Financial Statement Analysis Package (FSAP): Version 8.

0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 8th 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.) 2007 2008 2009 2010 2011 2012

BALANCE SHEET DATA

Assets:
Cash and cash equivalents 910 2,064 3,943 5,943 4,067 6,297
Marketable securities 1,571 213 192 426 358 322
Accounts and notes receivablenet 4,389 4,683 4,624 6,323 6,912 7,041
Inventories 2,290 2,522 2,618 3,372 3,827 3,581
Prepaid expenses and other current assets 991 1,324 1,194 1,505 2,277 1,479
Deferred tax assetscurrent
Other current assets (1)
Other current assets (2)
Current Assets 10,151 10,806 12,571 17,569 17,441 18,720
Investments in noncontrolled affiliates 4,354 3,883 4,484 1,368 1,477 1,633
Property, plant, and equipmentat cost 21,896 22,552 24,912 33,041 35,140 36,162
<Accumulated depreciation> -10,668 -10,889 -12,241 -13,983 -15,442 -17,026
Amortizable intangible assets (net) 796 732 841 2,025 1,888 1,781
Goodwill 5,169 5,124 6,534 14,661 16,800 16,971
Other nonamortizable intangible assets 1,248 1,128 1,782 11,783 14,557 14,744
Deferred tax assetsnon current 0 0 0 0 0 0
Other assets 1,682 2,658 965 1,689 1,021 1,653
Total Assets 34,628 35,994 39,848 68,153 72,882 74,638

Liabilities and Equities:

Accounts payable 2,562 2,846 2,881 3,865 4,083 4,451
Current accrued expenses 5,040 5,427 5,246 7,058 7,674 7,452
Notes payable and short-term debt 0 369 464 4,898 6,205 4,815
Current maturities of long-term debt
Deferred tax liabilitiescurrent
Income taxes payable 151 145 165 71 192 371
Other current liabilities (2)
Other current liabilities (1)
Current Liabilities 7,753 8,787 8,756 15,892 18,154 17,089
Long-term debt obligations 4,203 7,858 7,400 19,999 20,568 23,544
Long-term accrued liabilities 4,730 6,541 5,591 6,729 8,266 6,543
Deferred tax liabilitiesnoncurrent 646 226 659 4,057 4,995 5,063
Other noncurrent liabilities (1)
Other noncurrent liabilities (2)
Total Liabilities 17,332 23,412 22,406 46,677 51,983 52,239

Preferred stock -91 -97 -104 -109 -116 -123

Common stock + Additional paid in capital 480 381 280 4,558 4,487 4,204
Retained earnings <deficit> 28,184 30,638 33,805 37,090 40,316 43,158
Accum. other comprehensive income <loss> -952 -4,694 -3,794 -3,630 -6,229 -5,487
<Treasury stock> and other equity adjustments -10,387 -14,122 -13,383 -16,745 -17,870 -19,458
Total Common Shareholders' Equity 17,325 12,203 16,908 21,273 20,704 22,417
Noncontrolling interests 62 476 638 312 311 105
Total Equity 17,296 12,582 17,442 21,476 20,899 22,399
Total Liabilities and Equities 34,628 35,994 39,848 68,153 72,882 74,638
INCOME STATEMENT DATA 2007 2008 2009 2010 2011 2012

Revenues 39,474 43,251 43,232 57,838 66,504 65,492

<Cost of goods sold> -18,038 -20,351 -20,099 -26,575 -31,593 -31,291
Gross Profit 21,436 22,900 23,133 31,263 34,911 34,201
<Selling, general and administrative expenses> -14,196 -15,877 -15,026 -22,814 -25,145 -24,970
<Research and development expenses>
<Amortization of intangible assets> -58 -64 -63 -117 -133 -119
<Other operating expenses (1)>
<Other operating expenses (2)>
Other operating income (1)
Other operating income (2)
Non-recurring operating gains <losses>
Operating Profit 7,182 6,959 8,044 8,332 9,633 9,112
Interest income 125 41 67 68 57 91
<Interest expense> -224 -329 -397 -903 -856 -899
Income <Loss> from equity affiliates 560 374 365 735 0 0
Other income or gains <Other expenses or losses>
Income before Tax 7,643 7,045 8,079 8,232 8,834 8,304
<Income tax expense> -1,973 -1,879 -2,100 -1,894 -2,372 -2,090
Income <Loss> from discontinued operations
Extraordinary gains <losses>
Changes in accounting principles
Net Income 5,670 5,166 5,979 6,338 6,462 6,214
Net income attributable to noncontrolling interests -12 -24 -33 -18 -19 -36
Net Income attributable to common shareholders 5,658 5,142 5,946 6,320 6,443 6,178
Net Income (enter reported amount as a check) 5,658 5,142 5,946 6,320 6,443 6,178

Other comprehensive income items 1,282 -3,817 867 146 -2,618 706
Comprehensive Income 6,952 1,349 6,846 6,484 3,844 6,920
STATEMENT OF CASH FLOWS DATA 2007 2008 2009 2010 2011 2012

Net Income 5,670 5,166 5,979 6,338 6,462 6,214

Add back depreciation and amortization expenses 1,426 1,543 1,635 2,327 2,737 2,689
Add back stock-based compensation expense 260 238 227 299 326 278
Deferred income taxes 118 573 284 500 495 321
<Income from equity affiliates, net of dividends> -441 -202 -235 42 0 0
<Increase> Decrease in accounts receivable -405 -549 188 -268 -666 -250
<Increase> Decrease in inventories -204 -345 17 276 -331 144
<Increase> Decrease in prepaid expenses -16 -68 -127 144 -27 89
<Increase> Decrease in other current assets
<Increase> Decrease in other noncurrent assets
Increase <Decrease> in accounts payable 522 718 -133 488 520 548
Increase <Decrease> in income taxes payable 128 -180 319 123 -340 -97
Increase <Decrease> in other current liabilities
Increase <Decrease> in other noncurrent liabilities
Other addbacks to <subtractions from> net income 97 496 -1,077 -1,689 456 -1,257
Other operating cash flows -221 -391 -281 -132 -688 -200
Net CF from Operating Activities 6,934 6,999 6,796 8,448 8,944 8,479
Proceeds from sales of property, plant, and equipment 47 98 58 81 84 95
<Property, plant, and equipment acquired> -2,430 -2,446 -2,128 -3,253 -3,339 -2,714
<Increase> Decrease in marketable securities -383 1,282 55 -212 66 61
Investments sold 27 364 99 12 780 -32
<Investments acquired> -1,320 -1,925 -500 -4,279 -3,193 -427
Payments for acquisitions of intangible assets 315 -40
Other investment transactions 15 -17 -16 12
Net CF from Investing Activities -3,744 -2,667 -2,401 -7,668 -5,618 -3,005
Increase <Decrease> in short-term borrowing -395 445 -1,018 2,482 303 -1,461
Increase <Decrease> in long-term borrowing 1,589 3,070 831 5,892 633 3,550
Issue of capital stock 0 0 0 0 0 0
Proceeds from stock option exercises 1,108 620 455 1,145 1,015 1,246
<Share repurchases - treasury stock> -4,312 -4,726 -7 -4,983 -2,496 -3,226
<Dividend payments> -2,204 -2,541 -2,732 -2,978 -3,157 -3,305
Other financing transactions (1) 208 107 0 -159 -1,406 -68
Other financing transactions (2) -26 -13 -27 -42
Net CF from Financing Activities -4,006 -3,025 -2,497 1,386 -5,135 -3,306
Effects of exchange rate changes on cash 75 -153 -19 -166 -67 62
Net Change in Cash -741 1,154 1,879 2,000 -1,876 2,230
Cash and cash equivalents, beginning of year 1,651 910 2,064 3,943 5,943 4,067
Cash and cash equivalents, end of year 910 2,064 3,943 5,943 4,067 6,297
SUPPLEMENTAL DATA 2007 2008 2009 2010 2011 2012

Statutory tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%

Average tax rate implied from income statement data 25.8% 26.7% 26.0% 23.0% 26.9% 25.2%
After-tax effects of nonrecurring and unusual items on
net income 71 -745 100 -355 -592 -276
Depreciation expense 1,304 1,422 1,500 2,124 2,476 2,489
Preferred stock dividends (total, if any) 2 1 2 1 1 1
Common shares outstanding 1,605 1,553 1,566 1,582 1,565 1,544
Earnings per share (basic) 3.48 3.26 3.81 3.97 4.08 3.96
Common dividends per share 1.37 1.64 1.74 1.88 2.02 2.14
Share price at fiscal year end 65.86 48.14 56.22 61.95 64.86 68.43

FINANCIAL DATA CHECKS

Assets - Liabilities - Equities 0 0 0 0 0 0
Net Income (computed) - Net Income (reported) 0 0 0 0 0 0
Cash Changes 0 0 0 0 0
Financial Statement Analysis Package (FSAP): Version 8.0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 8th 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 2008 2009 2010 2011 2012

RETURN ON ASSETS (based on reported amounts):

