%

Common Stock + Paid in Capital 2.3% 2.0% 2.1% 1.4% 1.1%

Retained Earnings <Deficit> 66.9% 66.6% 83.0% 81.4% 85.1%
Accum. Other Comprehensive Income <Loss> -3.2% -3.3% -7.5% -2.7% -13.0%
Other Equity Adjustments 0.0% 0.0% 0.0% 0.0% 0.0%
<Treasury Stock> -17.6% -20.1% -25.9% -30.0% -39.2%
Common Shareholders' Equity 48.5% 45.1% 51.6% 50.0% 33.9%
Total Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0%

BALANCE SHEET ITEMS: GROWTH RATES

Year 2004 2005 2006 2007 2008
COMPOUND
GROWTH
Assets: YEAR TO YEAR GROWTH RATES: RATE
Cash and Cash Equivalents 56.1% 34.1% -3.8% -44.9% 126.8% 20.3%
Marketable Securities 83.3% 46.2% -63.0% 34.2% -86.4% -29.0%
Accounts Receivable - Net 6.0% 8.7% 14.2% 17.8% 6.7% 10.6%
Inventories 9.1% 9.9% 13.8% 18.9% 10.1% 12.3%
Prepaid Expenses and Other Current Assets -4.8% -5.5% 6.3% 50.8% 33.6% 14.0%
Deferred Tax Assets - Current #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Current Assets (1) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Current Assets (2) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Current Assets 24.7% 21.0% -12.7% 11.2% 6.5% 9.3%
Long Term Investments 12.5% 6.1% 5.9% 18.0% -10.8% 5.9%
Property, Plant & Equipment - at cost 8.0% 7.6% 11.2% 14.9% 3.0% 8.9%
<Accumulated Depreciation> 12.3% 8.8% 10.7% 13.8% 2.1% 9.5%
Amortizable Intangible Assets (net) -16.7% -11.4% 20.2% 25.0% -8.0% 0.4%
Goodwill and Nonamortizable Intangibles 3.8% 6.9% 12.2% 10.5% -2.6% 6.0%
Deferred Tax Assets - Noncurrent #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Non-Current Assets (1) 9.2% 37.5% -71.2% 71.6% 58.0% 3.2%
Other Non-Current Assets (2) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Assets 10.5% 13.4% -5.7% 15.7% 3.9% 7.3%

Liabilities and Equities:

Accounts Payable - Trade 5.7% 3.9% 16.8% 21.9% 11.1% 11.7%
Current Accrued Liabilities 8.2% 7.9% 5.3% 14.7% 7.7% 8.7%
Notes Payable and Short Term Debt 516.6% 207.2% -90.0% -100.0% #DIV/0! 20.5%
Current Maturities of Long Term Debt -64.1% -10.6% -100.0% #DIV/0! #DIV/0! -100.0%
Deferred Tax Liabilities - Current #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income Taxes Payable -83.8% 451.5% -83.5% 67.8% -4.0% -25.0%
Other Current Liabilities (1) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Current Liabilities (2) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Current Liabilities 5.3% 39.3% -27.1% 13.0% 13.3% 6.5%
Long Term Debt 40.8% -3.5% 10.2% 64.8% 87.0% 35.8%
Long Term Accrued Liabilities 0.6% 5.5% 7.0% 3.6% 46.4% 11.5%
Deferred Tax Liabilities - Noncurrent -3.6% 17.9% -63.2% 22.3% -65.0% -29.1%
Other Non-Current Liabilities (1) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Non-Current Liabilities (2) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Liabilities 7.5% 20.8% -16.7% 19.4% 37.3% 12.2%
Minority Interest #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Preferred Stock 122.7% 40.8% 14.5% 15.2% 6.6% 34.5%

Common Stock + Paid in Capital 12.1% -0.6% -4.7% -21.8% -20.6% -8.0%
Retained Earnings <Deficit> 17.3% 12.7% 17.6% 13.5% 8.7% 13.9%
Accum. Other Comprehensive Income <Loss> -30.1% 18.8% 113.3% -57.6% 393.1% 29.9%
Other Equity Adjustments #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
<Treasury Stock> 45.7% 29.8% 21.5% 33.9% 36.0% 33.1%
Common Shareholders' Equity 14.1% 5.5% 7.9% 12.2% -29.6% 0.5%
Total Liabilities and Equities 10.5% 13.4% -5.7% 15.7% 3.9% 7.3%
RETURN ON ASSETS ANALYSIS (excluding the effects of non-recurring items)

Level 1 RETURN ON ASSETS

2006 2007 2008
18.8% 18.0% 15.2%

Level 2 PROFIT MARGIN FOR ROA ASSET TURNOVER

2006 2007 2008 2006 2007 2008
16.5% 14.7% 12.4% 1.1 1.2 1.2

Level 3 2006 2007 2008 2006 2007 2008 Turnovers:

Revenues 100.0% 100.0% 100.0% 10.1 9.7 9.5 Receivables
<Cost of Goods Sold> -44.9% -45.7% -47.1% 8.7 8.6 8.5 Inventory
Gross Profit 55.1% 54.3% 52.9% 3.8 3.8 3.8 Fixed Assets
<Selling, General and Administrative Expenses> -36.2% -36.0% -36.8%
Operating Profit 18.5% 18.2% 16.0%
Income before Tax 19.9% 19.3% 16.2%
<Income Tax Expense> -3.8% -5.0% -4.3%
Profit Margin for ROA* 16.5% 14.7% 12.4%
*
Amounts do not sum.

RETURN ON COMMON SHAREHOLDERS' EQUITY ANALYSIS (excluding the effects of non-recurring items)

RETURN ON COMMON SHAREHOLDERS' EQUITY

2006 2007 2008
37.9% 34.5% 34.8%

2006 2007 2008

PROFIT MARGIN FOR ROCE 16.1% 14.3% 11.9%
ASSET TURNOVER 1.1 1.2 1.2
CAPITAL STRUCTURE LEVERAGE 2.1 2.0 2.4
Financial Statement Analysis Package (FSAP): Version 7.0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 7th Edition
By James Wahlen, Steve Baginski, and Mark Bradshaw

The FSAP User Guides appear in column L to the right.

