Intrinsic value of Molson Coors Brewing Cl B - TAP

Previous Close

$83.25

  Intrinsic Value

$90.39

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  Rating & Target

hold

+9%

Previous close

$83.25

 
Intrinsic value

$90.39

 
Up/down potential

+9%

 
Rating

hold

We calculate the intrinsic value of TAP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 17.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  36.91
  36.90
  33.71
  30.84
  28.26
  25.93
  23.84
  21.95
  20.26
  18.73
  17.36
  16.12
  15.01
  14.01
  13.11
  12.30
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
Revenue, $m
  4,885
  6,688
  8,942
  11,700
  15,005
  18,896
  23,400
  28,537
  34,318
  40,747
  47,820
  55,530
  63,865
  72,812
  82,357
  92,485
  103,184
  114,442
  126,253
  138,610
  151,514
  164,966
  178,972
  193,543
  208,692
  224,437
  240,798
  257,801
  275,474
  293,846
  312,954
Variable operating expenses, $m
 
  5,407
  6,951
  8,841
  11,105
  13,771
  16,857
  20,376
  24,337
  28,741
  33,587
  38,044
  43,755
  49,885
  56,424
  63,363
  70,693
  78,406
  86,498
  94,964
  103,804
  113,020
  122,616
  132,599
  142,978
  153,765
  164,975
  176,624
  188,731
  201,319
  214,409
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,576
  5,407
  6,951
  8,841
  11,105
  13,771
  16,857
  20,376
  24,337
  28,741
  33,587
  38,044
  43,755
  49,885
  56,424
  63,363
  70,693
  78,406
  86,498
  94,964
  103,804
  113,020
  122,616
  132,599
  142,978
  153,765
  164,975
  176,624
  188,731
  201,319
  214,409
Operating income, $m
  3,309
  1,281
  1,991
  2,859
  3,900
  5,125
  6,543
  8,161
  9,981
  12,006
  14,233
  17,485
  20,110
  22,927
  25,933
  29,122
  32,491
  36,036
  39,755
  43,646
  47,709
  51,945
  56,355
  60,944
  65,714
  70,672
  75,824
  81,178
  86,742
  92,528
  98,544
EBITDA, $m
  3,697
  2,673
  3,575
  4,677
  5,998
  7,554
  9,354
  11,408
  13,719
  16,289
  19,116
  22,198
  25,530
  29,107
  32,922
  36,971
  41,248
  45,748
  50,470
  55,410
  60,568
  65,945
  71,544
  77,369
  83,425
  89,719
  96,259
  103,056
  110,121
  117,465
  125,104
Interest expense (income), $m
  163
  403
  625
  905
  1,248
  1,658
  2,141
  2,700
  3,338
  4,056
  4,854
  5,732
  6,689
  7,724
  8,835
  10,020
  11,277
  12,605
  14,003
  15,469
  17,003
  18,605
  20,275
  22,014
  23,823
  25,704
  27,658
  29,690
  31,801
  33,994
  36,275
Earnings before tax, $m
  3,035
  878
  1,365
  1,954
  2,652
  3,467
  4,402
  5,461
  6,643
  7,950
  9,379
  11,754
  13,421
  15,204
  17,098
  19,102
  21,214
  23,431
  25,752
  28,177
  30,706
  33,340
  36,080
  38,929
  41,891
  44,968
  48,165
  51,488
  54,942
  58,533
  62,269
Tax expense, $m
  1,050
  237
  369
  527
  716
  936
  1,189
  1,474
  1,794
  2,146
  2,532
  3,173
  3,624
  4,105
  4,617
  5,158
  5,728
  6,326
  6,953
  7,608
  8,291
  9,002
  9,742
  10,511
  11,311
  12,141
  13,005
  13,902
  14,834
  15,804
  16,813
Net income, $m
  1,976
  641
  997
  1,426
  1,936
  2,531
  3,214
  3,986
  4,850
  5,803
  6,847
  8,580
  9,797
  11,099
  12,482
  13,945
  15,486
  17,105
  18,799
  20,569
  22,415
  24,338
  26,339
  28,419
  30,580
  32,827
  35,161
  37,586
  40,108
  42,729
  45,456