Profit Margin for ROA 12.4% 14.4% 12.0% 10.6% 10.4%
x Asset Turnover 1.2 1.1 1.1 0.9 0.9
= Return on Assets 15.2% 16.4% 12.8% 10.0% 9.2%

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

Profit Margin for ROA 14.2% 14.2% 12.6% 11.4% 10.8%
x Asset Turnover 1.2 1.1 1.1 0.9 0.9
= Return on Assets 17.3% 16.2% 13.5% 10.8% 9.6%

RETURN ON COMMON EQUITY (based on reported amounts):

Profit Margin for ROCE 11.9% 13.7% 10.9% 9.7% 9.4%
x Asset Turnover 1.2 1.1 1.1 0.9 0.9
x Capital Structure Leverage 2.4 2.6 2.8 3.4 3.4
= Return on Common Equity 34.8% 40.8% 33.1% 30.7% 28.6%

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

Profit Margin for ROCE 13.6% 13.5% 11.5% 10.6% 9.9%
x Asset Turnover 1.2 1.1 1.1 0.9 0.9
x Capital Structure Leverage 2.4 2.6 2.8 3.4 3.4
= Return on Common Equity 39.9% 40.1% 35.0% 33.5% 29.9%
OPERATING PERFORMANCE:
Gross Profit / Revenues 52.9% 53.5% 54.1% 52.5% 52.2%
Operating Profit / Revenues 16.1% 18.6% 14.4% 14.5% 13.9%
Net Income / Revenues 11.9% 13.8% 10.9% 9.7% 9.4%
Comprehensive Income / Revenues 3.1% 15.8% 11.2% 5.8% 10.6%

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

Persistent Operating Profit / Revenues 16.1% 18.6% 14.4% 14.5% 13.9%
Persistent Net Income / Revenues 13.6% 13.5% 11.5% 10.6% 9.9%

GROWTH:
Revenue Growth 9.6% 0.0% 33.8% 15.0% -1.5%
Net Income Growth -9.1% 15.6% 6.3% 1.9% -4.1%
Persistent Net Income Growth 5.4% -0.7% 14.2% 5.4% -8.3%

OPERATING CONTROL:
Gross Profit Control Index 97.5% 101.1% 101.0% 97.1% 99.5%
Operating Profit Contol Index 88.4% 115.6% 77.4% 100.5% 96.1%
Profit Margin Decomposition:
Gross Profit Margin 52.9% 53.5% 54.1% 52.5% 52.2%
Operating Profit Index 30.4% 34.8% 26.7% 27.6% 26.6%
Leverage Index 101.2% 100.4% 98.8% 91.7% 91.1%
Tax Index 73.3% 74.0% 77.0% 73.1% 74.8%
Net Profit Margin 11.9% 13.8% 11.0% 9.7% 9.5%
Comprehensive Income Performance:
Comprehensive Income Index 26.1% 114.5% 102.3% 59.5% 111.4%
Comprehensive Income Margin 3.1% 15.8% 11.2% 5.8% 10.6%
RISK FACTORS:
Year 2008 2009 2010 2011 2012

LIQUIDITY:
Current Ratio 1.23 1.44 1.11 0.96 1.10
Quick Ratio 0.79 1.00 0.80 0.62 0.80
Operating Cash Flow to Current Liabilities 84.6% 77.5% 68.5% 52.5% 48.1%

ASSET TURNOVER:
Accounts Receivable Turnover 9.5 9.3 10.6 10.0 9.4
Days Receivables Held 38 39 35 36 39
Inventory Turnover 8.5 7.8 8.9 8.8 8.4
Days Inventory Held 43 47 41 42 43
Accounts Payable Turnover 7.6 7.1 8.1 8.1 7.3
Days Payables Held 48 52 45 45 50
Net Working Capital Days 33 34 31 33 32
Revenues / Average Net Fixed Assets 3.8 3.6 3.6 3.4 3.4
Cash Turnover 29.1 14.4 11.7 13.3 12.6
Days Sales Held in Cash 12.5 25.4 31.2 27.5 28.9

SOLVENCY:
Total Liabilities / Total Assets 65.0% 56.2% 68.5% 71.3% 70.0%
Total Liabilities / Total Equity 186.1% 128.5% 217.3% 248.7% 233.2%
LT Debt / LT Capital 38.4% 29.8% 48.2% 49.6% 51.2%
LT Debt / Total Equity 62.5% 42.4% 93.1% 98.4% 105.1%
Operating Cash Flow to Total Liabilities 34.4% 29.7% 24.5% 18.1% 16.3%
Interest Coverage Ratio (reported amounts) 22.4 21.4 10.1 11.3 10.2
Interest Coverage ratio (recurring amounts) 22.4 21.4 10.1 11.3 10.2

RISK FACTORS:
Bankruptcy Predictors:
Altman Z Score 5.05 5.45 3.34 3.29 3.33
Bankruptcy Probability 0.00% 0.00% 0.96% 1.11% 0.98%
Earnings Manipulation Predictors:
Beneish Earnings Manipulation Score -2.73 -2.59 -2.31 -2.54 -2.61
Earnings Manipulation Probability 0.31% 0.48% 1.05% 0.55% 0.46%

DIVIDEND and STOCK MARKET-BASED RATIOS:

Stock Returns -24.4% 20.4% 13.5% 8.0% 8.8%
Price-Earnings Ratio (reported amounts) 14.8 14.8 15.6 15.9 17.3
Price-Earnings Ratio (recurring amounts) 12.9 15.0 14.8 14.5 16.5
Market Value to Book Value Ratio 6.1 5.2 4.6 4.9 4.7
Common Dividends per Share $ 1.64 $ 1.74 $ 1.88 $ 2.02 $ 2.14
Common Dividend Payout (% of Net Income) -49.4% -45.9% -47.1% -49.0% -53.5%
Common Dividend Yield (% of Share Price) 3.4% 3.1% 3.0% 3.1% 3.1%
INCOME STATEMENT ITEMS AS A PERCENT OF REVENUES:
Year 2008 2009 2010 2011 2012

Revenues 100.0% 100.0% 100.0% 100.0% 100.0%

<Cost of goods sold> -47.1% -46.5% -45.9% -47.5% -47.8%
Gross Profit 52.9% 53.5% 54.1% 52.5% 52.2%
<Selling, general and administrative expenses> -36.7% -34.8% -39.4% -37.8% -38.1%
<Research and development expenses>
<Amortization of intangible assets> -0.1% -0.1% -0.2% -0.2% -0.2%
<Other operating expenses (1)>
<Other operating expenses (2)>
Other operating income (1)
Other operating income (2)
Non-recurring operating gains <losses>
Operating Profit 16.1% 18.6% 14.4% 14.5% 13.9%
Interest income 0.1% 0.2% 0.1% 0.1% 0.1%
<Interest expense> -0.8% -0.9% -1.6% -1.3% -1.4%
Income <Loss> from equity affiliates 0.9% 0.8% 1.3%
Other income or gains <Other expenses or losse
Income before Tax 16.3% 18.7% 14.2% 13.3% 12.7%
<Income tax expense> -4.3% -4.9% -3.3% -3.6% -3.2%
Income <Loss> from discontinued operations
Extraordinary gains <losses>
Changes in accounting principles
Net Income 11.9% 13.8% 11.0% 9.7% 9.5%
Net income attributable to noncontrolling interests -0.1% -0.1% 0.0% 0.0% -0.1%
Net Income attributable to common sharehol 11.9% 13.8% 10.9% 9.7% 9.4%

Other comprehensive income items -8.8% 2.0% 0.3% -3.9% 1.1%

Comprehensive Income 3.1% 15.8% 11.2% 5.8% 10.6%
INCOME STATEMENT ITEMS: GROWTH RATES
Year 2008 2009 2010 2011 2012
COMPOUND
GROWTH
YEAR TO YEAR GROWTH RATES: RATE
Revenues 9.6% 0.0% 33.8% 15.0% -1.5% 10.7%
<Cost of goods sold> 12.8% -1.2% 32.2% 18.9% -1.0% 11.6%
Gross Profit 6.8% 1.0% 35.1% 11.7% -2.0% 9.8%
<Selling, general and administrative expenses> 11.8% -5.4% 51.8% 10.2% -0.7% 12.0%
<Research and development expenses>
<Amortization of intangible assets> 10.3% -1.6% 85.7% 13.7% -10.5% 15.5%
<Other operating expenses (1)>
<Other operating expenses (2)>
Other operating income (1)
Other operating income (2)
Non-recurring operating gains <losses>
Operating Profit -3.1% 15.6% 3.6% 15.6% -5.4% 4.9%
Interest income -67.2% 63.4% 1.5% -16.2% 59.6% -6.2%
<Interest expense> 46.9% 20.7% 127.5% -5.2% 5.0% 32.0%
Income <Loss> from equity affiliates -33.2% -2.4% 101.4% -100.0% -100.0%
Other income or gains <Other expenses or losse
Income before Tax -7.8% 14.7% 1.9% 7.3% -6.0% 1.7%
<Income tax expense> -4.8% 11.8% -9.8% 25.2% -11.9% 1.2%
Income <Loss> from discontinued operations
Extraordinary gains <losses>
Changes in accounting principles
Net Income -8.9% 15.7% 6.0% 2.0% -3.8% 1.8%
Net income attributable to noncontrolling interests 100.0% 37.5% -45.5% 5.6% 89.5% 24.6%
Net Income attributable to common sharehol -9.1% 15.6% 6.3% 1.9% -4.1% 1.8%