FSAP OUTPUT: FINANCIAL STATEMENT FORECASTS

Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

Row Format: Row Format:

Actual Amounts Forecast Amounts Year +6 and beyond:
Common Size Percentage Forecast assumption Long-Run Growth Rate: 3.0%
Rate of Change Percentage Forecast assumption explanation Long-Run Growth Factor: 103.0%

Actuals Forecasts
Year 2006 2007 2008 Year +1 Year +2 Year +3 Year +4 Year +5 Year +6
INCOME STATEMENT
Revenues 35,137 39,474 43,251 47,191 51,562 57,502 61,820 67,839 69,875
common size 100.0% 100.0% 100.0% 9.1% 9.3% 11.5% 7.5% 9.7%
rate of change 12.3% 9.6% See Forecast Development worksheet for details of revenues forecasts.
<Cost of Goods Sold> -15,762 -18,038 -20,351 -22,321 -24,492 -27,429 -29,612 -32,563 -33,540
common size -44.9% -45.7% -47.1% -47.3% -47.5% -47.7% -47.9% -48.0%
rate of change 14.4% 12.8% Assume slowly increasing cost of goods sold as a percent of sales.
Gross Profit 19,375 21,436 22,900 24,870 27,070 30,074 32,208 35,277 36,335
common size 55.1% 54.3% 52.9% 52.7% 52.5% 52.3% 52.1% 52.0% 52.0%
rate of change 10.6% 6.8% 8.6% 8.8% 11.1% 7.1% 9.5% 3.0%
<Selling, General and Administrative Expenses> -12,711 -14,208 -15,901 -16,517 -18,047 -20,126 -21,637 -23,744 -24,456
common size -36.2% -36.0% -36.8% -35.0% -35.0% -35.0% -35.0% -35.0%
rate of change 11.8% 11.9% Assume steady SG&A expense as a percent of sales.
<Research and Development Expenses> 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Explain assumptions.
<Amortization of Intangible Assets> -162 -58 -64 -64 -63 -62 -60 -56 -58
common size -0.5% -0.1% -0.1% -64.0 -63.0 -62.0 -60.0 -56.0
rate of change -64.2% 10.3% Amounts based on PepsiCo disclosures in Note 4.
<Other Operating Expenses (1)> 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Explain assumptions.
<Other Operating Expenses (2)> 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Explain assumptions.
Other Operating Income (1) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Explain assumptions.
Other Operating Income (2) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Explain assumptions.
Non-Recurring Operating Gains 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Explain assumptions
<Non-Recurring Operating Losses> 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Explain assumptions
Operating Profit 6,502 7,170 6,935 8,289 8,960 9,886 10,511 11,477 11,821
common size 18.5% 18.2% 16.0% 17.6% 17.4% 17.2% 17.0% 16.9% 16.9%
rate of change 10.3% -3.3% 19.5% 8.1% 10.3% 6.3% 9.2% 3.0%
 Interest Income 173 125 41 73 81 90 98 107 110
common size 0.5% 0.3% 0.1% 3.0% 3.0% 3.0% 3.0% 3.0%
rate of change -27.7% -67.2% Interest rate earned on average balance in cash and marketable securities.
<Interest Expense> -239 -224 -329 -493 -531 -579 -626 -677 -697
common size -0.7% -0.6% -0.8% -5.8% -5.8% -5.8% -5.8% -5.8%
rate of change -6.3% 46.9% Interest rate paid on average balance in financial liabilities.
Income <Loss> from Equity Affiliates 553 560 374 480 509 539 572 606 624
common size 1.6% 1.4% 0.9% 12.0% 12.0% 12.0% 12.0% 12.0%
rate of change 1.3% -33.2% Assume expected return of 12% on investments in noncontrolled affilates.
Other Income or Gains 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Explain assumptions
<Other Expenses or Losses> 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Explain assumptions
Income before Tax 6,989 7,631 7,021 8,348 9,019 9,935 10,555 11,513 11,858
common size 19.9% 19.3% 16.2% 17.7% 17.5% 17.3% 17.1% 17.0% 17.0%
rate of change 9.2% -8.0% 18.9% 8.0% 10.2% 6.2% 9.1% 3.0%
 <Income Tax Expense> -1,347 -1,973 -1,879 -2,237 -2,417 -2,663 -2,829 -3,085 -3,178
common size -3.8% -5.0% -4.3% -26.8% -26.8% -26.8% -26.8% -26.8%
rate of change 46.5% -4.8% Effective income tax rate assumptions.
<Minority Interest in Earnings> 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Explain assumptions
Income <Loss> from Discontinued Operations 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Explain assumptions
Extraordinary Gains <Losses> 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Explain assumptions
Changes in Acctg. Principles 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Explain assumptions
Net Income (computed) 5,642 5,658 5,142 6,111 6,602 7,273 7,726 8,427 8,680
common size 16.1% 14.3% 11.9% 12.9% 12.8% 12.6% 12.5% 12.4% 12.4%
rate of change 0.3% -9.1% 18.8% 8.0% 10.2% 6.2% 9.1% 3.0%
Other Comprehensive Income Items 456 1,294 -3,793 0 0 0 0 0 0
common size 1.3% 3.3% -8.8% 0.0 0.0 0.0 0.0 0.0
rate of change 183.8% -393.1% Assume random walk.
Comprehensive Income 6,098 6,952 1,349 6,111 6,602 7,273 7,726 8,427 8,680
common size 17.4% 17.6% 3.1% 12.9% 12.8% 12.6% 12.5% 12.4% 12.4%
rate of change 14.0% -80.6% 353.0% 8.0% 10.2% 6.2% 9.1% 3.0%
FSAP OUTPUT: FINANCIAL STATEMENT FORECASTS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

Row Format: Row Format:

Actual Amounts Forecast Amounts Year +6 and beyond:
Common Size Percent Forecast assumption Long-Run Growth Rate: 3.0%
Rate of Change Percent Forecast assumption explanation Long-Run Growth Factor: 103.0%

