Company Analysis Report: Molson Coors Brewing Co.

* First, we calculate the Net Operating Profit after Tax, which is equals to EBIT×1-t.

Cost of Debt. In Item 8 of Boston Beer’s 2014 10k, the interest rate of the company’s only note is fixed at an annual rate of 4.25%. We take this rate as the cost of debt (Boston Beer Co. Inc.).

The 8 percent pre-tax estimate is the nominal cost of debt. Because the firm's debt has semiannual coupons, its effective annual cost rate is 8.16 percent

What are some alternative ways to obtain a market risk premium for use in a CAPM cost-of-equity calculation? Discuss both the possibility of obtaining estimates from outside organizations and also ways which Ace could calculate a market risk premium itself.

• “In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Molson Coors Brewing Company and its subsidiaries at December 25, 2010 and December 26, 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 25, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion the financial statement schedule listed in the index appearing under Item 15(a) (2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements”

The mixture of debt-equity mix is important so as to maximize the stock price of the Costco. However, it will be significant to consider the Weighted Average Cost of Capital (WACC) as well so that it can evaluate the company targeted capital structure. Cost of capital (OC) may be used by the companies as for long term decision making, so industries that faced to take the important of Cost of capital seriously may not make the right choice by choosing the right project(Gitman’s, ).

1. Determine the Weighted Average Cost of Capital (WACC) based on using retained earnings in the capital structure.

Molson Coors is a thriving international brewing company that has nine Signature Brew drinks and 123 Special Brew drinks that ranges from non-alcoholic to alcoholic (Molson Coors Brewing Company, 2016b). They have multiple markets around the world which contributes to the success of the company in the brewing industry. This report analyzes Molson Coors’ internal and external environments which determines their position in the brewing industry. It also discusses strategies the company uses in order to be successful in their industry. Molson Coors shares the industry with its main competitors but has its own uniqueness that makes its business stand out. Molson Coors is a successful business that presents opportunities for economic growth.

The Coors brewing industry had many ups and downs throughout its history dating back to its start in 1873 (Adolf Coors in the Brewing Industry). There were times of great growth and expansion that would get interrupted by numerous setbacks. Some were small and some led to extreme changes. It sounds similar to any type of business. However, the different generations of the Coors family seemed to find ways to usually compete with their competitors and maintain the success of the company. It was also very challenging. Different changes had to be made for each new obstacle that came their way. Over a century has gone by since its start in Golden, Colorado, and the business seems to still be available in stores around the world (Adolf Coors in the Brewing Industry).

Adolph Coors year of 1985 was a great one. All the sales were record high while everyone else’s was dropping. The significance of this was astounding since the beer industry was down all together. People didn’t drink a lot of beer but, Coors beer jumped by 13% during that time. This shows how Coors can adapt with the industry and even though the industry may change Coors can still keep the competitiveness up with other vendors. If Coors continues the way they are and stay on top of the industry, they will be able to stay competitive and be the best brewing company in the United States.

Risk Free Rate:       The six-month and 30-year treasury rates given imply a fairly flat yield curve. Due to the relatively short forecast period and the short-term risk characteristics of this industry, the model uses the six-month rate as the risk free rate in calculating the cost of equity.

Government interest rates from Table B, 8.72%. The 10 year rate was chosen to be consistent with time lengths. Then the value for equity, debt and the firm need to be calculated, this is a simple step. The market price of the shares is multiplied by the number of outstanding shares to find the value of equity and the book value of long term debt is used for the value of debt and the value of both equity and debt are added together to come up with the value of the firm. The weight of the equity and debt can now be calculated by dividing the value of equity or debt by the value of the company. Lastly, the tax rate was calculated by using the balance sheet, given in exhibit 1, to determine income taxes paid and dividing it by earnings before interest and taxes for each of the last ten years then by taking the average of the ten years tax rates.

Executive Summary Business and Industry Analysis Competitive Advantages Five Forces Model Industry Competitive Analysis Accounting Analysis Key Accounting Policies Degree of Accounting Flexibility Evaluation of Accounting Strategy Accounting Quality of Disclosure Red Flags Quantitative Analysis Ratio Analysis Liquidity Profitability Capital Structure Forecasting Balance Sheet Income Statement Statement of Cash Flows Forecast Summary Valuation Analysis Method of Comparables

Unfortunately, this case study highlighted a point in time where Coors was not performing well. The first visible sign of their struggles was in Quiz 4, which highlighted Coors income per barrel drastic deterioration from 1977 to 1985. The charts and graphs included at the back of the case study gave a graphic representation of the relatively low market share Coors held in 1977 and how this decreased in coming years compared to companies such as Anheuser-Busch, Miller, Stoh, and Heileman. Market share is an important value driver when increasing a firm’s performance based on a comprehensive value metrics framework, and with Coors industry market share being low this provides a problem.

Thus the cost of capital can be easily calculated using the weighted average cost of capital formula (13.69%).