Finance (case study ) report

HW2template.xlsx

Balance Sheet

Exhibit1. Anheuser-Busch Balance Sheet (in Million $, except per share)
	Dec.31 2006	Dec.31 2007
Assets
Current Assets	219.20	283.20
Accounts receivable	720.20	805.20
Inventories	694.90	723.50
Other Current assets	195.20	212.60
Investments in affiliated companies	1,829.50	2,024.50
Total Current Assets	3,680.30	4,019.50
Plant & equipment, net	8,916.10	8,833.50
Intangible assets, including goodwill	1,367.20	1,547.90
Other assets	584.10	729.60
Total Assets	16,377.20	17,155.00
Liabilities and shareholders' equity
Current liability	1,426.30	1,464.50
Accounts payable	342.80	374.30
Accrued salaries, wages and benefits	133.90	106.20
Arrued taxes	124.20	136.40
Accrued interest	218.90	222.40
Total Current liability	2,246.10	2,303.80
Retirement benefits	1,191.50	1,002.50
Debt	7,653.50	9,140.30
Deferred income taxes	1,194.50	1,314.60
Other long term liabilities	152.90	242.20
Shareholders' Equity
Common stock, $1 par value, authorized 1.6 billion shares	1,473.70	1,482.50
Capital in excess of par value	2,962.50	3,382.10
Retained earnings	16,741.00	17,923.90
Treasury stock, at cost	-16,007.70	-18714.70
Accumulated non-owner changes in shareholder equity	-1230.80	-922.20
Total shareholders' equity	3938.70	3151.6
Commitments and contingencies		-
Total liabilities and shareholders' equity	16377.2	17155
Source: Andrew Inkpen, InBev and Anheuser-Busch, Thunderbird School of Global Management, 2010.

		Exhibit2: Income Statement and Assumptions
(Millions of dollars)																	10-yr
Years Ended December 31,			2003		2004		2005		2006		2007		5 yrs	1 yr	Revenue

		Net sales	14,147	100.0%	14,934	100.0%	15,036	100.0%	15,717	100.0%	16,686	100.0%	3.4%	6.2%	100.0%
OPERATING EXPENSES:
	Cost of goods Sold		7,572	53.5%	8,050	53.9%	8,601	57.2%	9,176	58.4%	9,840	59.0%	5.4%	7.2%	56.4%
	S, G & A expenses		2,498	17.7%	2,591	17.3%	2,730	18.2%	2,833	18.0%	2,982	17.9%	3.6%	5.3%	17.8%
		Depreciation, Depletion, and Amortization	877	6.2%	933	6.2%	979	6.5%	989	6.3%	996	6.0%	2.6%	0.8%	6.2%

OPERATING INCOME (EBIT)			3,199	22.6%	3,361	22.5%	2,726	18.1%	2,720	17.3%	2,894	17.3%	-2.0%	6.4%	19.6%
OTHER EXPENSES (INCOME):
	Interest expense		402	2.8%	454.5	3.0%	455	3.0%	451	2.9%	484	2.9%	3.8%	7.3%	2.9%
	Non-operating income/expense		365	2.6%	437	2.9%	508	3.4%	597	3.8%	685	4.1%	13.4%	14.7%	3.4%

PRETAX INCOME			3,169	22.4%	3,404	22.8%	2,690	17.9%	2,866	18.2%	3,095	18.5%	-0.5%	8.0%	20.0%
INCOME TAXES			1,093	7.7%	1,163	7.8%	850	5.7%	901	5.7%	970	5.8%	-2.4%	7.7%	6.5%
NET INCOME			2,076	14.7%	2,240	15.0%	1,939	12.9%	1,965	12.5%	2,125	12.7%	0.5%	8.1%	13.6%
NET INCOME PER SHARE,BASIC			4.95		4.56		5.72		6.05		6.40	0.04%	5.3%	5.8%
												0.0%
NET INCOME PER SHARE,DILUTED			4.89		4.52		5.63		5.96		6.32	0.04%	5.3%	6.0%		5 year
	Effective tax rate		0.34		0.34		0.32		0.31		0.31					0.33
	Capital expenditures (millions of $)								812.50	5.2%	870.00	5.2%		7.1%	5.2%
	Working Capital								5,640	35.9%	6,136	36.8%		8.8%	51.2%
		Source:	Anheuser-Busch Annual Reports except the last three columns.

