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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
| 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) |
- 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?
- What was the WACC for Heinz at the start of fiscal year 2010? What was the WACC one year earlier?
- 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?
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