Other comprehensive income items -397.7% -122.7% -83.2% -1893.2% -127.0% -11.2%
Comprehensive Income -80.6% 407.5% -5.3% -40.7% 80.0% -0.1%
COMMON SIZE BALANCE SHEET - AS A PERCENT OF TOTAL ASSETS
Year 2008 2009 2010 2011 2012

Assets:
Cash and cash equivalents 5.7% 9.9% 8.7% 5.6% 8.4%
Marketable securities 0.6% 0.5% 0.6% 0.5% 0.4%
Accounts and notes receivablenet 13.0% 11.6% 9.3% 9.5% 9.4%
Inventories 7.0% 6.6% 4.9% 5.3% 4.8%
Prepaid expenses and other current assets 3.7% 3.0% 2.2% 3.1% 2.0%
Deferred tax assetscurrent
Other current assets (1)
Other current assets (2)
Current Assets 30.0% 31.5% 25.8% 23.9% 25.1%
Investments in noncontrolled affiliates 10.8% 11.3% 2.0% 2.0% 2.2%
Property, plant, and equipmentat cost 62.7% 62.5% 48.5% 48.2% 48.4%
<Accumulated depreciation> -30.3% -30.7% -20.5% -21.2% -22.8%
Amortizable intangible assets (net) 2.0% 2.1% 3.0% 2.6% 2.4%
Goodwill 14.2% 16.4% 21.5% 23.1% 22.7%
Other nonamortizable intangible assets 3.1% 4.5% 17.3% 20.0% 19.8%
Deferred tax assetsnon current
Other assets 7.4% 2.4% 2.5% 1.4% 2.2%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0%

Liabilities and Equities:

Accounts payable 7.9% 7.2% 5.7% 5.6% 6.0%
Current accrued expenses 15.1% 13.2% 10.4% 10.5% 10.0%
Notes payable and short-term debt 1.0% 1.2% 7.2% 8.5% 6.5%
Current maturities of long-term debt
Deferred tax liabilitiescurrent
Income taxes payable 0.4% 0.4% 0.1% 0.3% 0.5%
Other current liabilities (2)
Other current liabilities (1)
Current Liabilities 24.4% 22.0% 23.3% 24.9% 22.9%
Long-term debt obligations 21.8% 18.6% 29.3% 28.2% 31.5%
Long-term accrued liabilities 18.2% 14.0% 9.9% 11.3% 8.8%
Deferred tax liabilitiesnoncurrent 0.6% 1.7% 6.0% 6.9% 6.8%
Other noncurrent liabilities (1)
Other noncurrent liabilities (2)
Total Liabilities 65.0% 56.2% 68.5% 71.3% 70.0%

Preferred stock -0.3% -0.3% -0.2% -0.2% -0.2%

Common stock + Additional paid in capital 1.1% 0.7% 6.7% 6.2% 5.6%
Retained earnings <deficit> 85.1% 84.8% 54.4% 55.3% 57.8%
Accum. other comprehensive income <loss> -13.0% -9.5% -5.3% -8.5% -7.4%
<Treasury stock> and other equity adjustments -39.2% -33.6% -24.6% -24.5% -26.1%
Total Common Shareholders' Equity 33.9% 42.4% 31.2% 28.4% 30.0%
Noncontrolling interests 1.3% 1.6% 0.5% 0.4% 0.1%
Total Equity 35.0% 43.8% 31.5% 28.7% 30.0%
Total Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0%
BALANCE SHEET ITEMS: GROWTH RATES
Year 2008 2009 2010 2011 2012
COMPOUND
GROWTH
Assets: YEAR TO YEAR GROWTH RATES: RATE
Cash and cash equivalents 126.8% 91.0% 50.7% -31.6% 54.8% 47.2%
Marketable securities -86.4% -9.9% 121.9% -16.0% -10.1% -27.2%
Accounts and notes receivablenet 6.7% -1.3% 36.7% 9.3% 1.9% 9.9%
Inventories 10.1% 3.8% 28.8% 13.5% -6.4% 9.4%
Prepaid expenses and other current assets 33.6% -9.8% 26.0% 51.3% -35.0% 8.3%
Deferred tax assetscurrent
Other current assets (1)
Other current assets (2)
Current Assets 6.5% 16.3% 39.8% -0.7% 7.3% 13.0%
Investments in noncontrolled affiliates -10.8% 15.5% -69.5% 8.0% 10.6% -17.8%
Property, plant, and equipmentat cost 3.0% 10.5% 32.6% 6.4% 2.9% 10.6%
<Accumulated depreciation> 2.1% 12.4% 14.2% 10.4% 10.3% 9.8%
Amortizable intangible assets (net) -8.0% 14.9% 140.8% -6.8% -5.7% 17.5%
Goodwill -0.9% 27.5% 124.4% 14.6% 1.0% 26.8%
Other nonamortizable intangible assets -9.6% 58.0% 561.2% 23.5% 1.3% 63.9%
Deferred tax assetsnon current
Other assets 58.0% -63.7% 75.0% -39.6% 61.9% -0.3%
Total Assets 3.9% 10.7% 71.0% 6.9% 2.4% 16.6%

Liabilities and Equities:

Accounts payable 11.1% 1.2% 34.2% 5.6% 9.0% 11.7%
Current accrued expenses 7.7% -3.3% 34.5% 8.7% -2.9% 8.1%
Notes payable and short-term debt 25.7% 955.6% 26.7% -22.4%
Current maturities of long-term debt
Deferred tax liabilitiescurrent
Income taxes payable -4.0% 13.8% -57.0% 170.4% 93.2% 19.7%
Other current liabilities (2)
Other current liabilities (1)
Current Liabilities 13.3% -0.4% 81.5% 14.2% -5.9% 17.1%
Long-term debt obligations 87.0% -5.8% 170.3% 2.8% 14.5% 41.1%
Long-term accrued liabilities 38.3% -14.5% 20.4% 22.8% -20.8% 6.7%
Deferred tax liabilitiesnoncurrent -65.0% 191.6% 515.6% 23.1% 1.4% 51.0%
Other noncurrent liabilities (1)
Other noncurrent liabilities (2)
Total Liabilities 35.1% -4.3% 108.3% 11.4% 0.5% 24.7%

Preferred stock 6.6% 7.2% 4.8% 6.4% 6.0% 6.2%

Common stock + Additional paid in capital -20.6% -26.5% 1527.9% -1.6% -6.3% 54.3%
Retained earnings <deficit> 8.7% 10.3% 9.7% 8.7% 7.0% 8.9%
Accum. other comprehensive income <loss> 393.1% -19.2% -4.3% 71.6% -11.9% 42.0%
<Treasury stock> and other equity adjustments 36.0% -5.2% 25.1% 6.7% 8.9% 13.4%
Total Common Shareholders' Equity -29.6% 38.6% 25.8% -2.7% 8.3% 5.3%
Noncontrolling interests 667.7% 34.0% -51.1% -0.3% -66.2% 11.1%
Total Equity -27.3% 38.6% 23.1% -2.7% 7.2% 5.3%
Total Liabilities and Equities 3.9% 10.7% 71.0% 6.9% 2.4% 16.6%
RETURN ON ASSETS ANALYSIS (excluding the effects of non-recurring items)

Level 1 RETURN ON ASSETS

2010 2011 2012
13.5% 10.8% 9.6%

Level 2 PROFIT MARGIN FOR ROA ASSET TURNOVER

2010 2011 2012 2010 2011 2012
12.6% 11.4% 10.8% 1.1 0.9 0.9

Level 3 2010 2011 2012 2010 2011 2012 Turnovers:

Revenues 100.0% 100.0% 100.0% 10.6 10.0 9.4 Receivables
<Cost of goods sold> -45.9% -47.5% -47.8% 8.9 8.8 8.4 Inventory
Gross Profit 54.1% 52.5% 52.2% 3.6 3.4 3.4 Fixed Assets
<Selling, general and administrative expenses> -39.4% -37.8% -38.1%
Operating Profit 14.4% 14.5% 13.9%
Income before Tax 14.2% 13.3% 12.7%
<Income tax expense> -3.3% -3.6% -3.2%
Profit Margin for ROA* 12.6% 11.4% 10.8%
*
Amounts do not sum.