Actuals Forecasts
2006 2007 2008 Year +1 Year +2 Year +3 Year +4 Year +5 Year +6
BALANCE SHEET
ASSETS:
Cash and Cash Equivalents 1,651 910 2,064 1,551 1,695 1,890 2,032 2,230 2,297
common size 5.5% 2.6% 5.7% 12.0 12.0 12.0 12.0 12.0
rate of change -44.9% 126.8% Assume ending cash balances equal to 12 days sales.
Marketable Securities 1,171 1,571 213 1,034 1,130 1,260 1,355 1,487 1,531
common size 3.9% 4.5% 0.6% 8.0 8.0 8.0 8.0 8.0
rate of change 34.2% -86.4% Assume ending balances equal to 8 days sales.
Accounts Receivable - Net 3,725 4,389 4,683 5,143 5,593 6,380 6,492 7,633 7,862
common size 12.4% 12.7% 13.0% 38.0 38.0 38.0 38.0 38.0
rate of change 17.8% 6.7% Assume 38 days to collect sales in accounts receivable.
Inventories 1,926 2,290 2,522 2,730 3,033 3,421 3,546 4,116 4,239
common size 6.4% 6.6% 7.0% 8.5 8.5 8.5 8.5 8.5
rate of change 18.9% 10.1% Assume average inventory turnover of roughly 8.5 times per year.
Prepaid Expenses and Other Current Assets 657 991 1,324 1,445 1,578 1,760 1,892 2,077 2,139
common size 2.2% 2.9% 3.7% 9.1% 9.3% 11.5% 7.5% 9.7%
rate of change 50.8% 33.6% Assume growth with sales.
Deferred Tax Assets - Current 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0% 0% 0% 0% 0%
rate of change #DIV/0! #DIV/0! Assume steady growth.
Other Current Assets (1) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0% 0% 0% 0% 0%
rate of change #DIV/0! #DIV/0! Assume steady growth.
Other Current Assets (2) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0% 0% 0% 0% 0%
rate of change #DIV/0! #DIV/0! Assume steady growth.
Current Assets 9,130 10,151 10,806 11,904 13,029 14,712 15,318 17,543 18,069
common size 30.5% 29.3% 30.0% 30.9% 31.3% 32.1% 31.5% 32.8% 32.8%
rate of change 11.2% 6.5% 10.2% 9.5% 12.9% 4.1% 14.5% 3.0%
 Long Term Investments 3,690 4,354 3,883 4,116 4,363 4,625 4,902 5,196 5,352
common size 12.3% 12.6% 10.8% 6% 6% 6% 6% 6%
rate of change 18.0% -10.8% Assume steady growth.
Property, Plant & Equipment - at cost 19,058 21,896 22,552 24,723 27,662 30,939 34,463 38,330 39,480
common size 63.7% 63.2% 62.7%
rate of change 14.9% 3.0% PP&E assumptions - see schedule in forecast development
<Accumulated Depreciation> -9,371 -10,668 -10,889 -12,471 -14,241 -16,220 -18,426 -20,878 -21,504
common size -31.3% -30.8% -30.3%
rate of change 13.8% 2.1% See depreciation schedule in forecast development worksheet.
Amortizable Intangible Assets (net) 637 796 732 668 605 543 483 427 440
common size 2.1% 2.3% 2.0% -64.0 -63.0 -62.0 -60.0 -56.0
rate of change 25.0% -8.0% Assume amortization per PepsiCo disclosures in Note 4; assume no new investments.
Goodwill and Nonamortizable Intangibles 5,806 6,417 6,252 6,822 7,453 8,312 8,936 9,806 10,100
common size 19.4% 18.5% 17.4% 9.1% 9.3% 11.5% 7.5% 9.7%
rate of change 10.5% -2.6% Assume growth with sales.
Deferred Tax Assets - Noncurrent 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Assume steady state growth.
Other Non-Current Assets (1) 980 1,682 2,658 2,738 2,820 2,904 2,992 3,081 3,174
common size 3.3% 4.9% 7.4% 3.0% 3.0% 3.0% 3.0% 3.0%
rate of change 71.6% 58.0% Assume steady growth.
Other Non-Current Assets (2) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Assume steady state growth.
Total Assets 29,930 34,628 35,994 38,499 41,692 45,815 48,669 53,506 55,111
common size 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
rate of change 15.7% 3.9% 7.0% 8.3% 9.9% 6.2% 9.9% 3.0%
 LIABILITIES:
Accounts Payable - Trade 2,102 2,562 2,846 3,080 3,442 3,875 3,947 4,768 4,911
common size 7.0% 7.4% 7.9% 48.0 48.0 48.0 48.0 48.0
rate of change 21.9% 11.1% Assume a steady payment period consistent with recent years.
Current Accrued Liabilities 4,394 5,040 5,427 5,921 6,470 7,215 7,757 8,512 8,768
common size 14.7% 14.6% 15.1% 9.1% 9.3% 11.5% 7.5% 9.7%
rate of change 14.7% 7.7% Assume growth with SG&A expenses, which grow with sales.
Notes Payable and Short Term Debt 274 0 369 385 417 458 487 535 551
common size 0.9% 0.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
rate of change -100.0% #DIV/0! Assume 1.0 percent of total assets.
Current Maturities of Long Term Debt 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Current maturities of long-term debt per long-term debt note.
Deferred Tax Liabilities - Current 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Assume steady state growth.
Income Taxes Payable 90 151 145 154 167 183 195 214 220
common size 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4%
rate of change 67.8% -4.0% Assume a steady percentage of total assets.
Other Current Liabilities (1) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Assume steady state growth.
Other Current Liabilities (2) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Assume steady state growth.
Current Liabilities 6,860 7,753 8,787 9,540 10,495 11,731 12,385 14,029 14,450
common size 22.9% 22.4% 24.4% 24.8% 25.2% 25.6% 25.4% 26.2% 26.2%
rate of change 13.0% 13.3% 8.6% 10.0% 11.8% 5.6% 13.3% 3.0%
Long Term Debt 2,550 4,203 7,858 8,405 9,102 10,002 10,625 11,681 12,031
common size 8.5% 12.1% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8%
rate of change 64.8% 87.0% Assume steady percent of total assets.
Long Term Accrued Liabilities 4,624 4,792 7,017 7,656 8,365 9,329 10,030 11,006 11,336
common size 15.4% 13.8% 19.5% 9.1% 9.3% 11.5% 7.5% 9.7%
rate of change 3.6% 46.4% Assume growth with SG&A expenses, which grow with sales.
Deferred Tax Liabilities - Noncurrent 528 646 226 242 262 288 306 336 346
common size 1.8% 1.9% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%
rate of change 22.3% -65.0% Assume steady percent of total assets.
Other Non-Current Liabilities (1) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Assume steady state growth.
Other Non-Current Liabilities (2) 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
rate of change #DIV/0! #DIV/0! Assume steady state growth.
Total Liabilities 14,562 17,394 23,888 25,843 28,224 31,350 33,345 37,052 38,164
common size 48.7% 50.2% 66.4% 67.1% 67.7% 68.4% 68.5% 69.2% 69.2%
rate of change 19.4% 37.3% 8.2% 9.2% 11.1% 6.4% 11.1% 3.0%
 SHAREHOLDERS' EQUITY
Minority Interest 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Minority interest assumptions
Preferred Stock -79 -91 -97 0 0 0 0 0 0
common size -0.3% -0.3% -0.3% 0.0 0.0 0.0 0.0 0.0
rate of change 15.2% 6.6% Preferred stock assumptions

