Analyzing Pepsico (PEP) on Capital IQ.

1. Download dividends from 2009-2019 and calculate the average growth rate.

a. Using the constant growth dividend discount model, calculate the estimated cost of equity (r_s). Use the growth rate from the previous question and the current stock price.

b. Use a 2 stage dividend model to calculate r_s using =IRR. Start with a 7.5% growth for years 1-3 then you make an estimate of long term dividend growth.

c. Average your equity estimates, using only the reasonable r_s estimates (throw out any that seem inappropriate) to get average equity cost. Calculate proportions of debt and equity.

d. Calculate WACC.