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

RETURN ON COMMON SHAREHOLDERS' EQUITY

2010 2011 2012
35.0% 33.5% 29.9%

PROFIT MARGIN FOR ROCE 11.5% 10.6% 9.9%

ASSET TURNOVER 1.1 0.9 0.9
CAPITAL STRUCTURE LEVERAGE 2.8 3.4 3.4

RETURN ON COMMON SHAREHOLDERS' EQUITY ANALYSIS: Alternative Approach to Disaggregation

RETURN ON COMMON SHAREHOLDERS' EQUITY

2010 2011 2012
ROCE 35.0% 33.5% 29.9%

INPUT VARIABLES
Total Revenues 57,838 66,504 65,492
Net Operating Profit After Tax (NOPAT) 7,387 7,679 7,162
Net Financing Expense After Tax 714 646 710
Average Net Operating Assets 35,840 47,023 49,215
Average Financing Obligations 16,749 26,034 27,655
Average Common Equity 19,091 20,989 21,561

Profit margin for operating ROA 0.128 0.115 0.109

Net operating asset turnover 1.614 1.414 1.331
Operating ROA (NOPAT/Average NOA) 0.206 0.163 0.146

Net Borrowing Rate 0.043 0.025 0.026

Spread 0.163 0.138 0.120
Leverage 0.877 1.240 1.283
Leverage*Spread 0.143 0.172 0.154

ROCE = Operating ROA+Leverage*Spread 0.350 0.335 0.299

STATEMENT OF CASH FLOWS: SUMMARY
Year 2008 2009 2010 2011 2012

Operating Activities:
Net Income 5,166 5,979 6,338 6,462 6,214
Add back depreciation and amortization expense 1,543 1,635 2,327 2,737 2,689
Net cash flows for working capital -424 264 763 -844 434
Other net addbacks/subtractions 714 -1,082 -980 589 -858
Net CF from Operating Activities 6,999 6,796 8,448 8,944 8,479

Investing Activities:
Capital expenditures (net) -2,348 -2,070 -3,172 -3,255 -2,619
Investments -279 -346 -4,479 -2,347 -398
Other investing transactions -40 15 -17 -16 12
Net CF from Investing Activities -2,667 -2,401 -7,668 -5,618 -3,005

Financing Activities:
Net proceeds from short-term borrowing 445 -1,018 2,482 303 -1,461
Net proceeds from long-term borrowing 3,070 831 5,892 633 3,550
Net proceeds from share issues and repurchases -4,106 448 -3,838 -1,481 -1,980
Dividends -2,541 -2,732 -2,978 -3,157 -3,305
Other financing transactions 107 -26 -172 -1,433 -110
Net CF from Financing Activities -3,025 -2,497 1,386 -5,135 -3,306

Effects of exchange rate changes on cash -153 -19 -166 -67 62

Net Change in Cash 1,154 1,879 2,000 -1,876 2,230
Financial Statement Analysis Package (FSAP): Version 8.0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 8th Edition
By James Wahlen, Steve Baginski and Mark Bradshaw

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

Analyst Name: Wahlen, Baginski & Bradshaw

Company Name: PepsiCo

Sales Revenue Forecast Development

Actuals Forecasts
Year 2010 2011 2012 Year +1 Year +2 Year +3 Year +4 Year +5

Revenues 57,838 66,504 65,492 68,198 71,044 74,038 78,672 80,504

rate of change 15.0% -1.5% 4.1% 4.2% 4.2% 6.3% 2.3%
Sales growth rate assumptions.

Sales Forecasts Combined by Divisions:

Frito-Lay North America 12,573 13,322 13,574 13,984 14,406 14,841 15,584 15,751
Quaker Foods North America 2,656 2,656 2,636 2,636 2,636 2,636 2,686 2,635
Latin America Foods 6,315 7,156 7,780 8,415 9,101 9,844 10,852 11,516
PepsiCo Americas Beverages 20,401 22,418 21,408 22,055 22,721 23,407 24,577 24,842
Europe 9,602 13,560 13,441 13,984 14,549 15,137 16,051 16,385
Asia, Middle East & Africa 6,291 7,392 6,653 7,125 7,631 8,173 8,922 9,375
PepsiCo Total Net Revenues 57,838 66,504 65,492 68,198 71,044 74,038 78,672 80,504
growth rates 15.0% -1.5% 4.1% 4.2% 4.2% 6.3% 2.3%

Sales Forecasts for PepsiCo by Division: 2010 2011 2012 Year +1 Year +2 Year +3 Year +4 Year +5

Frito-Lay North America 12,573 13,322 13,574 13,984 14,406 14,841 15,584 15,751
overall growth rates 6.0% 1.9% 3.0% 3.0% 3.0% 5.0% 1.1%
growth in volume 2.0% -1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
growth from price changes 2.0% 4.8% 2.0% 2.0% 2.0% 2.0% 2.0%
impact of foreign currency translation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 1.9% -1.9% 0.0% 0.0% 0.0% 1.9% -1.9%

Quaker Foods North America 2,656 2,656 2,636 2,636 2,636 2,636 2,686 2,635
overall growth rates 0.0% -0.8% 0.0% 0.0% 0.0% 1.9% -1.9%
growth in volume -5.0% -1.0% -1.0% -1.0% -1.0% -1.0% -1.0%
growth from price changes 2.1% 2.1% 1.0% 1.0% 1.0% 1.0% 1.0%
impact of foreign currency translation 1.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 1.9% -1.9% 0.0% 0.0% 0.0% 1.9% -1.9%

Latin America Foods 6,315 7,156 7,780 8,415 9,101 9,844 10,852 11,516
overall growth rates 13.3% 8.7% 8.2% 8.2% 8.2% 10.2% 6.1%
growth in volume and acquisitions 3.5% 6.0% 4.0% 4.0% 4.0% 4.0% 4.0%
growth from price changes 5.9% 11.6% 4.0% 4.0% 4.0% 4.0% 4.0%
impact of foreign currency translation 2.0% -7.0% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 1.9% -1.9% 0.0% 0.0% 0.0% 1.9% -1.9%

PepsiCo Americas Beverages 20,401 22,418 21,408 22,055 22,721 23,407 24,577 24,842
overall growth rates 9.9% -4.5% 3.0% 3.0% 3.0% 5.0% 1.1%
growth in volume and acquisitions 6.0% -7.5% 1.0% 1.0% 1.0% 1.0% 1.0%
 growth from price changes 1.0% 4.9% 2.0% 2.0% 2.0% 2.0% 2.0%
impact of foreign currency translation 1.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 1.9% -1.9% 0.0% 0.0% 0.0% 1.9% -1.9%

Europe 9,602 13,560 13,441 13,984 14,549 15,137 16,051 16,385

overall growth rates 41.2% -0.9% 4.0% 4.0% 4.0% 6.0% 2.1%
growth in volume and acquisitions 36.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
growth from price changes 0.3% 6.0% 2.0% 2.0% 2.0% 2.0% 2.0%
impact of foreign currency translation 3.0% -7.0% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 1.9% -1.9% 0.0% 0.0% 0.0% 1.9% -1.9%

Asia, Middle East & Africa 6,291 7,392 6,653 7,125 7,631 8,173 8,922 9,375
overall growth rates 17.5% -10.0% 7.1% 7.1% 7.1% 9.2% 5.1%
growth in volume and acquisitions 10.0% -9.0% 5.0% 5.0% 5.0% 5.0% 5.0%
growth from price changes 3.6% 3.9% 2.0% 2.0% 2.0% 2.0% 2.0%
impact of foreign currency translation 2.0% -3.0% 0.0% 0.0% 0.0% 0.0% 0.0%
53rd week effect 1.9% -1.9% 0.0% 0.0% 0.0% 1.9% -1.9%

Forecast Development: Capital Expenditures, Property, Plant and Equipment, and Depreciation

Capital Expenditures: CAPEX Forecasts:

2010 2011 2012 Year +1 Year +2 Year +3 Year +4 Year +5
CAPEX:
PP&E Acquired 3,253 3,339 2,714
PP&E Sold -81 -84 -95
Net CAPEX 3,172 3,255 2,619 3,000 3,410 3,554 3,776 3,864

Net CAPEX as a percent of:

Gross PP&E 12.7% 9.9% 7.5% 8.3% 8.7% 8.3% 8.2% 7.7%
Revenues 5.5% 4.9% 4.0% 4.4% 4.8% 4.8% 4.8% 4.8%
4.8%

Property, Plant and Equipment and Depreciation Property, Plant and Equipment and Depreciation Forecasts:

PP&E at cost: 2010 2011 2012 Year +1 Year +2 Year +3 Year +4 Year +5
Beg. balance at cost: 36,162 39,162 42,572 46,126 49,902
Add: CAPEX forecasts from above: 3,000 3,410 3,554 3,776 3,864
End balance at cost: 33,041 35,140 36,162 39,162 42,572 46,126 49,902 53,766

Accumulated Depreciation:
Beg. Balance: -17,026 -19,760 -22,732 -25,953 -29,437
Subtract: Depreciation expense forecasts from below: -2,734 -2,972 -3,220 -3,484 -3,754
End Balance: -13,983 -15,442 -17,026 -19,760 -22,732 -25,953 -29,437 -33,190

PP&E - net 19,058 19,698 19,136 19,402 19,840 20,173 20,466 20,576

Year +1 Year +2 Year +3 Year +4 Year +5

Depreciation Expense Forecast Development: Depreciation expense forecast on existing PP&E:
Existing PP&E at cost: 36,162 2,525 2,525 2,525 2,525 2,525
Remaining balance to be depreciated. 19,136 16,611 14,087 11,562 9,037 6,513

