In 2006,Anheuser-Busch Companies Inc.(BUD),engaged in theproduction and distribu

ID: 2628256 • Letter: I

Question

In 2006,Anheuser-Busch Companies Inc.(BUD),engaged in theproduction and distribution of beer worldwide,operating through four business segments:Domestic Beer,International Beer,Packaging,and Entertainment.The Domestic Beersegment offers beer under Budweiser,Michelob,Busch,and Natural brands in the UnitedStates,in addition to a number of specialty beers including non-alcohol brews,malt liquors,and specialty malt beverages,as well as energy drinks.The International Beersegment markets and sells Budweiser and other brands outside the United States andoperates breweries in the United Kingdom and China.In addition,the International Beersegment negotiates and administers license and contract brewing agreements with variousforeign brewers.The Packaging segment manufactures beverage cans and can lids for drinkcustomers,buys and sells used aluminum beverage containers,and recycles aluminumcontainers.Finally,the Entertainment segment owns and operates theme parks.

In 2005,Anheuser-Busch reported the following segment revenues and net income:

($ millions) Domestic BeerInternational BeerPackagingEntertainment2005 Gross sales$ 10,121.00$ 864.00$ 1,831.50$ 904.40Income before income taxes2,293.4070.10120.40215.10Equity income

Explanation / Answer

general approch cost of capital of business segment

Domestic Beer

International Beer

Packaging

Entertainment

Gross Sales

10121

864

1831

904

Income before income tax

2293.4

70.1

120.4

215.1

Equity Income

147.1

Net income

1421.9

433.7

74.6

133.4

The general approach to calculate cost of equity is by calculating cost of equity and cost of debt of the firm and calculating the rates to the weights of debt and equity

Yes, the internal sales affects the analysis as in th internal sales as the internal sales does not bear the interest on it.