Each student will conduct a thorough financial analysis/company valuation analysis for PEPSI.
You will research & discuss:
– The background/history of PEPSI
– Financial Analysis: Conduct a financial analysis of the corporation (see directions below).
– Valuation Analysis: Compute the intrinsic value of the stock of the corporation (see directions below).
– Report the findings of your analysis.
– Based on your financial and valuation analysis, is this company a good investment choice? Why or why not?
Financial Analysis:
Compute, interpret, and compare the following ratios for each firm: Current Ratio, Quick Ratio, Accounts Receivable Turnover, Inventory Turnover, Debt-Asset Ratio, Return on Assets, Return on Common Equity, Times Interest Earned, Gross Profit Margin, Net Profit Margin, and other ratios that you believe are relevant. (Optional)
Valuation Analysis
1) Present Trends in Stock Price: Examine the trend in PEPSI’s stock price over the past five years.
Websites, such as Yahoo Finance, CNBC.com, and Bloomberg.com can be used.
2) Compute Book Value per share
3) Show Market Value per share (find it through a stock quote search)
4) Show Current P/E Ratio
5) Determining the Required Rate of Return for your chosen stock by using the Capital Asset Pricing Model. *For the CAPM, assume that the Risk-Free Rate is 2.0% and the expected market return is 8%.
6) Compute the intrinsic value of each corporation’s stock. Here, the constant dividend growth model, the non-constant dividend growth model, OR the P/E valuation model can be utilized. Make sure to explain why you chose a particular model. To anticipate the future rate of dividend growth, you will have to research past trends in dividends. This can be done by looking at a corporation’s annual report or going onto a website such as Yahoo Finance.
– Each student will be required to submit a written paper, which will be 4 pages in length. All sources must be cited using APA, formats.
– Include an appendix at the end of the report showing all your ratio calculations.
Structure of Paper:
Cover Page (does not count toward page requirement)
Introduction
Body of Report/Financial & Valuation Analysis
Conclusion
Works Cited Page (does not count toward page requirement)
Appendix (does not count toward page requirement)