Common Stock + Paid in Capital 614 480 381 408 441 485 515 566 583
common size 2.1% 1.4% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1%
rate of change -21.8% -20.6% Assume steady percent of total assets.
Retained Earnings <Deficit> 24,837 28,184 30,638 33,565 36,842 40,296 43,624 47,203 48,479
common size 83.0% 81.4% 85.1%
rate of change 13.5% 8.7% Add net income and subtract dividends; see dividends forecast box below.
Accum. Other Comprehensive Income <Loss> -2,246 -952 -4,694 -4,694 -4,694 -4,694 -4,694 -4,694 -4,694
common size -7.5% -2.7% -13.0% 0.0 0.0 0.0 0.0 0.0
rate of change -57.6% 393.1% Add accumulated other comprehensive income items from income statement
Other Equity Adjustments 0 0 0 0 0 0 0 0 0
common size 0.0% 0.0% 0.0% 0.0 0.0 0.0 0.0 0.0
rate of change #DIV/0! #DIV/0! Other equity adjustments assumptions
<Treasury Stock> -7,758 -10,387 -14,122 -16,622 -19,122 -21,622 -24,122 -26,622 -27,421
common size -25.9% -30.0% -39.2% -2500 -2500 -2500 -2500 -2500
rate of change 33.9% 36.0% Treasury stock repurchases, net of treasury stock reissues.
Common Shareholders' Equity 15,447 17,325 12,203.0 12,656.1 13,467.4 14,465.3 15,323.5 16,453.6 16,947
common size 51.6% 50.0% 33.9% 32.9% 32.3% 31.6% 31.5% 30.8% 30.8%
rate of change 12.2% -29.6% 3.7% 6.4% 7.4% 5.9% 7.4% 3.0%
Total Liabilities and Equities 29,930 34,628 35,994 38,499 41,692 45,815 48,669 53,506 55,111
common size 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
rate of change 15.7% 3.9% 7.0% 8.3% 9.9% 6.2% 9.9% 3.0%
Check figures: Balance Sheet A=L+OE? 0 0 0 0 0 0 0 0 0
Initial adjustment needed to balance the balance sheet:
-444 -269 -517 -762 -985 -3,426

Account adjusted: Dividends

Dividends forecasts:
Common Dividends: 2,571 3,055 3,301 3,636 3,863 3,979
50.0% 50.0% 50.0% 50.0% 50.0%
Assume dividend payout of lagged net income from continuing operations.
Preferred Dividends: 169 0 0 0 0 0
169.0 0.0 0.0 0.0 0.0
Enter preferred stock dividend payments, if any.
Implied Dividends: 444 269 517 762 985 3,426
Implied dividend amount to balance the balance sheet.
Total Dividends: 3,184 3,325 3,818 4,398 4,848 7,405
Total dividend forecast amounts.
FSAP OUTPUT: FINANCIAL STATEMENT FORECASTS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

Actuals Forecasts
IMPLIED STATEMENT OF CASH FLOWS 2007 2008 Year +1 Year +2 Year +3 Year +4 Year +5 Year +6

Net Income 5,658 5,142 6,111 6,602 7,273 7,726 8,427 8,680
Add back Depreciation Expense (net) 1,297 221 1,582 1,770 1,980 2,205 2,453 626
Add back Amortization Expense (net) 58 64 64 63 62 60 56 58
<Increase> Decrease in Receivables - Net -664 -294 -460 -450 -787 -112 -1,141 -229
<Increase> Decrease in Inventories -364 -232 -208 -303 -388 -125 -569 -123
<Increase> Decrease in Prepaid Expenses -334 -333 -121 -134 -182 -132 -184 -62
<Increase> Decrease in Other Curr. Assets (1) 0 0 0 0 0 0 0 0
<Increase> Decrease in Other Curr. Assets (2) 0 0 0 0 0 0 0 0
Increase <Decrease> in Accounts Payable - Trade 460 284 234 362 433 72 821 143
Increase <Decrease> in Current Accrued Liabilities 646 387 494 548 745 542 755 255
Increase <Decrease> in Income Taxes Payable 61 -6 9 13 16 11 19 6
Increase <Decrease> in Other Current Liabilities (1) 0 0 0 0 0 0 0 0
Increase <Decrease> in Other Current Liabilities (2) 0 0 0 0 0 0 0 0
Net Change in Deferred Tax Assets and Liabilities 118 -420 16 20 26 18 30 10
Increase <Decrease> in Long-Term Accrued Liabilities 168 2,225 639 709 964 700 977 330
Increase <Decrease> in Other Non-Current Liabilities (1) 0 0 0 0 0 0 0 0
Increase <Decrease> in Other Non-Current Liabilities (2) 0 0 0 0 0 0 0 0
Net Cash Flows from Operations 7,104 7,038 8,360 9,201 10,142 10,966 11,644 9,694
<Increase> Decrease in Prop., Plant, & Equip. at cost -2,838 -656 -2,171 -2,939 -3,278 -3,524 -3,867 -1,150
<Increase> Decrease in Marketable Securities -400 1,358 -821 -96 -130 -95 -132 -45
<Increase> Decrease in Investment Securities -664 471 -233 -247 -262 -277 -294 -156
<Increase> Decrease in Amortizable Intangible Assets (net) -217 0 0 0 0 0 0 -70
<Increase> Decrease in Goodwill and Nonamort. Intang. -611 165 -570 -632 -859 -624 -870 -294
<Increase> Decrease in Other Non-Current Assets (1) -702 -976 -80 -82 -85 -87 -90 -92
<Increase> Decrease in Other Non-Current Assets (2) 0 0 0 0 0 0 0 0
Net Cash Flows from Investing Activities -5,432 362 -3,874 -3,996 -4,613 -4,607 -5,253 -1,808
Increase <Decrease> in Short-Term Debt -274 369 16 32 41 29 48 16
Increase <Decrease> in Long-Term Debt 1,653 3,655 547 697 900 623 1,056 350
Increase <Decrease> in Minority Interest and Preferred Stock -12 -6 97 0 0 0 0 0
Increase <Decrease> in Common Stock + Paid in Capital -134 -99 27 34 44 30 51 17
Increase <Decrease> in Accum. OCI and Other Equity Adjs. 1,294 -3,742 0 0 0 0 0 0
Increase <Decrease> in Treasury Stock -2,629 -3,735 -2,500 -2,500 -2,500 -2,500 -2,500 -799
Dividends -2,311 -2,688 -3,184 -3,325 -3,818 -4,398 -4,848 -7,405
Net Cash Flows from Financing Activities -2,413 -6,246 -4,998 -5,062 -5,333 -6,217 -6,193 -7,820
Net Change in Cash -741 1,154 -513 144 195 142 198 67
Check Figure:
Net change in cash - Change in cash balance 0 0 0 0 0 0 0 0
FSAP OUTPUT: FINANCIAL STATEMENT FORECASTS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

Actuals Forecasts
2006 2007 2008 Year +1 Year +2 Year +3 Year +4 Year +5 Year +6
FORECAST VALIDITY CHECK DATA:
GROWTH
Revenue Growth Rates: 7.9% 12.3% 9.6% 9.1% 9.3% 11.5% 7.5% 9.7% 3.0%
Net Income Growth Rates: 38.4% 0.3% -9.1% 18.8% 8.0% 10.2% 6.2% 9.1% 3.0%
Total Asset Growth Rates -5.7% 15.7% 3.9% 7.0% 8.3% 9.9% 6.2% 9.9% 3.0%

RETURN ON ASSETS (based on reported amounts):

