COCA COLA CO

PEPSICO INC

BALANCES

INDICADORES

ECONOMICO FINANCIEROS
COCA COLA CO
 https://www.gurufocus.com/term/wacc/NYSE:KO/WACC-/Coca-Cola

Competitive Comparison Data

Ticker Company Market Cap (M) WACC %
KO Coca-Cola Co $ 206,340.88 4.11
PEP PepsiCo Inc $ 191,090.10 4.03
Coca-Cola Femsa SAB de
COCSF $ 81,176.16 0.00
CV
KDP Keurig Dr Pepper Inc $ 36,792.69 3.91
MNST Monster Beverage Corp $ 33,389.57 7.97
Coca-Cola European
LSE:CCEP $ 18,812.79 0.00
Partners PLC
Coca-Cola Femsa SAB de
MEX:KOF L $ 11,246.92 0.00
CV
TSE:2267 Yakult Honsha Co Ltd $ 10,471.73 3.83
LSE:CCH Coca-Cola HBC AG $ 9,131.16 5.08
Coca-Cola Hellenic Bottling
ATH:EEEK $ 8,092.49 0.00
Company S.A.
Coca-Cola C o WA C C % Calculation
T h e w e i g h t e d a v e r a g e c o s t o f c a p i t a l ( W A C C ) is t h e r a t e t h a t a c o m p a n y is e x p e c t e d t o p a y o n
a v e r a g e t o all its s e c u r i t y h o l d e r s t o f i n a n c e i t s a s s e t s . T h e W A C C is c o m m o n l y r e fe r r e d t o a s
t h e f i r m ' s c o s t o f ca p i ta l . G e n e r a l l y s p e a k i n g , a c o m p a n y ' s a s s e t s a r e f i n a n c e d b y d e b t a n d
e q u i t y. W A C C is t h e a v e r a g e o f t h e c o s t s o f t h e s e s o u r c e s o f f i n a n c i n g , e a c h o f w h i c h is
w e i g h t e d b y its r e s p e c t i v e u s e i n t h e g i v e n s i t u a t i o n . B y t a k i n g a w e i g h t e d a v e r a g e , w e c a n s e e
h o w m u c h i n t e r e s t t h e c o m p a n y h a s t o p a y f o r e v e r y d o l l a r it f i n a n c e s .

W A C C = E / ( E + D ) * C o s t o f E q u i t y + D / ( E + D ) * C o s t o f D e b t * ( 1 - Ta x R a t e )