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  561
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  29,342
  39,339
  52,600
  68,821
  88,266
  111,153
  137,649
  167,867
  201,872
  239,687
  281,294
  326,646
  375,677
  428,308
  484,453
  544,029
  606,962
  673,189
  742,662
  815,354
  891,257
  970,385
  1,052,776
  1,138,487
  1,227,599
  1,320,216
  1,416,461
  1,516,478
  1,620,433
  1,728,507
  1,840,904
Adjusted assets (=assets-cash), $m
  28,781
  39,339
  52,600
  68,821
  88,266
  111,153
  137,649
  167,867
  201,872
  239,687
  281,294
  326,646
  375,677
  428,308
  484,453
  544,029
  606,962
  673,189
  742,662
  815,354
  891,257
  970,385
  1,052,776
  1,138,487
  1,227,599
  1,320,216
  1,416,461
  1,516,478
  1,620,433
  1,728,507
  1,840,904
Revenue / Adjusted assets
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
Average production assets, $m
  12,439
  17,027
  22,766
  29,787
  38,203
  48,109
  59,577
  72,656
  87,374
  103,741
  121,749
  141,379
  162,601
  185,380
  209,681
  235,467
  262,705
  291,370
  321,439
  352,902
  385,754
  420,002
  455,662
  492,760
  531,329
  571,416
  613,073
  656,362
  701,356
  748,132
  796,780
Working capital, $m
  -988
  -1,184
  -1,583
  -2,071
  -2,656
  -3,345
  -4,142
  -5,051
  -6,074
  -7,212
  -8,464
  -9,829
  -11,304
  -12,888
  -14,577
  -16,370
  -18,263
  -20,256
  -22,347
  -24,534
  -26,818
  -29,199
  -31,678
  -34,257
  -36,938
  -39,725
  -42,621
  -45,631
  -48,759
  -52,011
  -55,393
Total debt, $m
  12,073
  17,871
  25,868
  35,649
  47,375
  61,175
  77,152
  95,374
  115,879
  138,681
  163,770
  191,118
  220,683
  252,420
  286,275
  322,200
  360,148
  400,083
  441,975
  485,808
  531,578
  579,292
  628,974
  680,657
  734,392
  790,240
  848,276
  908,587
  971,271
  1,036,440
  1,104,215
Total liabilities, $m
  17,923
  23,721
  31,718
  41,499
  53,225
  67,025
  83,002
  101,224
  121,729
  144,531
  169,620
  196,968
  226,533
  258,270
  292,125
  328,050
  365,998
  405,933
  447,825
  491,658
  537,428
  585,142
  634,824
  686,507
  740,242
  796,090
  854,126
  914,437
  977,121
  1,042,290
  1,110,065
Total equity, $m
  11,419
  15,617
  20,882
  27,322
  35,042
  44,128
  54,646
  66,643
  80,143
  95,156
  111,674
  129,678
  149,144
  170,038
  192,328
  215,980
  240,964
  267,256
  294,837
  323,696
  353,829
  385,243
  417,952
  451,979
  487,357
  524,126
  562,335
  602,042
  643,312
  686,217
  730,839
Total liabilities and equity, $m
  29,342
  39,338
  52,600
  68,821
  88,267
  111,153
  137,648
  167,867
  201,872
  239,687
  281,294
  326,646
  375,677
  428,308
  484,453
  544,030
  606,962
  673,189
  742,662
  815,354
  891,257
  970,385
  1,052,776
  1,138,486
  1,227,599
  1,320,216
  1,416,461
  1,516,479
  1,620,433
  1,728,507
  1,840,904
Debt-to-equity ratio
  1.057
  1.140
  1.240
  1.300
  1.350
  1.390
  1.410
  1.430
  1.450
  1.460
  1.470
  1.470
  1.480
  1.480
  1.490
  1.490
  1.490
  1.500
  1.500
  1.500
  1.500
  1.500
  1.500
  1.510
  1.510
  1.510
  1.510
  1.510
  1.510
  1.510
  1.510
Adjusted equity ratio
  0.378
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,976
  641
  997
  1,426
  1,936
  2,531
  3,214
  3,986
  4,850
  5,803
  6,847
  8,580
  9,797
  11,099
  12,482
  13,945
  15,486
  17,105
  18,799
  20,569
  22,415
  24,338
  26,339
  28,419
  30,580
  32,827
  35,161
  37,586
  40,108
  42,729
  45,456
Depreciation, amort., depletion, $m
  388
  1,393
  1,584
  1,818
  2,098
  2,429
  2,811
  3,247
  3,737
  4,283
  4,883
  4,713
  5,420
  6,179
  6,989
  7,849
  8,757
  9,712
  10,715
  11,763
  12,858
  14,000
  15,189
  16,425
  17,711
  19,047
  20,436
  21,879
  23,379
  24,938
  26,559
Funds from operations, $m
  987
  2,033
  2,580
  3,244
  4,035
  4,960
  6,025
  7,233
  8,587
  10,086
  11,730
  13,293
  15,217
