EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread
Economic Profit Margin

PepsiCo Inc., economic profit calculation

US$ in millions

	12 months ended	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 26, 2015	Dec 27, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ NOPAT. See Details »

² Cost of capital. See Details »

³ Invested capital. See Details »

⁴ Economic profit = NOPAT – Cost of capital × Invested capital
= hidden – hidden × hidden = hidden

Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	PepsiCo Inc.’s economic profit declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

PepsiCo Inc., NOPAT calculation

US$ in millions

	12 months ended	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 26, 2015	Dec 27, 2014
	Net income attributable to PepsiCo
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts²
	Increase (decrease) in restructuring liability³
	Increase (decrease) in equity equivalents⁴
	Interest expense
	Interest expense, operating lease liability⁵
	Adjusted interest expense
	Tax benefit of interest expense⁶
	Adjusted interest expense, after taxes⁷
	(Gain) loss on marketable securities
	Investment income, before taxes
	Tax expense (benefit) of investment income⁸
	Investment income, after taxes⁹
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in restructuring liability.

⁴ Addition of increase (decrease) in equity equivalents to net income attributable to PepsiCo.

⁵ Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

⁶ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

⁷ Addition of after taxes interest expense to net income attributable to PepsiCo.

⁸ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

⁹ Elimination of after taxes investment income.

Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	PepsiCo Inc.’s NOPAT declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

PepsiCo Inc., cash operating taxes calculation

US$ in millions

	12 months ended	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 26, 2015	Dec 27, 2014
	Provision for income taxes
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest expense
	Less: Tax imposed on investment income
	Cash operating taxes

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	PepsiCo Inc.’s cash operating taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

PepsiCo Inc., invested capital calculation (financing approach)

US$ in millions

		Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 26, 2015	Dec 27, 2014
	Short-term debt obligations
	Long-term debt obligations
	Operating lease liability¹
	Total reported debt & leases
	Total PepsiCo shareholders’ equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts³
	Restructuring liability⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Noncontrolling interests
	Adjusted total PepsiCo shareholders’ equity
	Construction in progress⁷
	Short-term investments⁸
	Invested capital

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See Details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of restructuring liability.

⁵ Addition of equity equivalents to total PepsiCo shareholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

⁸ Subtraction of short-term investments.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	PepsiCo Inc.’s invested capital declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

PepsiCo Inc., cost of capital calculations


Equity²	÷	=	×		=
Preferred stock	÷	=	×		=
Debt obligations³	÷	=	×	× (1 – 21.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 21.00%)	=
Total:

Based on: 10-K (filing date: 2019-02-15).

¹ US$ in millions

² Equity. See Details »

³ Debt obligations. See Details »

⁴ Operating lease liability. See Details »


Equity²	÷	=	×		=
Preferred stock	÷	=	×		=
Debt obligations³	÷	=	×	× (1 – 35.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 35.00%)	=
Total:

Based on: 10-K (filing date: 2018-02-13).

¹ US$ in millions

² Equity. See Details »

³ Debt obligations. See Details »

⁴ Operating lease liability. See Details »


Equity²	÷	=	×		=
Preferred stock	÷	=	×		=
Debt obligations³	÷	=	×	× (1 – 35.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 35.00%)	=
Total:

Based on: 10-K (filing date: 2017-02-15).

¹ US$ in millions

² Equity. See Details »

³ Debt obligations. See Details »

⁴ Operating lease liability. See Details »


Equity²	÷	=	×		=
Preferred stock	÷	=	×		=
Debt obligations³	÷	=	×	× (1 – 35.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 35.00%)	=
Total:

Based on: 10-K (filing date: 2016-02-11).

¹ US$ in millions

² Equity. See Details »

³ Debt obligations. See Details »

⁴ Operating lease liability. See Details »


Equity²	÷	=	×		=
Preferred stock	÷	=	×		=
Debt obligations³	÷	=	×	× (1 – 35.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 35.00%)	=
Total:

Based on: 10-K (filing date: 2015-02-12).

¹ US$ in millions

² Equity. See Details »

³ Debt obligations. See Details »

⁴ Operating lease liability. See Details »

PepsiCo Inc., economic spread calculation

		Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 26, 2015	Dec 27, 2014
	Selected Financial Data (US$ in millions)
	Economic profit¹
	Invested capital²
	Ratio
	Economic spread³

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ Economic profit. See Details »

² Invested capital. See Details »

³ Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Economic spread	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	PepsiCo Inc.’s economic spread deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

PepsiCo Inc., economic profit margin calculation

		Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 26, 2015	Dec 27, 2014
	Selected Financial Data (US$ in millions)
	Economic profit¹
	Net revenue
	Ratio
	Economic profit margin²

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ Economic profit. See Details »

² Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	PepsiCo Inc.’s economic profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

	PepsiCo Inc.	Other companies (not purchased previously)
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PepsiCo Inc. (PEP)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Dec 29, 2018

Dec 30, 2017

Dec 31, 2016

Dec 26, 2015

Dec 27, 2014

Economic Spread

Economic Profit Margin