1. Weig hts :
G e n e r a l l y s p e a k i n g , a c o m p a n y ' s a s s e t s a r e f i n a n c e d b y d e b t a n d e q u i t y. W e n e e d t o c a l c u l a t e
the weig ht of equity an d the weight of debt.
T h e m a r k e t v a l u e o f e q u i t y ( E ) is a l s o c a l l e d " M a r k e t C a p " . A s o f t o d a y, C o c a - C o l a C o ' s m a r k e t
capitalization (E) is $ 2 0 6 3 4 0 . 8 7 7 Mil.
T h e m a r k e t v a l u e o f d e b t is t y p i c a l l y d i ff i c u l t t o c a l c u l a t e , t h e r e f o r e , G u r u F o c u s u s e s b o o k
v a l u e o f d e b t ( D ) t o d o t h e c a l c u l a t i o n . I t is s i m p l i f i e d b y a d d i n g t h e l a t e s t t w o - y e a r
a v e r a g e S h o r t - Te r m D e b t & C a p i t a l L e a s e O b l i g a t i o n a n d L o n g - Te r m D e b t & C a p i t a l L e a s e
O b l i g a t i o n t o g e t h e r. A s o f D e c . 2 0 1 9 , C o c a - C o l a C o ' s l a t e s t t w o - y e a r a v e r a g e S h o r t - Te r m D e b t
& C a p i t a l L e a s e O b l i g a t i o n w a s $ 1 7 0 4 2 . 5 M i l a n d its l a t e s t t w o - y e a r a v e r a g e L o n g - Te r m D e b t &
C a p i t a l L e a s e O b l i g a t i o n w a s $ 2 6 4 4 6 M i l . T h e to ta l B o o k Va l u e o f D e b t ( D ) is $ 4 3 4 8 8 . 5 M i l .
a) weight of equity = E / (E + D) = 2 0 6 3 4 0 .8 77 / (206340.877 + 43488.5) = 0.8259
b) weight of debt = D / (E + D) = 43488.5 / (206340.877} + 43488.5) = 0.1741
2. Cost of Equity:
GuruFocus uses Capital Asset Pricing M o d e l ( C A P M ) to calculate the required rate of return.
T h e f o r m u l a is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market -
Risk-Free Rate of Return)
a ) G u r u F o c u s u s e s 1 0 - Y e a r T r e a s u r y C o n s t a n t M a t u r i t y R a t e as t h e risk-free rate. It is u p d a t e d
daily. T h e current risk-free rate is 0 . 6 5 0 0 0 0 0 0 % . Pl eas e g o to E c o n o m i c Indicators p a g e for
m o r e information.
b ) B eta is t h e sensitivity of th e e x p e c t e d ex ces s asset returns to th e e x p e c t e d ex ces s m a r k e t
returns. Co ca- Co l a Co's b e t a is 0.66.
c) ( E x p ected R e t u r n of th e M a r k e t - Risk-Free R ate of R etu rn ) is also called m a r k e t p r e m i u m .
GuruFocus requires market p r em i u m to b e 6%.
Cost of Equity = 0.65000000% + 0.66 * 6 % = 4.61%

3. Cost of Debt:
G u r u F o c u s u s e s last fiscal y e a r e n d I n teres t E x p e n s e d i v i d e d b y t h e latest t w o - y e a r a v e r a g e
debt to get the simplified cost of debt.
A s o f D e c . 2 0 1 9 , C o c a - C o l a Co ' s interest e x p e n s e (positive n u m b e r ) w a s $ 9 4 6 Mil. Its total B o o k
Val u e of D e b t (D) is $ 4 3 4 8 8 . 5 Mil.
Cost of Debt = 946 / 43488.5 = 2.1753%.

4. Multiply by one minus Average Tax Rate:

G u r u F o c u s uses the latest two - y ear av er ag e tax rate to d o the calculation.
T h e latest Two-year Average Tax Rate is18.98%.

Co ca - Co l a Co's W e i g h t e d A v e r a g e Co s t O f Capital ( W A C C ) for T o d a y is calculated as:

WACC = E / (E + D) * Cost of Equity + D / (E + D) * Cost of Debt * (1 - Tax Rate)

= 0.8259 * 4.61% + 0.1741 * 2.1753% * (1 - 18.98%)

= 4.11%

* All n u m b e r s are in millions ex cep t for p er s h are d ata a n d ratio. All n u m b e r s are in their local
exchange's currency.
PEPSICO INC
 https://www.gurufocus.com/term/wacc/NYSE:KO/WACC-/Coca-Cola