  17,278
  19,471
  21,794
  24,243
  26,817
  29,514
  32,333
  35,274
  38,338
  41,527
  44,844
  48,291
  51,874
  55,596
  59,465
  63,486
  67,667
  72,016
Change in working capital, $m
  -140
  -319
  -399
  -488
  -585
  -689
  -797
  -909
  -1,023
  -1,138
  -1,252
  -1,365
  -1,475
  -1,584
  -1,689
  -1,793
  -1,894
  -1,993
  -2,090
  -2,187
  -2,284
  -2,381
  -2,479
  -2,579
  -2,681
  -2,787
  -2,896
  -3,010
  -3,128
  -3,252
  -3,382
Cash from operations, $m
  1,127
  2,352
  2,979
  3,732
  4,620
  5,648
  6,822
  8,142
  9,610
  11,224
  12,982
  14,657
  16,693
  18,862
  21,160
  23,586
  26,137
  28,810
  31,604
  34,520
  37,558
  40,719
  44,006
  47,423
  50,973
  54,661
  58,492
  62,474
  66,614
  70,919
  75,398
Maintenance CAPEX, $m
  0
  -415
  -568
  -759
  -993
  -1,273
  -1,604
  -1,986
  -2,422
  -2,912
  -3,458
  -4,058
  -4,713
  -5,420
  -6,179
  -6,989
  -7,849
  -8,757
  -9,712
  -10,715
  -11,763
  -12,858
  -14,000
  -15,189
  -16,425
  -17,711
  -19,047
  -20,436
  -21,879
  -23,379
  -24,938
New CAPEX, $m
  -342
  -4,588
  -5,740
  -7,021
  -8,416
  -9,906
  -11,468
  -13,079
  -14,718
  -16,367
  -18,008
  -19,629
  -21,222
  -22,780
  -24,301
  -25,786
  -27,239
  -28,664
  -30,069
  -31,463
  -32,852
  -34,248
  -35,660
  -37,097
  -38,570
  -40,086
  -41,657
  -43,290
  -44,993
  -46,777
  -48,648
Cash from investing activities, $m
  -12,287
  -5,003
  -6,308
  -7,780
  -9,409
  -11,179
  -13,072
  -15,065
  -17,140
  -19,279
  -21,466
  -23,687
  -25,935
  -28,200
  -30,480
  -32,775
  -35,088
  -37,421
  -39,781
  -42,178
  -44,615
  -47,106
  -49,660
  -52,286
  -54,995
  -57,797
  -60,704
  -63,726
  -66,872
  -70,156
  -73,586
Free cash flow, $m
  -11,160
  -2,650
  -3,328
  -4,048
  -4,790
  -5,531
  -6,250
  -6,922
  -7,530
  -8,055
  -8,484
  -9,030
  -9,242
  -9,338
  -9,320
  -9,189
  -8,951
  -8,611
  -8,178
  -7,657
  -7,058
  -6,388
  -5,654
  -4,863
  -4,022
  -3,137
  -2,212
  -1,251
  -258
  764
  1,812
Issuance/(repayment) of debt, $m
  9,195
  6,359
  7,996
  9,781
  11,726
  13,801
  15,977
  18,221
  20,506
  22,802
  25,089
  27,348
  29,566
  31,736
  33,855
  35,925
  37,949
  39,935
  41,892
  43,833
  45,770
  47,714
  49,681
  51,684
  53,735
  55,848
  58,036
  60,311
  62,684
  65,169
  67,775
Issuance/(repurchase) of shares, $m
  2,537
  3,558
  4,268
  5,014
  5,784
  6,555
  7,305
  8,010
  8,651
  9,209
  9,671
  9,425
  9,668
  9,796
  9,808
  9,707
  9,498
  9,187
  8,782
  8,289
  7,718
  7,076
  6,370
  5,609
  4,797
  3,942
  3,049
  2,121
  1,162
  176
  0
Cash from financing (excl. dividends), $m  
  11,671
  9,917
  12,264
  14,795
  17,510
  20,356
  23,282
  26,231
  29,157
  32,011
  34,760
  36,773
  39,234
  41,532
  43,663
  45,632
  47,447
  49,122
  50,674
  52,122
  53,488
  54,790
  56,051
  57,293
  58,532
  59,790
  61,085
  62,432
  63,846
  65,345
  67,775
Total cash flow (excl. dividends), $m
  483
  7,267
  8,937
  10,747
  12,720
  14,825
  17,032
  19,309
  21,626
  23,956
  26,276
  27,742
  29,992
  32,194
  34,344
  36,443
  38,496
  40,511
  42,497
  44,465
  46,430
  48,403
  50,398
  52,429
  54,510
  56,653
  58,873
  61,180
  63,589
  66,109
  69,588
Retained Cash Flow (-), $m
  -4,376
  -4,198
  -5,265
  -6,440
  -7,720
  -9,086
  -10,519
  -11,997
  -13,500
  -15,012
  -16,518
  -18,005
  -19,465
  -20,894
  -22,290
  -23,652
  -24,984
  -26,292
  -27,581
  -28,859
  -30,134
  -31,414
  -32,709
  -34,027
  -35,378
  -36,769
  -38,209
  -39,707
  -41,270
  -42,906
  -44,621
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,068
  3,672
  4,308
  5,000
  5,739
  6,513
  7,313
  8,126
  8,944
  9,758
  9,737
  10,527
  11,300
  12,054
  12,791
  13,512
  14,219
  14,916
  15,607
  16,296
  16,989
  17,689
  18,402
  19,132
  19,885
  20,664
  21,473
  22,319
  23,203
  24,966
Discount rate, %
 
