"H. J. Heinz: Estimating the Cost of Capital in Uncertain Times" (HBPS coursepack reading). Refer to this Excel worksheet Download this Excel work sheet to better understand the WACC calculation. Keep in mind, there can be many different assumptions based on the market information provided in the case. As long as your assumption(s) is within a reasonable range, you will be able to derive important information concerning Heinz's cost of capital from your results. For the corporation's decision on capital structure, please refer to the article "How do CFOs make capital budgeting and capital structure decisions? Links to an external site."

 

After reading the case study and reviewing the provided Excel spreadsheet above, answer the following questions. Record all your needed calculations in the same Excel worksheet provided.

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1. How would you estimate the cost of capital for Heinz at the start of Fiscal Year 2010? What was the cost of capital one year earlier? As you calculate, carefully note the points of judgment or assumptions made in the calculation. 2. What is your best estimate of the cost of capital for Kraft Foods, Campbell Soup Company, and Del Monte Foods? Based on your findings, how do these comparable firms' cost of capital influence your thinking about the financing cost for Heinz? 3. What suggestions would you provide to Heinz insiders? Should they change their current capital structure to achieve lower cost of capital in the future? 1. How would you estimate the cost of capital for Heinz at the start of Fiscal Year 2010? What was the cost of capital one year earlier? As you calculate, carefully note the points of judgment or assumptions made in the calculation. 2. What is your best estimate of the cost of capital for Kraft Foods, Campbell Soup Company, and Del Monte Foods? Based on your findings, how do these comparable firms' cost of capital influence your thinking about the financing cost for Heinz? 3. What suggestions would you provide to Heinz insiders? Should they change their current capital structure to achieve lower cost of capital in the future?

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To calculate the cost of capital for Heinz at the start of Fiscal Year 2010 and one year earlier as well as the cost of capital for the comparable firms Kraft Foods Campbell Soup Company and Del Monte ... View the full answer