Profit Margin for ROA 16.5% 14.7% 12.4% 13.7% 13.6% 13.4% 13.2% 13.2% 13.2%
x Asset Turnover 1.1 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.3
= Return on Assets 18.8% 18.0% 15.2% 17.4% 17.4% 17.6% 17.3% 17.5% 16.9%

RETURN ON ASSETS (excluding the effects of nonrecurring items):

Profit Margin for ROA 16.5% 14.7% 12.4% 13.7% 13.6% 13.4% 13.2% 13.2% 13.2%
x Asset Turnover 1.1 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.3
= Return on Assets 18.8% 18.0% 15.2% 17.4% 17.4% 17.6% 17.3% 17.5% 16.9%

RETURN ON COMMON EQUITY (based on reported amounts):

Profit Margin for ROCE 16.1% 14.3% 11.9% 12.6% 12.8% 12.6% 12.5% 12.4% 12.4%
x Asset Turnover 1.1 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.3
x Capital Structure Leverage 2.1 2.0 2.4 3.0 3.1 3.1 3.2 3.2 3.3
= Return on Common Equity 37.9% 34.5% 34.8% 47.8% 50.5% 52.1% 51.9% 53.0% 52.0%

RETURN ON COMMON EQUITY (excluding the effects of nonrecurring items):

Profit Margin for ROCE 16.1% 14.3% 11.9% 12.6% 12.8% 12.6% 12.5% 12.4% 12.4%
x Asset Turnover 1.1 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.3
x Capital Structure Leverage 2.1 2.0 2.4 3.0 3.1 3.1 3.2 3.2 3.3
= Return on Common Equity 37.9% 34.5% 34.8% 47.8% 50.5% 52.1% 51.9% 53.0% 52.0%
 OPERATING PERFORMANCE:
Gross Profit / Revenues 55.1% 54.3% 52.9% 52.7% 52.5% 52.3% 52.1% 52.0% 52.0%
Operating Profit Before Taxes / Revenues 18.5% 18.2% 16.0% 17.6% 17.4% 17.2% 17.0% 16.9% 16.9%

ASSET TURNOVER:
Revenues / Avg. Accounts Receivable 10.1 9.7 9.5 9.6 9.6 9.6 9.6 9.6 9.0
COGS / Average Inventory 8.7 8.6 8.5 8.5 8.5 8.5 8.5 8.5 8.0
Revenues / Average Fixed Assets 3.8 3.8 3.8 3.9 4.0 4.1 4.0 4.1 3.9

LIQUIDITY:
Current Ratio 1.3 1.3 1.2 1.2 1.2 1.3 1.2 1.3 1.3
Quick Ratio 1.0 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.8

SOLVENCY:
Total Liabilities / Total Assets 48.7% 50.2% 66.4% 67.1% 67.7% 68.4% 68.5% 69.2% 69.2%
Total Liabilities / Total Equity 94.3% 100.4% 195.8% 204.2% 209.6% 216.7% 217.6% 225.2% 225.2%
Interest Coverage Ratio 30.2 35.1 22.3 17.9 18.0 18.1 17.9 18.0 18.0
Financial Statement Analysis Package (FSAP): Version 7.0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 7th Edition FSAP User Guides:
By James Wahlen, Steve Baginski and Mark Bradshaw
The FSAP user should only enter data in the blue-font ce

The FSAP User Guides appear in column K to the right. Forecast Development:
This Forecast Development spreadsheet provides work spac
- build detailed sales revenue forecasts
- build forecasts of capital expenditures, property, plant and
- build detailed forecasts of other financial statement amoun
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo
It is not necessary to use this spreadsheet to build financial s
spreadsheet. If you use this spreadsheet to build more detail
forecast amounts to the appropriate cells in the financial state
Sales Revenue Forecast Development

Actuals Forecasts
Year 2006 2007 2008 Year +1 Year +2 Year +3 Year +4 Year +5

Revenues 35,137 39,474 43,251 47,191 51,562 57,502 61,820 67,839 This sales revenue forecast development schedule was deve
rate of change 12.3% 9.6% 9.1% 9.3% 11.5% 7.5% 9.7%
10.9% Sales growth rate assumptions.
Sales Forecasts for PepsiCo:
Year 2006 2007 2008 Year +1 Year +2 Year +3 Year +4 Year +5

Sales Forecasts Combined by Segments:

Frito-Lay North America 10,844 11,586 12,507 13,269 14,077 15,221 15,843 16,808
Quaker Foods North America 1,769 1,860 1,902 1,979 2,058 2,183 2,228 2,317
Latin America Foods 3,972 4,872 5,895 6,660 7,524 8,663 9,602 10,848
PepsiCo Americas Foods 16,585 18,318 20,304 21,907 23,659 26,067 27,673 29,974

PepsiCo Americas Beverages 10,362 11,090 10,937 11,603 12,310 13,310 13,855 14,698

United Kingdom & Europe 4,750 5,492 6,435 7,168 7,984 9,063 9,905 11,032
Middle East, Africa & Asia 3,440 4,574 5,575 6,513 7,610 9,061 10,387 12,135
PepsiCo International 8,190 10,066 12,010 13,681 15,593 18,125 20,291 23,167

PepsiCo Total Net Revenues 35,137 39,474 43,251 47,191 51,562 57,502 61,820 67,839
growth rates 12.3% 9.6% 9.1% 9.3% 11.5% 7.5% 9.7%

PepsiCo Americas Foods 16,585 18,318 20,304 21,907 23,659 26,067 27,673 29,974
growth rates 10.4% 10.8% 7.9% 8.0% 10.2% 6.2% 8.3%
compound growth rate 10.6%

Frito-Lay North America 10,844 11,586 12,507 13,269 14,077 15,221 15,843 16,808
growth rates 6.8% 7.9% 6.1% 6.1% 8.1% 4.1% 6.1%
compound growth rate 7.4%
compound growth in volume 1.5% 3.0% 3.0% 3.0% 3.0% 3.0%
compound growth in prices 5.6% 3.0% 3.0% 3.0% 3.0% 3.0%
foreign exchange and acquisitions 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 0.0% 0.0% 1.9% -1.9% 0.0%

Quaker Foods North America 1,769 1,860 1,902 1,979 2,058 2,183 2,228 2,317
growth rates 5.1% 2.3% 4.0% 4.0% 6.0% 2.1% 4.0%
compound growth rate 3.7%
compound growth in volume 0.2% 1.0% 1.0% 1.0% 1.0% 1.0%
compound growth in prices 2.9% 3.0% 3.0% 3.0% 3.0% 3.0%
foreign exchange and acquisitions 0.5% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 0.0% 0.0% 1.9% -1.9% 0.0%