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

Capex Year +1 3,000 209 209 209 209 209
Capex Year +2 3,410 238 238 238 238
Capex Year +3 3,554 248 248 248
Capex Year +4 3,776 264 264
Capex Year +5 3,864 270
Total Depreciation Expense 2,734 2,972 3,220 3,484 3,754
Depreciation methods: 2010 2011 2012

PPE at Cost 33,041 35,140 36,162

Avg Depreciable PPE 34,091 35,651
Depreciation Expense 2,124 2,476 2,489
Implied Avg. Useful Life in Years 13.8 14.32
Useful Life Forecast Assumption: 14.32
(in years)
Financial Statement Analysis Package (FSAP): Version 8.0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 8th 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 2010 2011 2012 Year +1 Year +2 Year +3 Year +4 Year +5 Year +6
INCOME STATEMENT
Revenues 57,838 66,504 65,492 68,198 71,044 74,038 78,672 80,504 82,919
common size 100.0% 100.0% 100.0% 4.1% 4.2% 4.2% 6.3% 2.3%
rate of change 15.0% -1.5% See Forecast Development worksheet for details of revenues forecasts.
<Cost of goods sold> -26,575 -31,593 -31,291 -32,667 -34,101 -35,612 -37,920 -38,883 -40,050
common size -45.9% -47.5% -47.8% -47.9% -48.0% -48.1% -48.2% -48.3%
rate of change 18.9% -1.0% Assume slowly increasing cost of goods sold as a percent of sales.
Gross Profit 31,263 34,911 34,201 35,531 36,943 38,426 40,752 41,621 42,869
common size 54.1% 52.5% 52.2% 52.1% 52.0% 51.9% 51.8% 51.7% 51.7%
rate of change 11.7% -2.0% 3.9% 4.0% 4.0% 6.1% 2.1%
<Selling, general and administrative expenses> -22,814 -25,145 -24,970 -25,984 -27,068 -28,208 -29,974 -30,672 -31,592
common size -39.4% -37.8% -38.1% -38.1% -38.1% -38.1% -38.1% -38.1%
rate of change 10.2% -0.7% 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 Explain assumptions.
<Amortization of intangible assets> -117 -133 -119 -110 -95 -86 -78 -72 -74
common size -0.2% -0.2% -0.2%
rate of change 13.7% -10.5% 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 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 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 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 Explain assumptions.
Non-recurring operating 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 Explain assumptions
Operating Profit 8,332 9,633 9,112 9,438 9,780 10,131 10,700 10,877 11,203
common size 14.4% 14.5% 13.9% 13.8% 13.8% 13.7% 13.6% 13.5% 13.5%
rate of change 15.6% -5.4% 3.6% 3.6% 3.6% 5.6% 1.6%
 Interest income 68 57 91 61 56 58 61 63 65
common size 0.1% 0.1% 0.1% 1.0% 1.0% 1.0% 1.0% 1.0%
rate of change -16.2% 59.6% Assume 1.0% interest earned on avg balance in cash and marketable securities.
<Interest expense> -903 -856 -899 -1,049 -1,087 -1,136 -1,196 -1,248 -1,286
common size -1.6% -1.3% -1.4% -3.65% -3.65% -3.65% -3.65% -3.65%
rate of change -5.2% 5.0% Weighted average interest rate on financial liabilities.
Income <Loss> from equity affiliates 735 0 0 0 0 0 0 0 0
common size 1.3% 0.0% 0.0%
rate of change -100.0% Explain assumptions
Other income or gains <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 Explain assumptions
Income before Tax 8,232 8,834 8,304 8,450 8,749 9,053 9,565 9,691 9,982
common size 14.2% 13.3% 12.7% 12.4% 12.3% 12.2% 12.2% 12.0% 12.0%
rate of change 7.3% -6.0% 1.8% 3.5% 3.5% 5.7% 1.3%
 <Income tax expense> -1,894 -2,372 -2,090 -2,281 -2,362 -2,444 -2,583 -2,617 -2,695
common size -3.3% -3.6% -3.2% -27.0% -27.0% -27.0% -27.0% -27.0%
rate of change 25.2% -11.9% Assume effective income tax rate equal to that of past two years.
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 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 Explain assumptions
Changes in accounting 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 Explain assumptions
Net Income 6,338 6,462 6,214 6,168 6,387 6,609 6,983 7,075 7,287
common size 11.0% 9.7% 9.5% 9.0% 9.0% 8.9% 8.9% 8.8% 8.8%
rate of change 2.0% -3.8% -0.7% 3.5% 3.5% 5.7% 1.3% 3.0%
Net income attributable to noncontrolling interests -18 -19 -36 -10.5 -10.5 -10.5 -10.5 -10.5 -10.8
common size 0.0% 0.0% -0.1% 10% 10% 10% 10% 10%
rate of change 5.6% 89.5% Assume noncontrolling interests earn a 10% rate of return.
Net Income attributable to common shareholders 6,320 6,443 6,178 6,158 6,377 6,598 6,972 7,064 7,276
common size 10.9% 9.7% 9.4% 9.0% 9.0% 8.9% 8.9% 8.8% 8.8%
rate of change 1.9% -4.1% -0.3% 3.6% 3.5% 5.7% 1.3% 3.0%

