Sun Brewing Analysis
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…
First, we assumed a lower discount rate of 8% which is 1/3 less than the estimated discount rate of 12%. These values can be found in Exhibit 5. This more favorable rate generates an enterprise value of close to $5 billion which is a 63% higher valuation that the estimated 12% enterprise value. However, if volatility moves the discount rate higher a much lower valuation would be expected. To account for this scenario, we increased the discount rate rd to 16% which is a 1/3 increase from the 12% discount rate. The modified results are shown in
Exhibit 6. This lowers the valuation of the company to roughly $2.12 billion and results in a 30% drop in enterprise valuation. Comparing these two scenarios one may deem that since a decrease in the discount rate generates a return which is more than double the percent loss if the discount rate