Latin America Foods 3,972 4,872 5,895 6,660 7,524 8,663 9,602 10,848
growth rates 22.7% 21.0% 13.0% 13.0% 15.1% 10.8% 13.0%
compound growth rate 21.8%
compound growth in volume 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
compound growth in prices 7.0% 5.0% 5.0% 5.0% 5.0% 5.0%
foreign exchange and acquisitions 11.1% 5.0% 5.0% 5.0% 5.0% 5.0%
53rd week effect 0.0% 0.0% 1.9% -1.9% 0.0%
PepsiCo Americas Beverages 10,362 11,090 10,937 11,603 12,310 13,310 13,855 14,698
growth rates 7.0% -1.4% 6.1% 6.1% 8.1% 4.1% 6.1%
compound growth rate 2.7%
compound growth in volume -2.8% 3.0% 3.0% 3.0% 3.0% 3.0%
compound growth in prices 4.4% 3.0% 3.0% 3.0% 3.0% 3.0%
foreign exchange and acquisitions 1.2% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 0.0% 0.0% 1.9% -1.9% 0.0%

PepsiCo International 8,190 10,066 12,010 13,681 15,593 18,125 20,291 23,167
growth rates 22.9% 19.3% 13.9% 14.0% 16.2% 12.0% 14.2%
compound growth rate 21.1%

United Kingdom & Europe 4,750 5,492 6,435 7,168 7,984 9,063 9,905 11,032
growth rates 15.6% 17.2% 11.4% 11.4% 13.5% 9.3% 11.4%
compound growth rate 16.4%
compound growth in volume 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
compound growth in prices 2.1% 2.0% 2.0% 2.0% 2.0% 2.0%
foreign exchange and acquisitions 9.6% 5.0% 5.0% 5.0% 5.0% 5.0%
53rd week effect 0.0% 0.0% 1.9% -1.9% 0.0%

Middle East, Africa & Asia 3,440 4,574 5,575 6,513 7,610 9,061 10,387 12,135
growth rates 33.0% 21.9% 16.8% 16.8% 19.1% 14.6% 16.8%
compound growth rate 27.3%
compound growth in volume 12.5% 8.0% 8.0% 8.0% 8.0% 8.0%
compound growth in prices 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
foreign exchange and acquisitions 9.8% 5.0% 5.0% 5.0% 5.0% 5.0%
53rd week effect 0.0% 0.0% 1.9% -1.9% 0.0%
Forecast Development: Capital Expenditures, Property, Plant and Equipment, and Depreciation

Capital Expenditures: CAPEX Forecasts: The Capital Expenditures schedule permits the FSAP user to
2006 2007 2008 Year +1 Year +2 Year +3 Year +4 Year +5
CAPEX:
PP&E Acquired 2,068 2,430 2,446
PP&E Sold -49 -47 -98
Net CAPEX 2,019 2,383 2,348 2,171 2,939 3,278 3,524 3,867

Net CAPEX as a percent of:

Gross PP&E 10.6% 10.9% 10.4%
Revenues 5.7% 6.0% 5.4% 4.6% 5.7% 5.7% 5.7% 5.7%
5.7%

Property, Plant and Equipment and Depreciation Property, Plant and Equipment and Depreciation Forecasts: The Property, Plant & Equipment and Depreciation schedule
FSAP automatically links the projected amounts for gross PP
PP&E at cost: 2006 2007 2008 Year +1 Year +2 Year +3 Year +4 Year +5
Beg. balance at cost: 22,552 24,723 27,662 30,939 34,463
Add: CAPEX forecasts from above: 2,171 2,939 3,278 3,524 3,867
End balance at cost: 19,058 21,896 22,552 24,723 27,662 30,939 34,463 38,330

Accumulated Depreciation:
Beg. Balance: -10,889 -12,471 -14,241 -16,220 -18,426
Subtract: Depreciation expense forecasts from below: -1,582 -1,770 -1,980 -2,205 -2,453
End Balance: -9,371 -10,668 -10,889 -12,471 -14,241 -16,220 -18,426 -20,878

PP&E - net 9,687 11,228 11,663 12,252 13,421 14,719 16,038 17,452

Depreciation Expense Forecast Development: Depreciation expense forecast on existing PP&E:

Existing PP&E at cost: 22,552 1,443 1,443 1,443 1,443 1,443 This computation shows depreciation expense based on the
Remaining balance to be depreciated. 11,663 10,220 8,777 7,334 5,891 4,448 This computation shows the amount of gross PP&E still to be

PP&E Purchases: Depreciation expense forecasts on new PP&E:

Capex Year +1 2,171 139 139 139 139 139 FSAP automatically computes a new depreciation schedule fo
Capex Year +2 2,939 188 188 188 188
Capex Year +3 3,278 210 210 210
Capex Year +4 3,524 225 225
Capex Year +5 3,867 247
Total Depreciation Expense 1,582 1,770 1,980 2,205 2,453

Depreciation methods: 2006 2007 2008

PPE at Cost 19,058 21,896 22,552 FSAP automatically estimates the estimated useful life for dep
Avg Depreciable PPE 20,477 22,224
Depreciation Expense 1,182 1,304 1,422
Implied Avg. Useful Life in Years 15.7 15.6
Useful Life Forecast Assumption: 15.6
(in years)
should only enter data in the blue-font cells shaded light green.

evelopment spreadsheet provides work space in which the analyst can:

sales revenue forecasts
of capital expenditures, property, plant and equipment, depreciation expense, and accumulated depreciation.
orecasts of other financial statement amounts.

y to use this spreadsheet to build financial statement forecasts in the FSAP Forecasts
you use this spreadsheet to build more detailed forecasts, the you will need to link these
s to the appropriate cells in the financial statements in the FSAP Forecasts spreadsheet.

ue forecast development schedule was developed specifically for PepsiCo. FSAP users who wish to develop detailed sales forecasts of other firms should adapt this schedule as necessary to incorporate the other firms' various soruces of revenue
enditures schedule permits the FSAP user to build detailed forecasts of future capital expenditures as a percent of future revenues, gross PP&E or any other reasonable basis for these forecast assumptions.

ant & Equipment and Depreciation schedule automatically computes for the FSAP detailed forecasts of future PP&E based on exisitng PP&E plus projected future capital expenditures. The Depreciation expense schedule automatically computes fu
ally links the projected amounts for gross PP&E, accumulated depreciation, depreciation expense, and capital expenditures into the financial statements in the Forecasts worksheet.

n shows depreciation expense based on the exisiting depreciable PP&E at the start of the forecast period. The computation assumes straight line depreciation methods, zero salvage value, and the estimated useful life computed below. .
n shows the amount of gross PP&E still to be depreciated. Once this amount falls to zero, depreciation is complete.The FSAP user should be sure that these amounts are not negative.

ally computes a new depreciation schedule for each year's capital expenditures, which are included in PP&E. These computations assume straight line depreciation methods and zero salvage value. The computations use the extimated useful life a

ally estimates the estimated useful life for depreciation purposes by dividing the average amount of gross depreciable PP&E by depreciation expense. This estimate assume straight line depreciation and zero salvage value.
other firms' various soruces of revenue.
 nse schedule automatically computes future depreciation expense based on exisitng depreciable PP&E future capital expenditures. The expected useful life for depreciation purposes is computed below.

