Briefly explain reasons that Boston Beer Co. specifically may benefit from an IPO at this time. What does Boston Beer Co. plan to do with the proceeds of the IPO?
Arizona State University mark.sim Show more Finance 361 W. P. Carey School of Business Professor Mark Simonson Arizona State University firstname.lastname@example.org Boston Beer Co. Case Assignment This case requires applying standard valuation techniques in the evaluation of an IPO offer price. Your group must provide a short PowerPoint presentation which includes the results of your analysis evaluating the suggested initial offering price set by the investment bankers of $12.50 per share. Submit your completed PowerPoint presentation and Excel workbook in the digital dropbox. Do not restate the basic case facts the presentation; just summarize your analysis and conclusions. You must address the following questions and provide the following analysis. Part 1. Address the following issues regarding the IPO. Briefly explain reasons that Boston Beer Co. specifically may benefit from an IPO at this time. What does Boston Beer Co. plan to do with the proceeds of the IPO? What fraction of the shares will be owned by the public following the offering? If the IPO is underpriced by a typical amount how much will Boston Beer Co. leave on the table? Part 2. What is the value per share of the Boston Beer Co.? 1. Perform a discounted cash flow valuation and conduct some sensitivity/scenario analysis by changing the key assumptions. To complete this do the following analysis: For a base case forecast pro-forma unlevered income statements and balance sheets from 1996-2000 using percent of sales forecasting (assume it is the beginning of 1996). You can use the Excel worksheet Valuation Model in the posted Boston Beer Co. Excel workbook. Explain your assumptions including what your estimated sales revenue growth implies about the size of the craft beer market and the share of that market that Boston Beer Co. will be able to achieve in the future. Find the value per share in the base case. You can use the CAPM to estimate the cost of equity (note that Anheuser Busch has 30% debt in its capital structure). Consider various scenarios by varying several key assumptions (e.g. sales growth rates income statement cost items capital spending etc). Be sure to carefully explain the thought process behind your sales growth assumptions and what your estimated sales revenue growth implies about the size of the craft beer market and the share of that market that Boston Beer Co. will be able to achieve in the future. Change at least one other assumption besides sales growth that you believe is likely to change in the future in your scenarios. Summarize what you find in the various scenarios you examine in your presentation. 2. As a potential investor explain whether or not you feel comfortable with the $12.50 price and determine if you believe they are pricing the offering using optimistic or pessimistic forecasts. Show less