H. J. Heinz: Estimating the Cost of Capital in Uncertain Times
WACC Calculation for Heinz
		2009		2010
Shares outstanding (in millions)	315		318
Share price (dollars as of close April 30, 2010)	34.42		46.87
Market value equity	10,837		14,890
Short term		61		44
Long term (including current portion)	5,081		4,574
Book value of debt (in millions of dollars)	5,142		4,618
Scaled total (LTD scaled by price of LTD)	4705		5391
Weight of Debt
Weight of debt (based on book value of debt)
Weight with scaled debt (based on market value of debt)
Cost of Debt
Yield on long-term debt (from bond terms)
	YTM Calculation
	2032 Issue (3/15/32)
		2009		2010
	PV
	N
	FV
	PMT
	I
	YTM
	2012 Issue (10/15/12)
		2009		2010
	PV
	N
	FV
	PMT
	I
	YTM
Cost of Equity		2009		2010
Beta		0.65		0.65
MRP		6.00%		6.00%
Rf		3.16%		3.69%
Cost of equity		7.06%		7.59%
WACC
Tax rate		30.00%		30.00%
Cost of equity
Cost of debt
With book value of debt
Weight of debt
Weight of equity
With scaled book value of debt (market value)
Weight of debt
Weight of equity
WACC with book value of debt
WACC with scaled book value of debt (market value)

1. What were the yields on the two representative outstanding Heinz-debt issues as of the end of April 2010? What were they one year earlier?
2. What was the WACC for Heinz at the start of fiscal year 2010? What was the WACC one year earlier?
3. What is your best estimate o the WACC for Kraft Foods, Campbell Soup Company, and Del Monte Foods? How do these WACCs influence your thinking about the WACC for Heinz?