Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

What was the WACC for Heinz at the start of fiscal year 2010? What was the WACC one year earlier? Please show solution. H. J.

What was the WACC for Heinz at the start of fiscal year 2010? What was the WACC one year earlier? Please show solution.

H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES
Capital Market Data
(yields and prices as of the last trading day in April of the year indicated)
Average Historic Yields
2003 2004 2005 2006 2007 2008 2009 2010
1-year 1.22% 1.55% 3.33% 4.98% 4.89% 1.85% 0.49% 0.41%
5-year 2.85% 3.63% 3.90% 4.92% 4.51% 3.03% 2.02% 2.43%
10-year 3.89% 4.53% 4.21% 5.07% 4.63% 3.77% 3.16% 3.69%
30-year(1) 4.79% 5.31% 4.61% 5.17% 4.89% 4.49% 4.05% 4.53%
Moodys Aaa 5.53% 5.87% 5.21% 5.95% 5.40% 5.51% 5.45% 5.13%
Moodys Baa 6.65% 6.58% 5.97% 6.74% 6.31% 6.87% 8.24% 6.07%
3-month commercial paper 1.21% 1.08% 2.97% 4.90% 5.22% 1.91% 0.22% 0.24%
Heinz Capital Market Prices of Typical Issues
2009 2010
Heinz stock price $34.42 $46.87
Bond price: 6.750% coupon, semiannual bond due 3/15/32 (Baa rated) 91.4 116.9
Bond price: 6.625% coupon, semiannual bond due 10/15/12 (Baa rated) 116.5 113.7
(1) The 20-year yield is used for 200305, when the 30-year was not issued.
Note that bond data were slightly modified for teaching purposes.
Data sources: Federal Reserve, Value Line, Morningstar, and case writer estimates.
H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES
Balance Sheet
(numbers in thousands of dollars except per-share amounts; fiscal year ends in April)
2008 2009 2010
Cash 617,687 373,145 483,253
Net receivables 1,161,481 1,171,797 1,045,338
Inventories 1,378,216 1,237,613 1,249,127
Other current assets 168,182 162,466 273,407
Total current assets 3,325,566 2,945,021 3,051,125
Net fixed assets 2,104,713 1,978,302 2,091,796
Other noncurrent assets 5,134,764 4,740,861 4,932,790
Total assets 10,565,043 9,664,184 10,075,711
Accounts payable 1,247,479 1,113,307 1,129,514
Short-term debt 124,290 61,297 43,853
Current portion of long-term debt 328,418 4,341 15,167
Other current liabilities 969,873 883,901 986,825
Total current liabilities 2,670,060 2,062,846 2,175,359
Long-term debt 4,730,946 5,076,186 4,559,152
Other noncurrent liabilities 1,276,217 1,246,047 1,392,704
6,007,163 6,322,233 5,951,856
Equity 1,887,820 1,279,105 1,948,496
Total liabilities and equity 10,565,043 9,664,184 10,075,711
Shares outstanding (in millions of dollars) 311.45 314.86 317.69
Data source: H. J. Heinz SEC filings, 200810.
H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES
Income Statement
(numbers in thousands except per-share amounts; fiscal year ends in April)
2008 2009 2010
Revenue 9,885,556 10,011,331 10,494,983
Costs of goods sold 6,233,420 6,442,075 6,700,677
Gross profit 3,652,136 3,569,256 3,794,306
SG&A expense 2,081,801 2,066,810 2,235,078
Operating income 1,570,335 1,502,446 1,559,228
Interest expense 323,289 275,485 250,574
Other income (expense) (16,283) 92,922 (18,200)
Income before taxes 1,230,763 1,319,883 1,290,454
Income taxes 372,587 375,483 358,514
Net income after taxes 858,176 944,400 931,940
Adjustments to net income (13,251) (21,328) (67,048)
Net income 844,925 923,072 864,892
Diluted EPS 2.61 2.89 2.71
Dividends per share 1.52 1.66 1.68
Data source: H. J. Heinz SEC filings, 200810.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Markets Investments And Financial Management

Authors: Daisy Scott

1st Edition

1639892001, 9781639892006

More Books

Students also viewed these Finance questions