Enterprise Value Analysis: The Case of PepsiCo

Abstract

This paper has researched the Pepsi company value by using the discounted free cash flow (DCF) method and adjusted present value (APV) method. This paper has explained why company valuation is important at first. Then, discussed how the company valuation affects investors and managers. Finally, use DCF and APV methods to value Pepsi company based on the sales growth model and analyzed the research results. In order to obtain a relatively accurate result, this paper has forecasted the next five years’ sales revenue and calculated the free cash flow to estimate the company value. The result is that the company value calculated by these two methods is higher than market value. The reason is that the sales revenue is estimated to continue to grow, and the free cash flow neglects the other comprehensive incomes. According to the analysis of the valuing results, it could be concluded that managers should pay more attention to the company financial structure and business environment. At the same time, the managers should also expand the company market share to attract more consumers to achieve constant sales growth.