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SUN Brewing (B) - Case Solution

Belen Villalonga; Raphael Amit | Harvard Business Review ( 207039-PDF-ENG ) | November 28, 2006 (Revision: 2023-09-25)
Abstract:

SUN Brewing (B) case study discusses the Khemka family holdings in SUN Interbrew, a leading Russian beer producer. Several happenings led to the family contemplating a liquidity event. The case study looks into the enterprise value of Sun Interbrew, the value per share of Sun Interbrew, and the share value held by the Khemka family concerning their stake in the company.

Case Questions Answered

  • What is the enterprise value of SUN Brewing on July 31, 2004?
  • What is the value per share of Sun Interbrew?
  • What's the share value held by the Khemka family in Sun Interbrew?

This case solution includes an Excel file with calculations that will be available after purchase.

This case solution includes an Excel file with calculations.

1. What is the enterprise value of SUN Brewing on July 31, 2004?

The enterprise value of SUN Brewing, as of July 31, 2004, is $1,616.62 million. To compute the enterprise value of Sun Interbrew, we used the information provided in Exhibit 9a (SUN Interbrew Income and Cash Flow Statement Projections, 2004-2010) to calculate a five-year free cash flow projection.

Furthermore, we used a discount rate of 12% because this is the estimated Weighted Average Cost of Capital (“WACC”) of the company as of July 31, 2004.

Also, to compute the terminal value of free cash flows at the end of cash flow projections, we used a 5% constant growth rate.

Lastly, we performed a sensitivity analysis on the enterprise value by adjusting the constant growth rates to see the possible range of values of the EV. The assumptions and the computation of the free cash flows and terminal value are shown below:

SUN Brewing (B)

i. Computation of five-year free cash flow

five-year free cash flow

ii. Computation of terminal value and the present value of free cash flows

terminal value and present value

iii. The present value of free cash flows…

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