Heineken Case

We used the value-driver model to estimate Heineken's DCF continuing value. The values of the parameters for the Business as Usual case are estimated as follows:

• The NOPLAT at the beginning of the continuing value period (one year after the last forecasted year) is 2014's NOPLAT. In Chapter 10, we forecasted Heineken's 2014 NOPLAT to be NLG 2,136 million.

3 Thanks to Olivier Berlage for deriving this formula.

• Heineken's WACC is forecasted to remain at 6.7 percent. We do not foresee any significant change in Heineken's capital structure or business risk.

• Heineken's return on new invested capital before goodwill beyond 2013 is forecasted to be 17 percent. This is consistent with the forecast performance in the years leading up to 2013 in this scenario. This implies that Heineken has a basis for sustainable long-term advantage. Like Coca-Cola or Procter & Gamble, Heineken has created a brand that will allow it to achieve returns superior to what a company would normally earn if it were perfectly competitive in the long run (i.e., returns on invested capital equaling cost of capital).

• We expect that Heineken's NOPLAT will grow at 4 percent, based on 2 percent real growth and 2 percent price increases.

Using these parameters in the recommended continuing value formula results in an estimated continuing value of NLG 59.6 billion in 2013.

Using the economic profit approach and the same parameter's results in a continuing value of economic profit after 2013 equal to NLG 47.5 billion, calculated as:

Economic profitsy 14 CV ot ec< UK unie |)roiii = +

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