1. Using the data in Exhibits 1 and 2, estimate asset betas for WFM, KR, SFM, and SVU using five years of returns (or from origination, in the case of SFM) and the value-weighted market index. How do the companies' asset betas differ? What might explain the differences in the companies' asset betas?

2. Estimate the cost of equity capital for WFM, KR, and SFM.

a. How does the estimated cost of equity compare to the average returns from the past 5 years?

b. How are expected returns different from average past returns?

3. Estimate WFM's weighted average cost of capital.

4. Before Amazon's bid for WFM on June 15, 2017, WFM's stock was selling at $33.06 per share.Use your WACC estimate and the cash flow projections in Exhibit 4 to determine the terminal growth rate (g) for all years beyond 2021 that is reflected in a price of $33.06 per share.

a. Is this a reasonable growth rate g?

b. It is possible that WFM's cash flow projections are overly optimistic.Suppose investors believed that each of WFM's cash flow projections should be reduced by 12%.What growth rate g would be implied by a stock price of $33.06 per share?