Competitive Comparison Data

Ticker Company Market Cap (M) WACC %
KO Coca-Cola Co $ 206,340.88 4.11
PEP PepsiCo Inc $ 191,090.10 4.03
Coca-Cola Femsa SAB de
COCSF $ 81,176.16 0.00
CV
KDP Keurig Dr Pepper Inc $ 36,792.69 3.91
MNST Monster Beverage Corp $ 33,389.57 7.97
Coca-Cola European
LSE:CCEP $ 18,812.79 0.00
Partners PLC
Coca-Cola Femsa SAB de
MEX:KOF L $ 11,246.92 0.00
CV
TSE:2267 Yakult Honsha Co Ltd $ 10,471.73 3.83
LSE:CCH Coca-Cola HBC AG $ 9,131.16 5.08
Coca-Cola Hellenic Bottling
ATH:EEEK $ 8,092.49 0.00
Company S.A.
PepsiCo W A C C % Calculation
T h e w e i g h t e d a v e r a g e c o s t of c api tal ( W A C C ) is t h e r a t e t h a t a c o m p a n y is e x p e c t e d t o p a y o n a v e r a g e t o
all its s e c u r i t y h o l d e r s t o f i n a n c e its a s s e t s . T h e W A C C is c o m m o n l y r e f e r r e d t o a s t h e f i r m ' s c o s t of
c a p i t a l . G e n e r a l l y s p e a k i n g , a c o m p a n y ' s a s s e t s a r e f i n a n c e d b y d e b t a n d e q u i t y. W A C C is t h e a v e r a g e o f
t h e c o s t s o f t h e s e s o u r c e s o f f i n a n c i n g , e a c h o f w h i c h i s w e i g h t e d b y i ts r e s p e c t i v e u s e i n t h e g i v e n
situation. B y taking a wei ghted average, w e c a n see h o w m u c h interest the c o m p a n y h a s to p a y for every
d o l l a r it f i n a n c e s .

WAC (E + Cost of (E + Cost of ( 1 - Ta x

= E / * Equity + D / D) * Debt * Rate)
C D)
1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We
need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today,
PepsiCo's market capitalization (E) is $191090.099 Mil.
The market value of debt is typically difficult to calculate, therefore,
GuruFocus uses book value of debt (D) to do the calculation. It is simplified
by adding the latest two-year average Short-Term Debt & Capital Lease
Obligation and Long-Term Debt & Capital Lease Obligation together. As of Dec.
2019, PepsiCo's latest two-year average Short-Term Debt & Capital Lease
Obligation was $3694 Mil and its latest two-year average Long-Term Debt &
Capital Lease Obligation was $28721.5 Mil. The total Book Value of Debt (D) is
$32415.5 Mil.
a)weight of equity = E / (E + D) = 191090.099 / (191090.099 + 32415.5) =
0.855
b) weight of debt = D / (E + D) = 32415.5 / (191090.099} + 32415.5) = 0.145
2 . Cost of Equity:
G u ruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required
r a te of return. The formula is:
C o st of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return
o f the Market - Risk-Free Rate of Return)
a ) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free
r a te. It is updated daily. The current risk-free rate is 0.65000000%. Please
g o to Economic Indicators page for more information.
b ) Beta is the sensitivity of the expected excess asset returns to the
e x pected excess market returns. PepsiCo's beta is 0.57.
c ) (Expected Return of the Market - Risk-Free Rate of Return) is also called
m a rket premium. GuruFocus requires market premium to be 6%.
C o st of Equity = 0.65000000% + 0.57 * 6% = 4.07%
3 . Cost of Debt:
G u ruFocus uses last fiscal year end Interest Expense divided by the latest
t w o-year average debt to get the simplified c ost of debt.
A s of Dec. 2019, PepsiCo's interest expense ( positive number) was $1135 Mil.
I t s total Book Value of Debt (D) is $32415.5 Mil.
C o st of Debt = 1135 / 32415.5 = 3.5014%.
4. Multiply by one minus Average Tax Rate:
GuruFocus uses the latest two-year average tax rate to do the calculation.
The latest Two-year Average Tax Rate is-7.815%.

P e p s i Co ' s W e i g h t e d A v e r a g e Co s t O f Capital ( W A C C ) for T o d a y is calculated as:

WAC E / (E + * Cost of D / (E + * Cost of (1 - Ta x

= + *
C D) Equity D) Debt Rate)
(1 - -
= 0.855 * 4.07% + 0.145 * 3.5014% *
7.815%)
= 4.03%
* All n u m b e r s are in millions except for per s h a r e data a n d ratio. All n u m b e r s are in their local e xc h a n g e ' s
currency.