Company-Coca Cola (KO)
Competitor- Pepsi (PEP)
1. Determine the appropriate risk-free rate and equity risk-premium to use in valuing your company. Briefly explain the reasoning behind your estimates.
2. Determine the appropriate weighted average cost of capital to use in valuing your company. Show your calculations and briefly explain the reasoning behind your estimates.
3. Calculate the tax rate, NOPAT, invested capital, the return on capital, net investment for growth, the reinvestment rate, the fundamental growth rate, the actual sales growth rate, and the investment to sales ratio for your company and the competitor for all of the years of historical data that you have for each firm, and for the trailing twelve-month (ttm) period.
4. The total amount of cash and marketable securities on the firm's balance sheet. The amount of debt that the firm has. Find and report the following information for your company:
The number of common shares outstanding, both total and diluted.
The firm's net defined benefit pension deficit, if any (sometimes this is clearly stated on the balance sheet. If not, search the 10-K).
The book value of any cross-holdings in other companies that might appear on the firm's balance sheet.
The book value of any non-controlling interests in the company that might appear on the firm's balance sheet.
5. Report the current P/E ratio for your firm and its closest competitor. What do you think accounts for the difference in the P/E ratios of the two firms?
6. Estimate the intrinsic value per share of your firm's stock using comparable Enterprise Value to EBITDA multiples.
7. Does your firm have a durable competitive advantage (i.e., a "moat")? Briefly evaluate your firm's competitive position and discuss your conclusion.