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Microsoft Excel LibreOffice Calc

PepsiCo Inc. (PEP)

Economic Value Added (EVA)

Advanced level

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

PepsiCo Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 28, 2019 Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (filing date: 2020-02-13), 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).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =

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 increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

PepsiCo Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 28, 2019 Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015
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: 2020-02-13), 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).

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 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

6 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

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

8 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

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 increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Cash Operating Taxes

PepsiCo Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 28, 2019 Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015
Provision for (benefit from) 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: 2020-02-13), 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).

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 decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Invested Capital

PepsiCo Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 28, 2019 Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015
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: 2020-02-13), 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).

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 increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Cost of Capital

PepsiCo Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Preferred stock ÷ = × =
Debt obligations3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2020-02-13).

1 US$ in millions

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
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 »

Capital (fair value)1 Weights Cost of capital
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 »

Capital (fair value)1 Weights Cost of capital
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 »

Capital (fair value)1 Weights Cost of capital
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 »

Economic Spread Ratio

PepsiCo Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 28, 2019 Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3

Based on: 10-K (filing date: 2020-02-13), 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).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

Performance ratio Description The company
Economic spread ratio 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 ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Economic Profit Margin

PepsiCo Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 28, 2019 Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Net revenue
Performance Ratio
Economic profit margin2

Based on: 10-K (filing date: 2020-02-13), 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).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × ÷ =

Performance 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 improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.