useful life computed below. .

mputations use the extimated useful life as computed below.

o salvage value.
Financial Statement Analysis Package (FSAP): Version 7.0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 7th Edition FSAP User Guides:
By James Wahlen, Steve Baginski and Mark Bradshaw
The FSAP user should only enter data in the

The FSAP User Guides appear in column L to the right. A Comment on Entering Valuation Paramete
The FSAP user must enter valuation paramete
DATA CHECKS - Estimated Value per Share
Dividend Based Valuation $ 83.03 FSAP automatically references the estimated v
Free Cash Flow Valuation $ 83.03 FSAP automatically references the estimated v
Residual Income Valuation $ 83.03 FSAP automatically references the estimated v
Residual Income Market-to-Book Valuation $ 83.03 FSAP automatically references the estimated v
Free Cash Flow for All Debt and Equity Valuation $ 83.99 FSAP automatically references the estimated v
Check: All Estimated Value per Share amounts should be the same, with the possible exception of the share value from the Free Cash Flow for All Debt and Equity model. See additional comments in cell L26

FSAP OUTPUT: VALUATION MODELS

Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

VALUATION PARAMETER ASSUMPTIONS

Market Value Parameters:
Current share price $ 54.77 FSAP uses the most recent share price entere
Number of shares outstanding 1,553.0 FSAP uses the most recent number of shares
Current market value $ 85,058 FSAP computes market value of equity using m

Long-run growth assumption used in forecasts 3.0% Long Run Growth Parameters:
Long-run growth assumption used in valuation. 3.0% Enter the long run growth rate assumption for u
(Both long-run growth assumptions should be the same.)

COST OF EQUITY CAPITAL: Cost of Equity Capital Parameters:

Equity risk factor (market beta) 0.75 Enter the market beta.
Risk free rate 4.0% Enter a risk-free rate of return, such as the yiel
Market risk premium 6.0% Enter the expected market risk premium. This
Required rate of return on common equity: 8.50% Using the above parameters, FSAP computes

COST OF DEBT CAPITAL Cost of Debt Capital Parameters:

Debt capital $ 8,227 FSAP uses the total amount of short term debt
Cost of debt capital, before tax 5.8% FSAP uses the interest rate assumption entere
Effective tax rate -26.8% FSAP uses the tax rate assumption entered in
After-tax cost of debt capital 4.25% FSAP uses the above parameters to compute

COST OF PREFERRED STOCK Cost of Preferred Stock Parameters:

Preferred stock capital $ - FSAP uses the amount of preferred stock ente
Preferred dividends $ - FSAP uses the preferred stock dividend entere
Implied yield 0.00% FSAP uses the above parameters to compute

WEIGHTED AVERAGE COST OF CAPITAL Weighted Average Cost of Capital:

Weight of equity in capital structure 0.912 FSAP computes the weight of equity in the cap
Weight of debt in capital structure 0.088 FSAP computes the weight of debt in the capita
Weight of preferred in capital structure 0.00 FSAP computes the weight of preferred stock i
Weighted average cost of capital 8.12% FSAP uses the above weights and costs of cap
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo
Continuing
1 2 3 4 5 Value Dividends-Based Valuation:
Dividends-Based Valuation Year +1 Year +2 Year +3 Year +4 Year +5 Year +6 Chapter 11 describes the dividends-based valu

Dividends Paid to Common Shareholders 3,015.3 3,324.5 3,818.5 4,398.5 4,848.3 FSAP uses implied dividends for common shar
Less: Common Stock Issues -26.5 -33.8 -43.7 -30.2 -51.2 FSAP uses the change in common stock plus p
Plus: Common Stock Repurchases 2,500.0 2,500.0 2,500.0 2,500.0 2,500.0 FSAP uses the change in treasury stock from t
Dividends to Common Equity 5,488.8 5,790.7 6,274.8 6,868.3 7,297.1 8,186.50 These figures represent the forecasted total div

Present Value Factors 0.922 0.849 0.783 0.722 0.665 These present value factors are based on the e
PV Net Dividends 5,058.8 4,919.0 4,912.6 4,956.0 4,852.9
Sum of PV Net Dividends 24,699.3 The sum of the present value of net dividends
PV of Continuing Value 98,988.9 The present value of continuing value dividend
Total 123,688.2
Adjust to midyear discounting 1.043 This adjustment corrects for over-discounting.
Total PV Dividends 128,945.0
Shares Outstanding 1,553.0
Estimated Value per Share $ 83.03 The estimated value per share.

Current share price $ 54.77

Percent difference 52% (Value/price)-1: positive number indicates unde
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo
Continuing
1 2 3 4 5 Value Free Cash Flows for Common Equity Valuat
Free Cash Flows for Common Equity Year +1 Year +2 Year +3 Year +4 Year +5 Year +6 Chapter 12 describes the free cash flows-base

Net Cash Flow from Operations 8,359.9 9,201.1 10,141.5 10,965.8 11,643.5 9,694.4 FSAP uses net cash flows from operations from
Decrease (Increase) in Cash Required for Operations 512.5 -143.7 -195.3 -141.9 -197.9 -66.9 The analyst should adjust free cash flows for c
Net Cash Flow from Investing -3,874.4 -3,995.7 -4,612.9 -4,607.1 -5,252.9 -1,807.5 FSAP uses net cash flows from investing from
Net CFs from Debt Financing 562.8 729.0 941.5 651.5 1,104.4 366.5 FSAP uses net cash flows from debt financing
Net CFs into Financial Assets 0.0 0.0 0.0 0.0 0.0 0.0 This row enables the analyst to adjust for any i
Net CFs - Pref. Stock and Minority Int. -72.0 0.0 0.0 0.0 0.0 0.0 FSAP uses net cash flows from preferred stock
Free Cash Flow for Common Equity 5,488.8 5,790.7 6,274.8 6,868.3 7,297.1 8,186.5 These figures represent the forecasted total fre

Present Value Factors 0.922 0.849 0.783 0.722 0.665 These present value factors are based on the e
PV Free Cash Flows 5,058.8 4,919.0 4,912.6 4,956.0 4,852.9
Sum of PV Free Cash Flows 24,699.3 The sum of the present value of free cash flow
PV of Continuing Value 98,988.9 The present value of continuing free cash flows
Total 123,688.2
Adjust to midyear discounting 1.043 This adjustment corrects for over-discounting.
Total PV Free Cash Flows to Equity 128,945.0
Shares Outstanding 1,553.0
Estimated Value per Share $ 83.03 The estimated value per share.

