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Case Study: Coke Versus Pepsi, 2001 What is EVA? What are the advantages and disadvantages of EVA as a measure of company performance? Examine the
Case Study: Coke Versus Pepsi, 2001
- What is EVA? What are the advantages and disadvantages of EVA as a measure of company performance?
- Examine the historical performances of Coca-Cola and PepsiCo in terms of EVA. What trends do you observe? What are the factors behind those trends? What do you think are the key drivers of EVA?
- What is the weighted-average cost of capital and why is it important to estimate it? Is the cost of capital something that managers set? Who sets it?
- Calculate the WACCs for Coca Cola and PepsiCo. Assume a tax rate of 35%. Be prepared to explain your assumptions for the following components:
- Beta
- Market risk premium
- Weights of debt and equity capital
- Interpret the results of your WACC calculations. What observations can you make?
- Calculate EVA for 2001 to 2003 using the forecast given in the case and the WACCs you have estimated.
- Interpret the results of your EVA calculations. If you had to choose between Coca-Cola and PepsiCo, which one would you choose? Why?
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Machine Learning In Finance From Theory To Practice
Authors: Matthew F Dixon, Igor Halperin, Paul Bilokon
1st Edition
3030410676, 978-3030410674
