So, we have gone through the financial statements, right, and you learned the mechanics of debt and equity, right? So, how would the debt issuance change the financial statement? How would an equity issuance change the financial statement? What's the benefit? What's the cost between debt and equity, right? But we still have to make the decision. Is the company right? Which choice, steps you're going to make, steps you're going to issue that, or steps you're going to issue equity right? And in Corporate Finance I, we actually learned a tool that is the right tool to guide managers when managers are making financial decisions like that, right? Which is the Net present value, right? So, essentially, what companies would do is to take investments that have positive Net present value, right? If you applied the Net present value idea to the financing decision, we are talking about now, the answer would be that the company is going to issue debt when the NPV of issuing debt is greater than the NPV of issuing equity, right? Let's try to apply that idea and see how far we get. We're not going to get the answer from here and just telling you upfront, but I think it's going to be useful, very important for us to think about this culturally, okay? Let's start with debt, all right? We already figured out that there is a benefit and a cost, right? The cost, of course, is that you're going to pay interest. The interest is $200 million per year, right? The benefit is that you're going to get a $5 million e flow of capital, right? So, the 4% interest payment, right, is also the yield to maturity of this bond, right? That's another concept we talked about in Corporate Finance I that might be used to recap here, right? It's also the yield to maturity or the expected return on this bond, right? So, what this means is that it would be very reasonable, it's actually theoretically correct, to discount. If we're figuring out the NPV of the debt issuance, the correct discount rate to use would also be 4%. We would be discounting the interest payments exactly at the 4% rate. So, the NPV would the positive five there at the beginning. Right, you have the money coming in the company, and in the future years, the interest payments go out, minus 0.2 every year with discount for five years. If you do the math, the answer you'll get is that the NPV is going to be zero, right? Does that make sense to you or not? Let's talk about it. Okay, think about what we've done, right? The idea here is that if the debt is fairly priced, right? Meaning that if the interest rate is the same as the discount rate, so if PepsiCo is paying interest, exactly at the required rate of return, right? Then what's going to happen, this is what the math is reflecting, what's going to happen is that the cost of issuing new debt, which is this $200 million annual interest, is going to exactly compensate for the benefits, right? So, the benefits are exactly the same as the present value of the cost, right? That's why we have a zero NPV, right? And of course, what's going on here is that we are relying on the assumption of efficient markets, which again, is something we talked about a lot in Corporate Finance I, right? So, we are relying on the assumption that the debt is going to be fairly priced by the marketplace, that PepsiCo is issuing debt exactly at the required rate of return. Right, if the debt, for some reason, is not fairly priced, then obviously the NPV would not be zero. So, if PepsiCo can issue debt at a cheaper rate, for example, then it might be positive NPV to issue debt. But if you think about it, why would that be the case? If the debt issuance, it should be correctly priced by the market. The zero NPV is actually a very reasonable answer to this problem. What about equity, right? We covered debt. What about equity? Now we have $5 billion of cash coming in, and we have the new shares being issued, right? I put a couple more numbers there that we're going to need. The first is the current market value of equity, right, and the second one is the number of shares outstanding. We're going to need those numbers. Right, and the question is what is the NPV of equity issuance? This is a little bit trickier, right, because as we already figured out, we don't really have the counterpart of the interest payments. The cost of issuing equity is that the number of shares is going up, right? So here, what we're going to use is we're going to think in terms of stock prices, right? Remember that maximizing the net present value is exactly the same thing as maximizing the stock price. This is another idea we covered in Corporate Finance I the equivalent between net present value and stock price. So, NPV and stock price are the same thing, and we can actually think in terms of stock prices here. Let me show you, right, we have the old stock price, which I'm expressing as the market capitalization divided by the number of shares, $94. With 138 billion divided by 1.468 billion shares, right? And then what's going to happen? If PepsiCo issues new shares, right, PepsiCo is going to get $5 billion in cash. Right, the cash is going to come in, right? Who owns the cash, the cash is going to be owned by the shareholders. Right, so the cash that PepsiCo gets is going to increase the company's market capitalization, right? And then what I've done, so that's the numerator, what I've done in the denominator, you can see there is to add the number of new shares, right? So, PepsiCo receives cash, but the counterpart is that their new shares being issued, right? If you do the math, what you get is that the stock price is $94 a share, okay? Okay, so the stock price hasn't changed. Again, the answer then is since the stock price hasn't changed, what this means is that the NPV of the equity insurance, again, is 0. And it's exactly the same idea, right, that made the NPV of debt equal to 0. The idea is that, the new cash that comes into the company exactly compensates for the issuance of new shares. So, the stock price remains constant, and again, this notion relies on the assumption of efficient market, or at least on the assumption that the equity is fairly priced. Of course, if Pepsi Cola manages to sell shares at a higher price than what the shares should be worth, of course, that's going to be a good deal. If you're selling a product, you want to sell at a high price. Right, if you sell the product at a low price, you can think of the equity of the product, then PepsiCo is going to make money. But if you sell just at the right price, you know the NPV is zero. You don't lose money, you don't make money. At this point, you may be wondering. So, PepsiCo is raising cash to finance this new investment. That was our original assumption, and you might be an hour complaining in your mind or your mind might be complaining with you that we're not talking about the NPV of the new investment at all, right? We're just talking about interest payment, shares, cash coming in, where is the net present value of the new investment? That, of course, has to matter, right? So, think about that question for a while. The answer is that the NPV of the new investment is not incremento. Right, again, that's another concept that we talked about in Corporate Finance I, is the idea that cash flows, that matter for the NPV are the incremental cash flow. The only cash flow that matters is a cash flow that changes, like what happens in the company. So, when you think about that in equity, right, the NPV of that was zero, right, when you think about Interest payment and cash coming in. And then there is the NPV of investment, right, because the company is going to invest its money, and hopefully make a positive NPV. What is PepsiCo going to do with equity? The same thing, right? So, if you issue equity, you're going to take the $5 billion and invest in the company. So, the NPV of investment is the same, irrespective of whether you're issuing debt or equity, right? So, it's not incremental. The NPV of the investment will not affect the decision of whether PepsiCo is going to issue debt, or whether PepsiCo is going to issue equity. In fact, it's safe for us to completely ignore what companies are going to do with the money. We just have to think about the immediate consequences of issuing new securities. That's a very useful idea that we're going to follow up later.