Q1-1.What situation was Khemka family involve during the case?

SUN Brewing was founded in 1992 by Shiv Khemka with Nand, his father, and his brother, Uday.
The situation is set in March 1999, when the company was facing a major crisis.
In 1998, the family had been planning to raise a $200-$400 million through equity and debt offering for the company on the NYSE (New York Stock Exchange), in aim to finance major investments because of the increasing competition from international beer companies in the Russian market.
In August 1998, there was a massive devaluation of the rouble that led to a 90% decrease in the stock price of SUN Brewing listed on the Luxembourg stock exchange.
The proposed NYSE listings have then been cancelled …show more content…
First, we use the Exhibit7 in the case for the first five-year forecast.

Then we use other information in the case to calculate the implied perpetuity growth rate and using it for the next five-year forecast.

Finally, we will use the sensitive analysis with two different ways to calculate the terminal value to show the range of the answer:

1. Exit Multiple Method, EMM 2. Perpetuity Growth Method, PGM

Discounted Cash Flow Model
Discounted Cash Flow Model

Sensitive Analysis Model
Sensitive Analysis Model

Market Data
Market Data

Sensitive Analysis
Sensitive Analysis
WACC = 1.38%
WACC = 1.38%

WACC (Authorized) = 1.30%
WACC (Authorized) = 1.30%

Sensitive Analysis (supplement)
Sensitive Analysis (supplement)
WACC = 26.58%
WACC = 26.58%

Q4. What kind of risks investing in the Russian beer industry in 1999?

Market risk: In 1998, the Russian economy collapsed. With the country defaulting on public and private debt, and massive devaluation of the ruble, the drop in traded equity in Russian companies was precipitous. Because of the bad economy environment, SUN Brewing’s stock price Sharply declined.
System risk: In 1999, SUN Brewing was facing intense competition from its longtime rival, Baltika, which had overtaken SUN as the leading Russian brewer. Analysts expected Baltika to become an even tougher rival following the merger between