Other comprehensive income items 146 -2,618 706 0 0 0 0 0 0

common size 0.3% -3.9% 1.1% 0.0 0.0 0.0 0.0 0.0
rate of change -1893.2% -127.0% Assume random walk with mean zero.
Comprehensive Income 6,484 3,844 6,920 6,158 6,377 6,598 6,972 7,064 7,276
common size 11.2% 5.8% 10.6% 9.0% 9.0% 8.9% 8.9% 8.8% 8.8%
rate of change -40.7% 80.0% -11.0% 3.6% 3.5% 5.7% 1.3% 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
2010 2011 2012 Year +1 Year +2 Year +3 Year +4 Year +5 Year +6
BALANCE SHEET
ASSETS:
Cash and cash equivalents 5,943 4,067 6,297 5,232 5,450 5,680 6,035 6,176 6,361
common size 8.7% 5.6% 8.4% 28.0 28.0 28.0 28.0 28.0
rate of change -31.6% 54.8% Assume ending cash balances equal to 28 days sales.
Marketable securities 426 358 322 293 267 243 221 201 207
common size 0.6% 0.5% 0.4% -9% -9% -9% -9% -9%
rate of change -16.0% -10.1% Assume 9 percent decline, consistent with trend since 2010.
Accounts and notes receivablenet 6,323 6,912 7,041 7,287 7,591 7,911 8,406 8,602 8,860
common size 9.3% 9.5% 9.4% 39.0 39.0 39.0 39.0 39.0
rate of change 9.3% 1.9% Assume ending accounts receivable equals 39 days sales.
Inventories 3,372 3,827 3,581 3,938 4,158 4,391 4,727 4,900 5,047
common size 4.9% 5.3% 4.8% 44.0 44.5 45.0 45.5 46.0
rate of change 13.5% -6.4% Assume continued increase in ending inventory, consistent with recent trend.
Prepaid expenses and other current assets 1,505 2,277 1,479 1,540 1,604 1,672 1,777 1,818 1,873
common size 2.2% 3.1% 2.0% 4.1% 4.2% 4.2% 6.3% 2.3%
rate of change 51.3% -35.0% Assume growth with SG&A expenses, which grow with sales.
Deferred tax assetscurrent 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 Explain assumptions
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 Explain assumptions
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 Explain assumptions
Current Assets 17,569 17,441 18,720 18,290 19,070 19,896 21,166 21,697 22,348
common size 25.8% 23.9% 25.1% 24.1% 24.3% 24.5% 24.8% 24.9% 24.9%
rate of change -0.7% 7.3% -2.3% 4.3% 4.3% 6.4% 2.5% 3.0%
 Investments in noncontrolled affiliates 1,368 1,477 1,633 1,764 1,905 2,057 2,222 2,399 2,471
common size 2.0% 2.0% 2.2% 8% 8% 8% 8% 8%
rate of change 8.0% 10.6% Assume 8% growth, consistent with past two years.
Property, plant, and equipmentat cost 33,041 35,140 36,162 39,162 42,572 46,126 49,902 53,766 55,379
common size 48.5% 48.2% 48.4%
rate of change 6.4% 2.9% PP&E assumptions - see schedule in forecast development
<Accumulated depreciation> -13,983 -15,442 -17,026 -19,760 -22,732 -25,953 -29,437 -33,190 -34,186
common size -20.5% -21.2% -22.8%
rate of change 10.4% 10.3% See depreciation schedule in forecast development worksheet.
Amortizable intangible assets (net) 2,025 1,888 1,781 1,671 1,576 1,490 1,412 1,340 1,380
common size 3.0% 2.6% 2.4% -110 -95 -86 -78 -72
rate of change -6.8% -5.7% Assume amortization per PepsiCo disclosures in Note 4.
Goodwill 14,661 16,800 16,971 17,672 18,410 19,185 20,386 20,861 21,487
common size 21.5% 23.1% 22.7% 4.1% 4.2% 4.2% 6.3% 2.3%
rate of change 14.6% 1.0% Assume growth with sales.
Other nonamortizable intangible assets 11,783 14,557 14,744 15,353 15,994 16,668 17,711 18,124 18,667
common size 17.3% 20.0% 19.8% 4.1% 4.2% 4.2% 6.3% 2.3%
rate of change 23.5% 1.3% Assume growth with sales.
Deferred tax assetsnon 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 Explain assumptions
Other assets 1,689 1,021 1,653 1,721 1,793 1,869 1,986 2,032 2,093
common size 2.5% 1.4% 2.2% 4.1% 4.2% 4.2% 6.3% 2.3%
rate of change -39.6% 61.9% Assume growth with sales.
Total Assets 68,153 72,882 74,638 75,873 78,587 81,338 85,348 87,029 89,640
common size 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
rate of change 6.9% 2.4% 1.7% 3.6% 3.5% 4.9% 2.0% 3.0%
 LIABILITIES:
Accounts payable 3,865 4,083 4,451 4,524 4,701 4,910 5,241 5,350 5,511
common size 5.7% 5.6% 6.0% 50.0 50.0 50.0 50.0 50.0
rate of change 5.6% 9.0% Assume a 50 day payment period consistent with prior year.
Current accrued expenses 7,058 7,674 7,452 7,760 8,084 8,424 8,952 9,160 9,435
common size 10.4% 10.5% 10.0% 4.1% 4.2% 4.2% 6.3% 2.3%
rate of change 8.7% -2.9% Assume growth with SG&A expenses, which grow with sales.
Notes payable and short-term debt 4,898 6,205 4,815 4,943 5,169 5,402 5,722 5,892 6,069
common size 7.2% 8.5% 6.5% 2.7% 4.6% 4.5% 5.9% 3.0%
rate of change 26.7% -22.4% Assume growth that is one perrcent faster than total assets growth.
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 Explain assumptions
Deferred tax liabilitiescurrent 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 Explain assumptions
Income taxes payable 71 192 371 379 393 407 427 435 448
common size 0.1% 0.3% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
rate of change 170.4% 93.2% Assume a constant 0.5% of total assets.
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 Explain assumptions
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 Explain assumptions
Current Liabilities 15,892 18,154 17,089 17,606 18,347 19,143 20,341 20,837 21,463
common size 23.3% 24.9% 22.9% 23.2% 23.3% 23.5% 23.8% 23.9% 23.9%
rate of change 14.2% -5.9% 3.0% 4.2% 4.3% 6.3% 2.4%
Long-term debt obligations 19,999 20,568 23,544 24,169 25,275 26,413 27,979 28,810 29,674
common size 29.3% 28.2% 31.5% 2.7% 4.6% 4.5% 5.9% 3.0%
rate of change 2.8% 14.5% Assume growth that is one percent faster than total assets growth.
Long-term accrued liabilities 6,729 8,266 6,543 6,813 7,098 7,397 7,860 8,043 8,284
common size 9.9% 11.3% 8.8% 4.1% 4.2% 4.2% 6.3% 2.3%
rate of change 22.8% -20.8% Assume growth with SG&A expenses, which grow with sales.
Deferred tax liabilitiesnoncurrent 4,057 4,995 5,063 5,159 5,344 5,531 5,804 5,918 6,095
common size 6.0% 6.9% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8%
rate of change 23.1% 1.4% Assume a constant 6.8% of total assets.
Other noncurrent 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 Explain assumptions
Other noncurrent 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 Explain assumptions
Total Liabilities 46,677 51,983 52,239 53,748 56,064 58,484 61,984 63,608 65,516
 common size 68.5% 71.3% 70.0% 70.8% 71.3% 71.9% 72.6% 73.1% 73.1%
rate of change 11.4% 0.5% 2.9% 4.3% 4.3% 6.0% 2.6% 3.0%
 SHAREHOLDERS' EQUITY
Preferred stock -109 -116 -123 0 0 0 0 0 0
common size -0.2% -0.2% -0.2% 0.0 0.0 0.0 0.0 0.0
rate of change 6.4% 6.0% Assume preferred stock retired.

Common stock + Additional paid in capital 4,558 4,487 4,204 4,249 4,401 4,555 4,779 4,874 5,020
common size 6.7% 6.2% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6%
rate of change -1.6% -6.3% Assume steady percent of total assets.
Retained earnings <deficit> 37,090 40,316 43,158 45,866 48,735 51,705 54,842 58,021 59,762
common size 54.4% 55.3% 57.8%
rate of change 8.7% 7.0% Add net income and subtract dividends; see dividends forecast box below.
Accum. other comprehensive income <loss> -3,630 -6,229 -5,487 -5,487 -5,487 -5,487 -5,487 -5,487 -5,487
common size -5.3% -8.5% -7.4% 0.0 0.0 0.0 0.0 0.0
rate of change 71.6% -11.9% Add accumulated other comprehensive income items from income statement
<Treasury stock> and other equity adjustments -16,745 -17,870 -19,458 -22,608 -25,231 -28,023 -30,875 -34,092 -35,279
common size -24.6% -24.5% -26.1% -3,150 -2,624 -2,792 -2,852 -3,217
rate of change 6.7% 8.9% Treasury stock repurchases, net of treasury stock reissues.
Total Common Shareholders' Equity 21,273 20,704 22,417 22,020 22,418 22,749 23,260 23,316 24,015
common size 31.2% 28.4% 30.0% 29.0% 28.5% 28.0% 27.3% 26.8%
rate of change -2.7% 8.3% -1.8% 1.8% 1.5% 2.2% 0.2% 3.0%
Noncontrolling interests 312 311 105 105 105 105 105 105 108.2
common size 0.5% 0.4% 0.1% 0.0 0.0 0.0 0.0 0.0
rate of change -0.3% -66.2% Assume noncontrolling interests remain constant; all earnings distributed.
Total Equity 21,585 21,015 22,522 22,125 22,523 22,854 23,365 23,421 24,123
common size 31.7% 28.8% 30.2% 29.2% 28.7% 28.1% 27.4% 26.9%
rate of change -2.6% 7.2% -1.8% 1.8% 1.5% 2.2% 0.2%
Total Liabilities and Equities 68,153 72,882 74,638 75,873 78,587 81,338 85,348 87,029 89,640
common size 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
rate of change 6.9% 2.4% 1.7% 3.6% 3.5% 4.9% 2.0% 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:
-150 376 208 148 -217 -1,187

Dividends forecasts:
Common dividends: 3,387 3,507 3,629 3,835 3,885 5,535
55.0% 55.0% 55.0% 55.0% 55.0%
Assume 55% payout of net income available to common shareholders.
Preferred dividends: 63 0 0 0 0 0
63.0 0.0 0.0 0.0 0.0
Assume $63 million paid to retire preferred shares.
Total dividends: 3,450 3,507 3,629 3,835 3,885 5,535
Total dividend forecast amounts.
 Flexible Financial Account: Treasury Stock Purchases:
Original Forecast Amounts:
Treasury Stock Purchases: -3,000 -3,000 -3,000 -3,000 -3,000
-3,000 -3,000 -3,000 -3,000 -3,000
Treasury stock repurchases, net of reissues, per PepsiCo disclosures.
Implied adjustments: -150 376 208 148 -217 -1187
Adjustment needed to balance the balance sheet, from above.
Total: -3150 -2624 -2792 -2852 -3217 -1187
Total Treasury Stock Purchase Amounts

FSAP OUTPUT: FINANCIAL STATEMENT FORECASTS

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

Actuals Forecasts
IMPLIED STATEMENT OF CASH FLOWS 2011 2012 Year +1 Year +2 Year +3 Year +4 Year +5 Year +6

