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Sun Brewing Analysis

Satisfactory Essays

1. Did Interbrew add value to SUN brewing? How? The Khemka family is evaluating multiple scenarios to decide what future action they want to proceed with in regards to their stake in SUN Interbrew. The Khemka family has identified their options and we are providing a discounted cash flow analysis to bestow insight as to what option is best. The income and cash flow projections as well as the balance sheet for Sun Interbrew (found in Exhibits 1 and 2, respectively) were used as a base for calculations. The assumptions necessary to evaluate the company are detailed in Exhibit 3 and are stated below for simplicity. The revenue growth was assumed to be 14.7% and the discount rate and expense growth rate to be 12% and 0% …show more content…

The assets, which consisted of two additional breweries, aided in achieving economies of scale. Additionally, the location of the assets expanded regional coverage in the burgeoning Russian market. When combined with SUN Brewing’s management talent, the joint venture experienced significant growth in both market share and overall revenues. In turn, this growth led to the acquisition of two additional breweries, bringing the total to nine in the country. Lastly (and probably most importantly), Interbrew provided SUN with economic cover during the NATO bombing of Serbia and Montenegro. Investors are notoriously reluctant to invest precious and scarce capital resources in unstable regions. What mustn’t be lost is the significance of the role that Russia played in protesting the NATO’s presence and influence in the region. The fact that they (Russia) were holding a position contrary to an organization that constitutes 70% of the world’s defense spending is more than enough reason to give any investor pause. SUN benefitted tremendously from the stable foundation Interbrew was able to provide during that turbulent time. 2. What was SUN Interbrew’s Total Enterprise Value as of July 31st, 2004? Using a 12% discount rate, the Total Enterprise Value of Sun Interbrew was calculated st to be $3.05 billion as July 31 , 2004. This

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