What was the WACC for Heinz at the start offiscal year 2010? What was the WACC one year earlier? Show all values used inyour calculations. The risk-free rates are quite low, in your opinion are thecalculated WACCs just "too low"? Why or Why not?

A B C D Exhibit 1 W N 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) 6 2008 2009 2010 7 Revenue 9,885,556 10,011,331 10,494,983 Costs of goods sold 6,233,420 6.442,075 6,700,677 9 Gross profit 3,652,136 3,569,256 3,794,306 10 11 SG&A expense 2,081,801 2,066,810 2,235.078 12 Operating income 1.570.335 1,502,446 1,559.228 13 14 Interest expense 323,289 275,485 250,574 15 Other income (expense) (16,283) 92.922 (18,200) 16 Income before taxes 1,230,763 1,319,883 1,290,454 17 18 Income taxes 372,587 375.483 358,514 19 Net income after taxes 858,176 944.400 931,940 20 21 Adjustments to net income (13,251) (21,328) (67,048) 22 Net income 844.925 923.072 864.892 23 24 Diluted EPS 2.61 2.89 2.71 25 Dividends per share 1.52 1.66 1.68 26 27 Data source: H. J. Heinz SEC filings, 2008-10. 28Exhibit 2 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 10 Inventories 1,378,216 1,237,613 1,249,127 11 Other current assets 168,182 162,466 273,407 12 Total current assets 3,325,566 2,945,021 3,051,125 13 14 Net fixed assets 2,104,713 1,978,302 2,091,796 15 Other noncurrent assets 5,134,764 4,740.861 4.932,790 16 Total assets 10.565.043 9,664,184 10,075,711 17 3 Accounts payable 1,247,479 1,113,307 1,129,514 19 Short-term debt 124,290 61,297 43.853 20 Current portion of long-term debt 328,418 4.341 15,167 21 Other current liabilities 969,873 883,901 986,825 22 Total current liabilities 2,670,060 2,062,846 2,175,359 23 24 Long-term debt 4,730,946 5,076,186 4,559,152 25 Other noncurrent liabilities 1,276,217 1,246.047 1,392,704 26 6,007,163 6,322,233 5,951,856 27 28 Equity 1,887,820 1,279,105 1,948,496 29 Total liabilities and equity 10,565,043 9.664,184 10,075,711 30 31 Shares outstanding (in millions of dollars) 311.45 314.86 317.69 32 33 Data source: H. J. Heinz SEC filings, 2008-10.A B C D E F G H Exhibit 3 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) 8 Average Historic Yields 10 2003 2004 2005 2006 2007 2008 2009 2010 11 1-year 1.22% 1.55% 3.33% 4.98% 4.89% 1.85% 0.49% 0.41% 12 5-year 2.85% 3.63% 3.90% 4.92% 4.51% 3.03% 2.02% 2.43% 13 10-year 3.89% 4.53% 4.21% 5.07% 4.63% 3.77% 3.16% 3.69% 14 30-year") 4.79% 5.31% 4.61% 5.17% 4.89% 4.49% 4.05% 4.53% 15 Moody's Aaa 5.53% 5.87% 5.21% 5.95% 5.40% 5.51% 5.45% 5.13% 16 Moody's Baa 6.65% 6.58% 5.97% 6.74% 6.31% 6.87% 8.24% 6.07% 17 3-month commercial paper 1.21% 1.08% 2.97% 4.90% 5.22% 1.91% 0.22% 0.24% 19 Heinz Capital Market Prices of Typical Issues 20 2009 2010 21 Heinz stock price $34.42 $46 87 22 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 24 25 "The 20-year yield is used for 2003-05, when the 30-year was not issued. 26 Note that bond data were slightly modified for teaching purposes. 27 Data sources: Federal Reserve, Value Line, Morningstar, and case writer estimates.W N H Exhibit 4 H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES Comparable Firm Data 7 Campbell Del Kraft Soup Monte 9 Financial Summary 10 Revenues (in millions of dollars) 40.386 7.589 3.739 11 Book value of equity (in millions of dollars) 25.972 728 1,827 12 Book value of debt (in millions of dollars) 18.990 2,624 1.290 13 14 Market Data 15 Beta 0.65 0.55 0.70 16 Shares outstanding (in millions of dollars) 1.735 363 182 17 Share price (dollars as of close April 30, 2010) 29.90 35.64 15.11 18 Typical Standard & Poor's bond rating BBB- A BB 19 Representative yield on long-term debt 5.12% 4.36% 6.19% 20 21 Data sources: Value Line; H. J. Heinz SEC filings, 2008-10; case writer estimates; Morningstar