In November 2008, the Belgian InBev S.A. completed the acquisition of US-based AnheuserBusch. The brewer acquired Anheuser-Busch for close to 40 billion, of which it classified approximately 25 billion as goodwill. At the end of the fiscal year ending on December 31, 2008, Anheuser-Busch InBevs (AB InBev) net assets amounted to 61,357 million, consisting of 64,183 million in non-current assets and 2,826 million in working capital. The companys book value of equity amounted to 16,126 million. Early May, 2009, when AB Inbevs 1,593 million common shares trade at about 24 per share, an analyst produces the following forecasts for the company and issues an overweight (buy) recommendation.

Forecast	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
sale	28,475	26,688	27,909	29,047	30,089	31,011	31,810	32,470	32,311	32,658
NOPAT	6,169	6,294	6,729	7,003	7,254	7,476	7,669	7,828	7,790	7,874
Depreciation & Armotization	2,297	2,158	2,228	2,318	2,402	2,475	2,539	2,592	2,579	2,607
Investment in Non Current Assets	-1,529	-1,441	1,549	-1,743	-1,805	-1,860	-1,909	-1,948	-1,939	-1,959
Investment in Working capital	485	580	669	435	451	465	477	487	485	490
Free Cash flow to debt to equity ratio	7,425	7,590	8,077	8,014	8,301	8,556	8,777	8,958	8,915	9,011

i. The analyst estimates that AB InBevs weighted average cost of capital is 9 percent and assumes that the free cash flow to debt and equity grows indefinitely at a rate of 1 percent after 2018. Show that under these assumptions, the equity value per share estimate exceeds AB InBevs share price

ii. Calculate AB InBevs expected abnormal NOPATs between 2009 and 2018 based on the above information. How does the implied trend in abnormal NOPAT compare with the general trends in the economy?

iii. Estimate AB InBevs equity value using the abnormal NOPAT model (under the assumption that the WACC is 9 percent and the terminal growth rate is 1 percent). Why do the discounted cash flow model and the abnormal NOPAT model yield different outcomes?

iv. What adjustments to the forecasts are needed to make the two valuation models consistent?