Reference no: EM133954347

Description and Tasks

In this assignment, you will select a publicly traded US-based corporation and analyze it along several dimensions related to managing financial resources. More specifically, you will perform an analysis on the company's corporate governance and shareholders, offer comparisons among multiple financial ratios between the firm and its peer group, and estimate its cost of capital (WACC).

Note: The company to be analyised is "PEPSI Co." USA for 2024 financials And then you will need to make a financial comparison with another company which is (Dr. Pepper drink company) in USA.

In particular, the analysis will stress the links between analysis of financial statements, firm behavior, and value creation.

Make sure of the following:

-The Ratio analysis should include:
**Profitability Analysis (Table of results with peers + Analysis)
**Asset utilization Analysis (Table of results with peers + Analysis)
**Solvency (short- and long-term) Analysis (Table of results with peers + Analysis)
**Dupont Analysis (Table of results with peers + Analysis)
-Balance sheet and income statement should be put as appendix.
-Make sure that your competitors are within the list of companies that were shared.

Please see below for instructions on the individual parts.

1. Introduction

In this section you will introduce your firm, list all external resources or references consulted, and then explain your selection of its peer group. Ideally, the peer group can consist of your firm plus 2, 3, or 4 other firms (per your preference).

There is no need in the introduction to summarize your results.

2. Corporate Governance and Shareholders Analysis

Critically analyze the corporate governance and shareholders relying on answering the following questions:

How does this firm interact with financial markets? How do markets get information on the firm?

How does this firm view its social obligations and manage its image in society?

Who is the average investor in this stock? (Individual or pension fund, taxable or tax-exempt, small or large, domestic or foreign)

Who is the marginal investor in this stock?

There are many scores that you would like to explore on ESG and Corporate Governance (see my handouts)

3. Financial Ratios Analysis Here you will conduct a financial statement analysis using financial ratios. You may look at common-size statements of your firm and its peers.

Specific Guidance:

Details on specific financial ratios will be forthcoming as we cover them in our class lectures each week.

Of course, you should comment on the ratios as well as simply provide the tables. You should highlight any differences and, if possible, offer interpretation. Get professional assignment help from qualified experts—on time, every time.

*** Important Note on Implementation (Read!): For any tables that involve the entire peer group, you are welcome to use standardized financial statements from any source. For example, SimFin offers free standardized financial statements after registration.

Furthermore, in the construction of these tables, you may collaborate with other students or students whose own firm resides in the peer group. However, for parts of the project that focus solely on the specific firm, you of course must work alone, and preferably you should use the firm's own official financial statements rather than anything from a standardized source. Any standardized statements for peer analysis should be mentioned in your introduction.

4. Cost of Capital (WACC) Estimation

Here the goal is to calculate the weighted-average cost of capital (WACC). Relevant inputs are the cost of equity, the cost of debt, the respective weights (based on market values), and the tax rate faced by the company.

You may consult the slides from Week 7 as a guide for the steps. Specific Guidance:

For the cost of equity, you can use CAPM. For the risk-free rate, you may assume it to be the yield on a 10-year US government bond (which you can look up online - please cite the source). For the market premium, you may assume for simplicity that it equals 5%. For the beta, you should do the unlevering-and-relevering procedure from the slides. You may use either the average or median unlevered beta within the estimation. You may collect the initial beta estimates from any online source such as Yahoo Finance or Investing.com, but please cite the source. The betas for your firm and its peers should come from the same source.

For the cost of debt, please calculate a "synthetic rating" based on the method in the slides. However, if you are able to find a yield quotation for a debt instrument of the firm that has at least 5 years to maturity, then you may use that yield in your final WACC calculation instead.• For the weights, remember to be careful with units such as millions and billions! Also see the slides for "What counts as debt" as a guide.

For the tax rate, you may either use the average of taxes / pre-tax income of the past few years, or else sometimes the firm itself will mention its own tax rate in its financial statements.

In your report, you should briefly outline the steps and calculations, and show a table or screenshot of the peer group unleveraging-releveraging technique. If you use a yield quotation for the cost of debt, then you should also include a screenshot.

With respect to the beta and overall cost of capital, does it make sense to you on an intuitive level? That is, if your firm has a high beta, can you explain why it might be high risk? If a low beta, why low risk?

In your Excel file, your WACC calculations should be a separate tab, titled ‘WACC.'

Conclusions

Here you should not only summarize your major findings from each section but also identify any connections between the results from the individual sections.

Follow the below order when creating the assignment
Table of Contents
1.?Introduction?4
2.?Corporate Governance and Shareholders Analysis?4
3.?Financial Ratios Analysis?4
4.?Cost of Capital (WACC) Estimation?4
5.?Conclusions?