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  #21  
Old 12-05-2005, 05:42 PM
AceHigh AceHigh is offline
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Location: Pennsylvania
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Default Re: BUD - Fools Duel

It's my favorite intrinsic value calculator, YMMV.


Found this in Quicken help:

• The bond rate: Your investment could grow risk-free at the bond rate. You'll need to beat this rate to make your investment worthwhile. Matching the bond rate also means automatically that your money will grow at or above the rate of inflation; if you fail to keep up with inflation, the purchasing power of your investment will dwindle over time.

• A "risk premium": You're probably looking to realize a certain percentage gain over and above the inflation and bond rates to make assuming the investment risk worth your while. The size of this risk premium is up to you.

Add the bond rate and risk premium together to arrive at a discount rate suitable to your investment expectations. Enter the discount rate into the text box. If you wish, you can leave the discount rate set to the default.

To calculate the default discount rate, Stock Evaluator uses a basic discount rate of 15% (assuming a 6% bond rate and 9% risk premium) for the first 10 years. After that, a lower discount rate of 12% is used. Assuming that younger companies pose a greater risk than older, more established companies, Stock Evaluator adjusts the default discount rate according to the age of the company (determined by the number of years of financial reports available) to allow for the attendant risk, as follows:
• For 9 or more years, no risk adjustment
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  #22  
Old 12-09-2005, 02:19 AM
DiamondDave DiamondDave is offline
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Location: bay area, ca
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Default Re: BUD - Fools Duel

Growth is only one component of value.

The company's stock market value is $33.4 billion. It returns $2.6 billion per year to shareholders via stock repurchases and dividends. That's a 7.8% rate of return right there.

When you consider that the value of assets in place will increase at the rate of inflation and that unit volume will increase (slowly) over time, it looks like a (nominal) rate of return of 11-12% over the long haul is pretty much a slam dunk.

And it's not as if shareholders need to bear a lot of risk to earn that return. Market share leadership, brand name recognition, partnerships with key equity investees, the best distribution network in the biz, shareholder-oriented management that displays skill and restraint in deploying capital, etc etc.
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  #23  
Old 12-09-2005, 07:03 AM
Uglyowl Uglyowl is offline
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Default Re: BUD - Fools Duel

[ QUOTE ]
When you consider that the value of assets in place will increase at the rate of inflation

[/ QUOTE ]

Since when do assets increase in value?

Assets decrease in value through wear and tear and/or becoming obsolete.
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  #24  
Old 12-10-2005, 03:34 AM
DiamondDave DiamondDave is offline
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Default Re: BUD - Fools Duel

If retained earnings are used to keep the plant and equipment in working order, the beer-making capacity of BUD's capital stock should stay about the same as time passes. And the nominal value of that plant & equipment will increase because the nominal price of its output (beer) will increase.

Obviously, vats used to make beer will eventually wear out. But I would hazard a guess that they will retain their usefulness to a greater degree than, say, the machines used to make panels for Dodge trucks. It's not as if all capital equipment wears out at the same rate, whatever GAAP rules on depreciation may say.
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