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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. |
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