Current share price $ 54.77

Percent difference 52% (Value/price)-1: positive number indicates unde
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

Free Cash Flow Valuation Sensitivity Analysis:

Long-Run Growth Assumptions Sensitivity Analyses:

83.03 0% 2% 3% 4% 5% 6% 8% 10% The FSAP user can enter the relevant range of
Discount 5% 105.16 160.50 229.67 437.20 #DIV/0! -392.90 -116.20 -60.86
Rates: 6% 87.18 120.00 152.81 218.45 415.34 #DIV/0! -175.35 -76.90
7% 74.37 95.73 114.41 145.56 207.85 394.72 -352.77 -103.60
8.50% 60.84 73.36 83.03 97.00 118.95 158.47 711.69 -210.35
9% 57.34 68.04 76.06 87.30 104.14 132.22 356.87 -317.06
10% 51.41 59.41 65.13 72.75 83.42 99.42 179.45 #DIV/0!
11% 46.57 52.71 56.94 62.37 69.61 79.75 120.30 323.07
12% 42.55 47.37 50.58 54.59 59.76 66.64 90.73 163.00
13% 39.16 43.00 45.50 48.55 52.37 57.28 72.98 109.63
14% 36.26 39.37 41.35 43.73 46.63 50.26 61.15 82.93
15% 33.76 36.30 37.90 39.78 42.04 44.80 52.70 66.90
16% 31.57 33.68 34.98 36.50 38.29 40.44 46.35 56.21
18% 27.95 29.44 30.33 31.35 32.53 33.90 37.47 42.83
20% 25.08 26.16 26.79 27.51 28.31 29.24 31.55 34.79
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo
Continuing
1 2 3 4 5 Value Residual Income Valuation:
RESIDUAL INCOME VALUATION Year +1 Year +2 Year +3 Year +4 Year +5 Year +6 Chapter 13 describes the residual income valu
Comprehensive Income Available
for Common Shareholders 5,941.9 6,602.1 7,272.7 7,726.4 8,427.3 8,680.1 FSAP uses comprehensive income from the Fo
Lagged Book Value of Common
Shareholders' Equity (at t-1) 12,203.0 12,656.1 13,467.4 14,465.3 15,323.5 16,453.6 FSAP uses beginning of year (lagged) book va

Required Earnings 1,037.3 1,075.8 1,144.7 1,229.5 1,302.5 1,398.6 FSAP computes required earnings as the equit
Residual Income 4,904.6 5,526.3 6,128.0 6,496.9 7,124.8 7,281.5 Residual income is the difference between pro

Present Value Factors 0.922 0.849 0.783 0.722 0.665 These present value factors are based on the e
PV Residual Income 4,520.4 4,694.4 4,797.6 4,688.0 4,738.3
Sum of PV Residual Income 23,438.7 The sum of the present value of residual incom
PV of Continuing Value 88,046.5 The present value of continuing residual incom
Total 111,485.2
Add: Beginning Book Value of Equity 12,203.0
PV of Equity 123,688.2
Adjust to midyear discounting 1.043 This adjustment corrects for over-discounting.
Total PV of Equity 128,945.0
Shares Outstanding 1,553.0
Estimated Value per Share $ 83.03 The estimated value per share.

Current share price $ 54.77

Percent difference 52% (Value/price)-1: positive number indicates unde
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

RESIDUAL INCOME VALUATION SENSITIVITY ANALYSIS:

Long-Run Growth Assumptions Sensitivity Analyses:

83.03 0% 2% 3% 4% 5% 6% 8% 10% The FSAP user can enter the relevant range of
Discount 5% 105.16 160.50 229.67 437.20 #DIV/0! -392.90 -116.20 -60.86
Rates: 6% 87.18 120.00 152.81 218.45 415.34 #DIV/0! -175.35 -76.90
7% 74.37 95.73 114.41 145.56 207.85 394.72 -352.77 -103.60
7.48% 69.44 87.23 102.08 125.46 167.70 267.01 -680.30 -123.94
9% 57.34 68.04 76.06 87.30 104.14 132.22 356.87 -317.06
10% 51.41 59.41 65.13 72.75 83.42 99.42 179.45 #DIV/0!
11% 46.57 52.71 56.94 62.37 69.61 79.75 120.30 323.07
12% 42.55 47.37 50.58 54.59 59.76 66.64 90.73 163.00
13% 39.16 43.00 45.50 48.55 52.37 57.28 72.98 109.63
14% 36.26 39.37 41.35 43.73 46.63 50.26 61.15 82.93
15% 33.76 36.30 37.90 39.78 42.04 44.80 52.70 66.90
16% 31.57 33.68 34.98 36.50 38.29 40.44 46.35 56.21
18% 27.95 29.44 30.33 31.35 32.53 33.90 37.47 42.83
20% 25.08 26.16 26.79 27.51 28.31 29.24 31.55 34.79
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo
Continuing
RESIDUAL INCOME VALUATION 1 2 3 4 5 Value Market-to-Book Valuation:
Market-to-Book Approach Year +1 Year +2 Year +3 Year +4 Year +5 Year +6 Chapter 14 describes the market-to-book valua
Comprehensive Income Available
for Common Shareholders 5,941.9 6,602.1 7,272.7 7,726.4 8,427.3 8,680.1 FSAP uses comprehensive income from the Fo
Book Value of Common
Shareholders' Equity (at t-1) 12,203.0 12,656.1 13,467.4 14,465.3 15,323.5 16,453.6 FSAP uses beginning of year (lagged) book va

Implied ROCE 48.7% 52.2% 54.0% 53.4% 55.0% 52.8% FSAP computes the implied ROCE, dividing co
Residual ROCE 40.2% 43.7% 45.5% 44.9% 46.5% 44.3% FSAP computes the residual ROCE as implied
Cumulative growth factor in common equity as of t-1 100.0% 103.7% 110.4% 118.5% 125.6% 134.8% FSAP computes the cumulative growth factor in
Residual ROCE times cumulative growth 40.2% 45.3% 50.2% 53.2% 58.4% 59.7% The product of residual ROCE and the cumula

Present Value Factors 0.922 0.849 0.783 0.722 0.665 These present value factors are based on the e
PV Residual ROCE times growth 0.370 0.385 0.393 0.384 0.388
Sum of PV Residual ROCE times growth 1.92 The sum of the present value of residual ROCE
PV of Continuing Value 7.22 The present value of residual ROCE times cum
Total PV Residual ROCE 9.14
Add one for book value of equity at t-1 1.0
Sum 10.14
Adjust to mid-year discounting 1.043 This adjustment corrects for over-discounting.
Implied Market-to-Book Ratio 10.567 The implied market-to-book value ratio.
Times Beginning Book Value of Equity 12,203.0
Total PV of Equity 128,945.0
Shares Outstanding 1,553.0
Estimated Value per Share $ 83.03 The estimated value per share.

Current share price $ 54.77

Percent difference 52% (Value/price)-1: positive number indicates unde

Sensitivity analysis for the market-to-book approach should be identical to that of the residual income approach.