Chapter 1 – Introduction
1.1 Introduction
Corporations make specific and strategic decisions in the areas or capital budgeting and raising capital. Capital budgeting is the process of determining whether an investment is worthwhile or not. Often corporations can have several opportunities and they must measure each one’s potential in order to make a comparison and then choose one or even a few. (Lewis, 2013) For example, if a company is trying to determine whether to invest in research and development for a new product, or to buy new equipment in order to expand the production capacity on an existing market. The Net Present Value (NPV), Internal Rate of Return (IRR) and Payback Period are the three main methods when taking this measurement. (PepsiCo. Inc., 2012) Capital budgeting is important as the capital is usually tied up in long term projects, and need these investments to be successful. The valuation principles that are used in capital budgeting are applied in security analysis and portfolio management. Lastly, when a company has sound capital budgeting decisions, it essentially maximizes the shareholders wealth. (Brigham and Ehrhardt, 2017)
All organizations need capital. There is the choice between issuing different types of securities – whether they choose between issuing debt or equity. The actual amount of debt determines the organizations leverage. Some other methods that receive relatively little attention are the selling of non-core assets, such as property, divisions, and financial investments. Asset sale is definitely the preferred method of raising capital, however, a manager should decide whether to selling assets or issuing securities. (Lewis, 2013)
This paper will focus on PepsiCo Inc. which is an American Multinational Corporation that is headquartered in New York. In detail, this paper will briefly go over the areas of PepsiCo’s merge with Quaker Oats along with other companies, their acquisitions, capital budgeting, raising capital, and cash management.
Chapter 2 – General Analysis
PepsiCo’s acquisition of the Quaker Oats brand was a smart move for the company which ultimately will help PepsiCo to maintain stable growth and to continue to trade at high multiples. PepsiCo acquired Quaker Oats for $13.4 Billion in stock and have announced that they will make various strategic investments and productivity initiatives in order to