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Anheuser-Busch's High Growth Stage

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Anheuser-Busch is in its high growth stage and this goes in line with reasons why its sales are growing each year at a faster rate. The shareholders of InBev’s should consider purchasing the stocks of Anheuser-Busch because the proposed deal its lower than its intrinsic value. Apparently the intrinsic value of the firm’s share stands at $76.02 per share. Regardless of the fact that the intrinsic value of Anheuser-Busch is higher than the 70$, InBev’s shareholders can endorse the acquisition at 70$ per share. The acquisition offers InBev an excellent opportunity to expand their operations and thereby acquire a considerable proportion of the market share that is controlled by Anheuser-Busch. This means that the company can recover the additional …show more content…

The financial managers at Anheuser-Busch did not accept this offer at first and this raises the need for adequate steps to evaluate the value of the company to ensure that the company is acquired at the right price. On the other hand, the finance managers at InBev have to evaluate the counter price offered by Anheuser-Busch to ensure that the investment is not overvalued. Overvaluation may result in financial loss or even business and operational failure. Also, financial managers should conduct risk assessment prior to making decisions on the investment to be acquired and ensure that the shareholders’ wealth is …show more content…

The terminal date is arrived at when the company has reached its full maturity and has completed its high growth phase. The high growth phase can be projected to a period of 5 years with a high degree of certainty. Additionally, if the terminal date is pushed any further than 2012, it may lead to an undervaluation of the company and this may lead to a financial loss. The most appropriate growth rate assumption for Anheuser-Busch is 4 %. Considering the performance of the company in the year 2007, this would represent reasonable growth for the next few years and it would represent a near true value of the company. The terminal value of the company would be 77,588.37 million at the end of the projection period. The CAPM provides a description of the relationship existing between the systematic risk and the assets expected return, especially the stocks. CAPM has been used widely by financial analysts since it makes it easy for risky assets to be priced thus leading to the generation of the assets’ expected

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