Sunbrew Case Essay

526 words - 3 pages

st, we chose Anheuser-Busch, Heineken and SABMiller as comparative companies and estimated the average asset beta in the brewing industry to be approximately 0.55. According to SUN's capital structure, we have determined that the company's beta is 1.36. Next, the CAPM model was applied to determine the required rate of return. We use the spread between the Russian government bond and the U.S. Treasury bond to estimate the country risk premium. When we add this country spread to the required rate of return from the CAPM, the cost of equity is approximately 29.55%, which reflects the current risk associated with Russia.

We expect that in the long run, the Russian economy will grow at a 6% rate. Based on this ...view middle of the document...

36. Next, the CAPM model was applied to determine the required rate of return. We use the spread between the Russian government bond and the U.S. Treasury bond to estimate the country risk premium. When we add this country spread to the required rate of return from the CAPM, the cost of equity is approximately 29.55%, which reflects the current risk associated with Russia.

We expect that in the long run, the Russian economy will grow at a 6% rate. Based on this assumption and our expectations around SUN's forecasted performance over the next five years, we used a DCF model (Exhibit 5) to calculate the value of the company as of March 1999. As reflected in Exhibit 5, the value of the company is st, we chose Anheuser-Busch, Heineken and SABMiller as comparative companies and estimated the average asset beta in the brewing industry to be approximately 0.55. According to SUN's capital structure, we have determined that the company's beta is 1.36. Next, the CAPM model was applied to determine the required rate of return. We use the spread between the Russian government bond and the U.S. Treasury bond to estimate the country risk premium. When we add this country spread to the required rate of return from the CAPM, the cost of equity is approximately 29.55%, which reflects the current risk associated with Russia.

We expect that in the long run, the Russian economy will grow at a 6% rate. Based on this assumption and our expectations around SUN's forecasted performance over the next five years, we used a DCF model (Exhibit 5) to calculate the value of the company as of March 1999. As reflected in Exhibit 5, the value of the company is approximatelyapproximately

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