Exhibit 1	(in Million $, except where noted)
		31-Dec-06	31-Dec-07	% change
Net Sales		15,717.10	16,685.70	6.20%
Gross Profit		5,552.10	5,849.60	5.40%
As a % of sales		35.33%	35.06%	(0.2) pts
Operating Income		2,719.60	2,894.00	6.40%
As a % of sales		17.30%	17.30%	(0.0) pts
Net Income		1,965.20	2,115.30	7.60%
Diluted EPS		2.53	2.79	10.30%
# of shares outstanding			715.00
Operating cash flow before the change in working capital		2,502.60	2,963.10	18.40%
Common dividend paid per share (in $)		1.13	1.25	10.60%
Return on shareholders' equity		51.60%	59.70%	(8.1) pts
Total assets		6,377.00	17,155.00	169.00%
Capital expenditures		812.50	870.00	7.10%
Closing stock price (in $)		49.20	52.34	6.40%
Source: Andrew Inkpen, InBev and Anheuser-Busch, Thunderbird School of Global Management, 2010.

Exhibit
	$ millions	Weight	Notes
Equity market cap as of 12/31/2007			(a)
Book value of debt as of 12/31/2007
Credit rating	A		(b)
Beta	0.6		(c)
10-year U.S. treasury YTM as of 12/31/2007	4.10%		(d)
A 10-yr corporate bond yield as of 12/31/2007	5.50%		(e)
expected annual market risk premium	4.79%		(f)
tax rate	32.61%		(g)
dividend growth rate	4.75%		(g)
last dividend			(a)
closing share price 12/31/2007			(a)
Cost of Equity Ke:
CAPM
Constant dividend growth (or "Dividend Discount Model")
WACC:
with Ke based on CAPM
with Ke based on Constant dividend growth model
Sources:
(a) Find relevant information from the "Other Info" tab.
(b) Source: http://www.netadvantage.standardandpoors.com
(c)Souce: Center for Research on Security Price
(d) http://www.federalreserve.gov/releases/h15/data.htm
(e) http://ycharts.com
(f)http://people.stern.nyu.edu/adamodar/pdfiles/papers/ERP2012.pdf
(g) Estimated based on historical dividend payments.

	Assumption		Base Year
			2007	2008	2009	2010	2011	2012	Notes for assumptions made
Period			0	1	2	3	4	5
Sales	6.00%	annual growth rate	$ 16,685.70						1. Historical pattern (including one-year growth rate of 6.1%); (2) Expectation of recession and (3) strategy to expand globally
OPERATING EXPENSES:
Cost of sales	59.0%	of total revenue	9,840						Expectation of rising commodity prices
S G & A	17.8%	of total revenue	2,982
Dep. and am.	6.2%	of total revenue	996	- 0	- 0	- 0	- 0	- 0
Total operating expenses			13,818
OPERATING INCOME (EBIT)			2,894
PROVISION FOR INCOME TAXES	32.61%	of operating income	970	0	0	0	0	0
Operating Cash Flows
EBIT
Taxes
Depreciation and amortization
Operating Cash Flows
Net Capital Spending	5.19%	of revenue or depr (whichever is greater)	$ 870	$ - 0	$ - 0	$ - 0	$ - 0	$ - 0
Change in NWC	51.21%	of incremental sales	$ 496	$ (8,544)	$ - 0	$ - 0	$ - 0	$ - 0
FREE CASH FLOW (=OCF-NCS-Change in NWC)

Discounted Cash Flow Valuation Based on Constant Growth Assumption
Your Growth Rate Assumption for TV
WACC
No. of common shares O/S (millions)
Debt
Year	2007	2008	2009	2010	2011	2012
Period	0	1	2	3	4	5
Free Cash Flows (millions)
Terminal value (millions)
PV of Free Cash Flows through year 2012
PV of Terminal Value
Estimated Value of Firm Vfirm
Less: Value of Long-term Debt Vd
Estimated Value of Equity Ve
Estimated Share Value