Net Income 6,462 6,214 6,168 6,387 6,609 6,983 7,075 7,287
Add back depreciation expense (net) 1,459 1,584 2,734 2,972 3,220 3,484 3,754 996
Add back amortization expense (net) 133 119 110 95 86 78 72 74
<Increase> Decrease in receivables - net -589 -129 -246 -304 -320 -495 -196 -258
<Increase> Decrease in inventories -455 246 -357 -220 -233 -336 -173 -147
<Increase> Decrease in prepaid expenses -772 798 -61 -64 -68 -105 -41 -55
<Increase> Decrease in other current assets (1) 0 0 0 0 0 0 0 0
<Increase> Decrease in other current assets (2) 0 0 0 0 0 0 0 0
Increase <Decrease> in accounts payable - trade 218 368 73 178 209 330 110 161
Increase <Decrease> in current accrued liabilities 616 -222 308 324 341 527 208 275
Increase <Decrease> in income taxes payable 121 179 8 14 14 20 8 13
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 938 68 96 185 187 273 114 178
Increase <Decrease> in long-term accrued liabilities 1,537 -1,723 270 284 299 463 183 241
Increase <Decrease> in other noncurrent liabilities (1) 0 0 0 0 0 0 0 0
Increase <Decrease> in other noncurrent liabilities (2) 0 0 0 0 0 0 0 0
Net Cash Flows from Operations 9,668 7,502 9,104 9,850 10,344 11,222 11,114 8,764
<Increase> Decrease in property, plant, & equip. at cost -2,099 -1,022 -3,000 -3,410 -3,554 -3,776 -3,864 -1,613
<Increase> Decrease in marketable securities 68 36 29 26 24 22 20 -6
<Increase> Decrease in investment securities -109 -156 -131 -141 -152 -165 -178 -72
<Increase> Decrease in amortizable intangible assets (net) 4 -12 0 0 0 0 0 -114
<Increase> Decrease in goodwill and nonamort. intangibles -4,913 -358 -1,311 -1,378 -1,450 -2,244 -887 -1,170
<Increase> Decrease in other noncurrent assets (1) 0 0 0 0 0 0 0 0
<Increase> Decrease in other noncurrent assets (2) 668 -632 -68 -72 -76 -117 -46 -61
Net Cash Flows from Investing Activities -6,381 -2,144 -4,481 -4,975 -5,207 -6,280 -4,955 -3,036
Increase <Decrease> in short-term debt 1,307 -1,390 128 226 233 320 170 177
Increase <Decrease> in long-term debt 569 2,976 625 1,106 1,138 1,566 831 864
Increase <Decrease> in preferred stock -7 -7 123 0 0 0 0 0
Increase <Decrease> in common stock + paid in capital -71 -283 45 152 154 225 94 146
Increase <Decrease> in accum. OCI -2,599 742 0 0 0 0 0 0
Increase <Decrease> in treasury stock and other equity adjs. -1,125 -1,588 -3,150 -2,624 -2,792 -2,852 -3,217 -1,187
Dividends -3,217 -3,336 -3,450 -3,507 -3,629 -3,835 -3,885 -5,535
Increase <Decrease> in noncontrolling interests -20 -242 -11 -11 -11 -11 -11 -8
Net Cash Flows from Financing Activities -5,163 -3,128 -5,689 -4,657 -4,907 -4,586 -6,018 -5,543
Net Change in Cash -1,876 2,230 -1,065 218 230 356 141 185
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
2010 2011 2012 Year +1 Year +2 Year +3 Year +4 Year +5 Year +6
FORECAST VALIDITY CHECK DATA:
GROWTH
Revenue Growth Rates: 33.8% 15.0% -1.5% 4.1% 4.2% 4.2% 6.3% 2.3% 3.0%
Net Income Growth Rates: 6.3% 1.9% -4.1% -0.7% 3.5% 3.5% 5.7% 1.3% 3.0%
Total Asset Growth Rates 71.0% 6.9% 2.4% 1.7% 3.6% 3.5% 4.9% 2.0% 3.0%

RETURN ON ASSETS (based on reported amounts):

Profit Margin for ROA 12.0% 10.6% 10.4% 10.2% 10.1% 10.0% 10.0% 9.9% 9.9%
x Asset Turnover 1.1 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
= Return on Assets 12.8% 10.0% 9.2% 9.2% 9.3% 9.3% 9.4% 9.3% 9.3%

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

Profit Margin for ROA 12.6% 11.4% 10.8% 10.2% 10.1% 10.0% 10.0% 9.9% 9.9%
x Asset Turnover 1.1 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
= Return on Assets 13.5% 10.8% 9.6% 9.2% 9.3% 9.3% 9.4% 9.3% 9.3%

RETURN ON COMMON EQUITY (based on reported amounts):

Profit Margin for ROCE 10.9% 9.7% 9.4% 9.0% 9.0% 8.9% 8.9% 8.8% 8.8%
x Asset Turnover 1.1 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
x Capital Structure Leverage 2.8 3.4 3.4 3.4 3.5 3.5 3.6 3.7 3.7
= Return on Common Equity 33.1% 30.7% 28.6% 27.5% 28.7% 29.3% 30.4% 30.4% 30.8%

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

Profit Margin for ROCE 11.5% 10.6% 9.9% 9.0% 9.0% 8.9% 8.9% 8.8% 8.8%
x Asset Turnover 1.1 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
x Capital Structure Leverage 2.8 3.4 3.4 3.4 3.5 3.5 3.6 3.7 3.7
= Return on Common Equity 35.0% 33.5% 29.9% 27.5% 28.7% 29.3% 30.4% 30.4% 30.8%
 OPERATING PERFORMANCE:
Gross Profit / Revenues 54.1% 52.5% 52.2% 52.1% 52.0% 51.9% 51.8% 51.7% 51.7%
Operating Profit Before Taxes / Revenues 14.4% 14.5% 13.9% 13.8% 13.8% 13.7% 13.6% 13.5% 13.5%

ASSET TURNOVER:
Revenues / Avg. Accounts Receivable 10.6 10.0 9.4 9.5 9.6 9.6 9.6 9.5 9.5
COGS / Average Inventory 8.9 8.8 8.4 8.7 8.4 8.3 8.3 8.1 8.1
Revenues / Average Fixed Assets 3.6 3.4 3.4 3.5 3.6 3.7 3.9 3.9 4.0

LIQUIDITY:
Current Ratio 1.1 1.0 1.1 1.0 1.0 1.0 1.0 1.0 1.0
Quick Ratio 0.8 0.6 0.8 0.7 0.7 0.7 0.7 0.7 0.7

SOLVENCY:
Total Liabilities / Total Assets 68.5% 71.3% 70.0% 70.8% 71.3% 71.9% 72.6% 73.1% 73.1%
Total Liabilities / Total Equity 217.3% 248.7% 233.2% 244.1% 250.1% 257.1% 266.5% 272.8% 272.8%
Interest Coverage Ratio 10.1 11.3 10.2 9.1 9.0 9.0 9.0 8.8 8.8
Financial Statement Analysis Package (FSAP): Version 8.0
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 8th Edition
By James Wahlen, Steve Baginski and Mark Bradshaw

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

DATA CHECKS - Estimated Value per Share

Dividend Based Valuation $ 85.86
Free Cash Flow Valuation $ 85.86
Residual Income Valuation $ 85.86
Residual Income Market-to-Book Valuation $ 85.86
Free Cash Flow for All Debt and Equity Valuation $ 89.02
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 L266.

FSAP OUTPUT: VALUATION MODELS

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

VALUATION PARAMETER ASSUMPTIONS

Current share price $ 68.43

Number of shares outstanding 1,544.0
Current market value $ 105,656

GROWTH:
Long-run growth assumption used in forecasts 3.0%
Long-run growth assumption used in valuation. 3.0%
(Both long-run growth assumptions should be the same.)

COST OF EQUITY CAPITAL:

Equity risk factor (market beta) 0.75
Risk free rate 3.0%
Market risk premium 6.0%
Required rate of return on common equity: 7.50%

COST OF DEBT CAPITAL

Debt capital $ 30,500
Cost of debt capital, before tax 3.65%
Effective tax rate -27.0%
After-tax cost of debt capital 2.66%

COST OF PREFERRED STOCK

Preferred stock capital $ -
Preferred dividends $ -
Implied yield 0.00%

COST OF NONCONTROLLING INTERESTS' CAPITAL

Noncontrolling interests capital $ 105
Earnings attributable to noncontrolling interests $ 10.5
Implied yield 10.00%

WEIGHTED AVERAGE COST OF CAPITAL

Weight of equity in capital structure 0.7754
Weight of debt in capital structure 0.2238
Weight of preferred in capital structure 0.0000
Weight of noncontrolling interests in capital structure 0.0008
Weighted average cost of capital 6.42%
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

1 2 3 4 5
Dividends-Based Valuation Year +1 Year +2 Year +3 Year +4 Year +5

Dividends Paid to Common Shareholders 3,386.8 3,507 3,629 3,835 3,885

Less: Common Stock Issues -44.9 -152 -154 -225 -94
Plus: Common Stock Repurchases 3,149.5 2,624 2,792 2,852 3,217
Dividends to Common Equity 6,491.4 5,979 6,267 6,462 7,008

Present Value Factors 0.930 0.865 0.805 0.749 0.697

Present Value Net Dividends 6,038.5 5,173.9 5,044.5 4,838.8 4,881.5
Sum of Present Value Net Dividends 25,977.2
Present Value of Continuing Value 101,800.3
Total 127,777.5
Adjust to midyear discounting 1.0375
Total Present Value Dividends 132,569.1
Shares Outstanding 1,544.0
Estimated Value per Share $ 85.86

Current share price $ 68.43

Percent difference 25%
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

1 2 3 4 5
Free Cash Flows for Common Equity Year +1 Year +2 Year +3 Year +4 Year +5

