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Coca Cola Vs Pepsi Co Essay

1095 words - 5 pages

The Coca-Cola Company vs. PepsiCo, Inc.
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Week 7 - Writing Assignment
Carmen Y Velazquez Professor: Reza Rafi ACC 305004VA016-1118-001 November 18, 2011
The Coca-Cola Company vs. PepsiCo, Inc.
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Week 7 - Writing Assignment
Carmen Y Velazquez Professor: Reza Rafi ...view middle of the document...

S. employees and some international employees. This plan is a noncontributory plan; the employer is the only provider funding the plan therefore they allow the entire cost of the plan. This plan is a qualified pension plan allowing tax incentives for employer contributions, which a recalculated based on employees years of service or a combination of service and income. In addition, PepsiCo offers medical and life insurance benefits and a retiree medical plan that are only funded on a “pay-as-you-go” basis. The employer does not generally fund these plans, since they do not fund plans where no tax benefits are received. A specific dollar amount is assigned as a “cap” for employer payments the remaining funds is received from the retiree. The funded status as of December 31, 2007 for pensions is 266 millions.
2. Calculate the relevant rates that were used by Coca-Cola and PepsiCo in computing their pension amounts.
All of the relevant rates used by Coca Cola and PepsiCo are shown in the notes of the financial statements listed in the comparative analysis reports. These rates are disclosed so that users of the statements can evaluate the fairness of the assumptions made when calculating pension expenses and liabilities. The discount rate, expected rate of return on plan assets, and rate of compensation are the relevant rates needed to make the necessary assumptions.
Coca Cola’s discount rate used to compute pension information for December 31, 2007 is 5.5% for pension benefits and 6% for other benefits. PepsiCo’s discount rate used to compute pension information for December 31, 2007 is 5.8% for U.S. pensions, 5.2% for international pensions, and 5.8% for other benefits.
Coca-Cola’s expected rate of return used to compute pension information for December 31, 2007 is 7.75%. PepsiCo’s expected rate of return used to compute pension information for December 31,2007 is 7.8%.
Coca Cola’s rate of compensation or “rate of increase in compensation levels” percentage used to compute pension information for December 21, 2007 is 4.25%. PepsiCo’s rate of compensation or “rate of increase in compensation levels” percentage used to compute pension information for December 21, 2007 is 4.7%.

3. Determine which company you would rather invest in if you were a potential shareholder. Justify your answer.
Coca Cola is a large company that was introduced in 1886 and their primarily marketing and selling products are carbonated soft drinks. They have a 63.9% gross profit margin for 2007 and show realistically good ratios...

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