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
 
  2,823
  3,083
  3,273
  3,406
  3,472
  3,463
  3,379
  3,226
  3,012
  2,751
  2,266
  1,992
  1,712
  1,437
  1,179
  945
  740
  565
  421
  306
  217
  149
  100
  65
  41
  25
  15
  8
  5
  3
Current shareholders' claim on cash, %
  100
  83.4
  71.1
  61.6
  54.3
  48.5
  43.9
  40.1
  37.1
  34.5
  32.4
  30.8
  29.4
  28.2
  27.2
  26.4
  25.6
  25.0
  24.5
  24.1
  23.7
  23.4
  23.2
  23.0
  22.8
  22.7
  22.6
  22.6
  22.6
  22.6
  22.6

Molson Coors Brewing Company (MCBC) is a holding company. The Company operates as a brewer. The Company's segments include MillerCoors LLC (United States segment), operating in the United States; Molson Coors Canada (Canada segment), operating in Canada; Molson Coors Europe (Europe segment), operating in Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Republic of Ireland, Romania, Serbia, the United Kingdom and various other European countries; Molson Coors International (Molson Coors International segment), operating in various other countries, and Corporate. The Company brews, markets, sells and distributes a range of beer brands. The Company offers a portfolio of owned and partner brands, including Carling, Coors Light, Miller Lite, Molson Canadian and Staropramen, as well as craft and specialty beers, such as the Blue Moon Brewing Company brands, the Jacob Leinenkugel Brewing Company brands, Creemore Springs, Cobra and Doom Bar.

FINANCIAL RATIOS  of  Molson Coors Brewing Cl B (TAP)

Valuation Ratios
P/E Ratio 9.1
Price to Sales 3.7
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 15.9
Price to Free Cash Flow 22.8
Growth Rates
Sales Growth Rate 36.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 24.4%
Cap. Spend. - 3 Yr. Gr. Rate 3.1%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 99.7%
Total Debt to Equity 105.7%
Interest Coverage 20
Management Effectiveness
Return On Assets 10%
Ret/ On Assets - 3 Yr. Avg. 5.9%
Return On Total Capital 11.8%
Ret/ On T. Cap. - 3 Yr. Avg. 6.5%
Return On Equity 21.4%
Return On Equity - 3 Yr. Avg. 10.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 40.2%
Gross Margin - 3 Yr. Avg. 39.8%
EBITDA Margin 73.4%
EBITDA Margin - 3 Yr. Avg. 40.5%
Operating Margin 67.7%
Oper. Margin - 3 Yr. Avg. 33.3%
Pre-Tax Margin 62.1%
Pre-Tax Margin - 3 Yr. Avg. 29.3%
Net Profit Margin 40.5%
Net Profit Margin - 3 Yr. Avg. 21%
Effective Tax Rate 34.6%
Eff/ Tax Rate - 3 Yr. Avg. 19.7%
Payout Ratio 17.9%

TAP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TAP stock intrinsic value calculation we used $4885 million for the last fiscal year's total revenue generated by Molson Coors Brewing Cl B. The default revenue input number comes from 2016 income statement of Molson Coors Brewing Cl B. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TAP stock valuation model: a) initial revenue growth rate of 36.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.7%, whose default value for TAP is calculated based on our internal credit rating of Molson Coors Brewing Cl B, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Molson Coors Brewing Cl B.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TAP stock the variable cost ratio is equal to 85.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for TAP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Molson Coors Brewing Cl B.

Corporate tax rate of 27% is the nominal tax rate for Molson Coors Brewing Cl B. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TAP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TAP are equal to 254.6%.

Life of production assets of 45.2 years is the average useful life of capital assets used in Molson Coors Brewing Cl B operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TAP is equal to -17.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $11419 million for Molson Coors Brewing Cl B - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 215.255 million for Molson Coors Brewing Cl B is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Molson Coors Brewing Cl B at the current share price and the inputted number of shares is $17.9 billion.

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Financial statements of TAP
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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