Net Cash Flow from Operations 9,104.3 9,850.3 10,344.0 11,221.7 11,113.7
Decrease (Increase) in Cash Required for Operations 1,065.3 -218.3 -229.6 -355.5 -140.5
Net Cash Flow from Investing -4,480.6 -4,974.8 -5,207.4 -6,280.2 -4,955.4
Net Cash Flow from Debt Financing 752.9 1,332.4 1,370.2 1,886.6 1,000.6
Net Cash Flow into Financial Assets 0.0 0.0 0.0 0.0 0.0
Net Cash FlowPref. Stock and Noncontrolling Interests 49.5 -10.5 -10.5 -10.5 -10.5
Free Cash Flow for Common Equity 6,491.4 5,979.0 6,266.7 6,462.1 7,008.0

Present Value Factors 0.930 0.865 0.805 0.749 0.697

Present Value Free Cash Flows 6,038.5 5,173.9 5,044.5 4,838.8 4,881.5
Sum of Present Value Free Cash Flows 25,977.2
Present Value of Continuing Value 101,800.3
Total 127,777.5
Adjust to midyear discounting 1.0375
Total Present Value Free Cash Flows to Equity 132,569.1
Shares Outstanding 1,544.0
Estimated Value per Share $ 85.86

Current share price $ 68.43

Percent difference 25%
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

Dividends Valuation Sensitivity Analysis:

Long-Run Growth Assumptions

85.86 0% 2% 3% 4% 5% 6% 8%
Discount 5% 91.96 135.32 189.52 352.10 #DIV/0! -298.25 -81.47
Rates: 6% 76.74 102.04 127.33 177.92 329.69 #DIV/0! -125.61
7% 65.88 82.07 96.23 119.84 167.05 308.67 -257.84
7.50% 61.54 74.81 85.86 103.23 134.50 207.46 -522.13
8% 57.74 68.75 77.56 90.77 112.79 156.83 #DIV/0!
9% 51.42 59.24 65.11 73.32 85.64 106.18 270.44
10% 46.37 52.11 56.21 61.68 69.33 80.82 138.23
11% 42.23 46.56 49.53 53.35 58.44 65.58 94.10
12% 38.80 42.12 44.33 47.10 50.65 55.40 72.00
13% 35.89 38.48 40.17 42.23 44.80 48.11 58.70
14% 33.40 35.45 36.76 38.33 40.24 42.63 49.82
15% 31.25 32.89 33.92 35.13 36.59 38.36 43.45
18% 26.23 27.12 27.65 28.26 28.96 29.78 31.91
20% 23.74 24.34 24.70 25.10 25.56 26.08 27.38
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

1 2 3 4 5
RESIDUAL INCOME VALUATION Year +1 Year +2 Year +3 Year +4 Year +5
Comprehensive Income Available
for Common Shareholders 6,094.7 6,376.6 6,598.3 6,972.2 7,064.2
Lagged Book Value of Common
Shareholders' Equity (at t-1) 22,417.0 22,020.3 22,417.9 22,749.5 23,259.5

Required Earnings 1,681.3 1,651.5 1,681.3 1,706.2 1,744.5

Residual Income 4,413.5 4,725.1 4,917.0 5,266.0 5,319.7

Present Value Factors 0.930 0.865 0.805 0.749 0.697

Present Value Residual Income 4,105.6 4,088.8 3,958.0 3,943.2 3,705.5
Sum of Present Value Residual Income 19,801.0
Present Value of Continuing Value 85,559.5
Total 105,360.5
Add: Beginning Book Value of Equity 22,417.0
Present Value of Equity 127,777.5
Adjust to midyear discounting 1.0375
Total Present Value of Equity 132,569.1
Shares Outstanding 1,544.0
Estimated Value per Share $ 85.86

Current share price $ 68.43

Percent difference 25%
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

RESIDUAL INCOME VALUATION SENSITIVITY ANALYSIS:

Long-Run Growth Assumptions

85.86 0% 2% 3% 4% 5% 6% 8%
Discount 5% 91.96 135.32 189.52 352.10 #DIV/0! -298.25 -81.47
Rates: 6% 76.74 102.04 127.33 177.92 329.69 #DIV/0! -125.61
7% 65.88 82.07 96.23 119.84 167.05 308.67 -257.84
7.50% 61.54 74.81 85.86 103.23 134.50 207.46 -522.13
8% 57.74 68.75 77.56 90.77 112.79 156.83 #DIV/0!
9% 51.42 59.24 65.11 73.32 85.64 106.18 270.44
10% 46.37 52.11 56.21 61.68 69.33 80.82 138.23
11% 42.23 46.56 49.53 53.35 58.44 65.58 94.10
12% 38.80 42.12 44.33 47.10 50.65 55.40 72.00
13% 35.89 38.48 40.17 42.23 44.80 48.11 58.70
14% 33.40 35.45 36.76 38.33 40.24 42.63 49.82
15% 31.25 32.89 33.92 35.13 36.59 38.36 43.45
18% 26.23 27.12 27.65 28.26 28.96 29.78 31.91
20% 23.74 24.34 24.70 25.10 25.56 26.08 27.38
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

RESIDUAL INCOME VALUATION 1 2 3 4 5

Market-to-Book Approach Year +1 Year +2 Year +3 Year +4 Year +5
Comprehensive Income Available
for Common Shareholders 6,094.7 6,376.6 6,598.3 6,972.2 7,064.2
Book Value of Common
Shareholders' Equity (at t-1) 22,417.0 22,020.3 22,417.9 22,749.5 23,259.5

Implied ROCE 27.2% 29.0% 29.4% 30.6% 30.4%

Residual ROCE 19.7% 21.5% 21.9% 23.1% 22.9%
Cumulative growth factor in common equity as of t-1 100.0% 98.2% 100.0% 101.5% 103.8%
Residual ROCE times cumulative growth 19.7% 21.1% 21.9% 23.5% 23.7%

Present Value Factors 0.930 0.865 0.805 0.749 0.697

Present Value Residual ROCE times growth 0.183 0.182 0.177 0.176 0.165
Sum of Present Value Residual ROCE times growth 0.88
Present Value of Continuing Value 3.82
Total Present Value Residual ROCE 4.70
Add one for book value of equity at t-1 1.0
Sum 5.70
Adjust to mid-year discounting 1.0375
Implied Market-to-Book Ratio 5.914
Times Beginning Book Value of Equity 22,417.0
Total Present Value of Equity 132,569.1
Shares Outstanding 1,544.0
Estimated Value per Share $ 85.86

Current share price $ 68.43

Percent difference 25%

Sensitivity analysis for the market-to-book approach should be identical to that of the residual income approach.
FSAP OUTPUT: VALUATION MODELS
Analyst Name: Wahlen, Baginski & Bradshaw
Company Name: PepsiCo

1 2 3 4 5
Free Cash Flows for All Debt and Equity Year +1 Year +2 Year +3 Year +4 Year +5

Net Cash Flow from Operations 9,104.3 9,850.3 10,344.0 11,221.7 11,113.7
Add back: Interest Expense after tax 765.7 793.4 829.4 872.8 911.3
Subtract: Interest Income after tax 0.0 0.0 0.0 0.0 0.0
Decrease (Increase) in Cash Required for Operations 1,065.3 -218.3 -229.6 -355.5 -140.5
Free Cash Flow from Operations 10,935.3 10,425.4 10,943.8 11,739.0 11,884.5
Net Cash Flow from Investing -4,480.6 -4,974.8 -5,207.4 -6,280.2 -4,955.4
Add back: Net CFs into Financial Assets 0.0 0.0 0.0 0.0 0.0
Free Cash Flows - All Debt and Equity 6,454.7 5,450.6 5,736.4 5,458.8 6,929.1

Present Value Factors 0.940 0.883 0.830 0.780 0.733

Present Value Free Cash Flows 6,065.3 4,812.8 4,759.7 4,256.1 5,076.6
Sum of Present Value Free Cash Flows 24,970.5
Present Value of Continuing Value 138,874.5
Total Present Value Free Cash Flows to Equity and Debt 163,845.0
Less: Value of Outstanding Debt -30,500.0
Less: Value of Preferred Stock -63.0
Less: Noncontrolling Interests -105.0
Plus: Value of Financial Assets 0.0
Present Value of Equity 133,177.0
Adjust to midyear discounting 1.0321
Total Present Value of Equity 137,451.7
Shares Outstanding 1,544.0
Estimated Value per Share $ 89.02

Current share price $ 68.43

Percent difference 30%
Continuing
Value
Year +6

6,576.6
Continuing
Value
Year +6

8,764.4
-185.3
-3,035.9
1,041.1
0.0
-7.7
6,576.6
 10%
-38.11
-49.73
-69.00
-84.38
-107.40
-222.36
#DIV/0!
236.75
121.80
83.42
64.18
52.60
35.10
29.20
Continuing
Value
Year +6

7,276.1

23,315.8

1,748.7
5,527.4
 10%
-38.11
-49.73
-69.00
-84.38
-107.40
-222.36
#DIV/0!
236.75
121.80
83.42
64.18
52.60
35.10
29.20
Continuing
Value
Year +6

7,276.1

23,315.8

31.2%
23.7%
104.0%
24.7%
Continuing
Value
Year +6

8,764.4
938.6
0.0
-185.3
9,517.7
-3,035.9
0.0
6,481.9