- 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? Find the yield to maturity (YTM) of the two representative bonds, both at the time of the case and one year earlier. Decide whether a long-term rate, a short-term rate, or a weighted average of weights is appropriate. Explain the reasons for your choice.
Page 1 eing in the world and med denned in the Italian market well-known handed the core offees with ep 15 brug for about 70% of events, and each SE 12 H. J. Heinz Estimating the Cost of Capital in Uncertain Times L. Weider Henry Jolie en Ascially when Company Work Acura di Shpend wir weinig wie the performance of www products and watowej. But the competed in 2010 final you the wall April wifi ilin mart of the received twend of 2009 dece of disco de company's wedge cotofapital (WACO Altheim, we were the cost of all of it, piedupped from 547 in 2008 14 in the row back in 2016, dvig debates were weight in a cost of capital de poder reflect these changes as they declined qually begrebere but pleting the completed www wodower the cost of forei of Thinlere was recentemen, te werk is the real but there was weer this should the cost of capite company, Helpwa pesan 200 cois. The company was credito Bhed primary region North American Conner Products, US Foodservice, Europe Ana Pacific, and Rest of About of res were from outside the sited States and the North Anri Coats and were of comparable increasing the company was Bring me, which had eerstede ofrece grand comprised 15% of alles The main obal food companies based in the third Suleinladedral Food, the largest us. howed food and bevege corp Campbell Soup Copene codiced food maker, and De Meer Foads of largest producers and des of quality branded food and put predats focused on de US and a few days. He le competed with a father global players white world leader in and deve, e chce pode conforte Recent Performance wie die wyn wye recovery and deep concer ojob w over the perview yan.com lebenso e value in their purchases and to enlyst how This for companies in food prodat menyap food producers and wins to focus encore des Asse. Hellad done well in both 2009 and 2010, with positive sales who shows heart, al 2010 profits were lower than in 2009. Then we were is the price for an increase is the cost of people price for dois pas vers les party is Ail, ledwo pively feed company's op 121 122 for the 2005, 2009, 2010 When Stepped wived works of Maryle felt the very of the debate Menester, Steppi er stod derende fora WACC by North Awan revenda dy was baie numbers Heinz and the Food Industry In te lewe. Hunched a food company by making here for me. As the weder will be the entreprenew bestellen 37 Vietinis adversely 2010, de company levy fundedecorated wito und 29.00 places and the Hented produs in de compris Kapal Sex, Meals and Snacks, and Na Hutoa leader in the develop prior con la The new full of the coprends leder te bere bere position in their respective. The Hei Kathe, with sales of 15 ribes www still the undisputed world leader Oher well-known buscaledige Washers a leader in dicury products Hein Beans in 2010, the brand sold over 1.5 curs a day in Britain, the biggest be SIT 12 lehet ber is the laws writ paid postage pence, un 80% increase over the sale price. Although the share price suffered a substantial price reversal in mid-2014, over the first six mof 2015 Royal Mail shares had recovered and closed on July 20th 311 pene. E provides a history of return to Royal Mail equity investors relative to return in the hrad FTSE 100 Index in October 2013. Despite the strong and growing profits and sets, there was still substantial certainty about the value of the shares TIBILI The the EXHIBIT 3 Cut Teal Stock Rom Wall PE 100 MONEY M AM Now, do to the date changes in postalrices down the beginning of the 21st century, it was once prin information at Reyal Mail. In 2006, the British overlademed Royal Mail's poly walipoping and monilin the United Kingdom with the centration was reduced, and Royal Mail was freed to its own postage rates. Over the years, Royal Mail spended by sing the price of Fine Class postage from 32 pene penee. Ia 2011, and the importanostal Services Act. In this Act, the Postal Services Comission wurdened and the replay purview of police in Kinded to the Of The wally legs of Royal Mail Despite increased libis, however, the Act designed to Royal Mail was required to maintain pricepereal service for leden of beach A decision to privatotherischillende i Royal Mail was less the disciplined the many other post offices where in and that it meded comida, capital, care price kly and effectively. This need sed worldwide de volume twenty-five few of Vince ped his before the Home of "The des sales practical lagitisa er decision designed to Royal Mail longe be Over the years dep, the fruil performance of Royal Mail roveland in pengawas Per 199 pli Cash flow for the company ludowe GPS million in final year 2009 GP22 milies in Eucal year 2013 The private of Royal Mail cane ise 2013, when the gods of its Marof Royal Mile puble for 30 The transaction proceeds of GBP2 Mies or the sees old, 19% werewolves and 23% wereld 690,000 individual Two wes of uncertainty were competition and regulations. In April 2012, the Dutch postal service o INT deered the UK door-to-doce postal services market with a subsidiary business at would eventually become on a WiOver the coming years, the financial viability of the venture and proved challenge. Just let me Whisperer deed that the company would be wapending its door to-door business to feni bulk wil processing rice in Britain. It would rely on Royal Mail's instructure for "famile of delivery service. Two thousand Winployees were laid of The British prenent responded by calling into question Olom's repory policies. In response, Ofcom win a high profile review of the postal services murais effort to imate competition concern was the Royal Mail maintained pricing power in the market share it could noge in competitive pricing Such allegations raised the question of what was the appropriate level of profitability for a firmsches Royal Mail. May Gree, choof Royal Mail, expressed the company's willingness to fully comply with the review She also indicated that Royal Mail was facing difficulties of its own but was determined to continue to put better She specifically led Os Raya Mufint day of dinge do Suchangiare prices 455 perce Depp profileries by postal workers who were dopped the private dhe price for Royal Mail me in the following the way lwy 2014, the care price was vading lever 600 Om enple was the recentemente company wieliciency objective by purchasing 76,000 har eid same devices from Zebra Technologies. Other initiatives included Page 20 generate cost-of-capital estimates for these competitors as well as for Heinz Arguably, if market conditions for Heinz were unusual at the time, the results for competitors could be more representative for other companies in the industry. At the very least, Sheppard knew he would be more comfortable with his recommendation if it were aligned with what he believed was appropriate for the company's major competitors. EXHIBIT 12.4 Comparable Firm Data Del Campbell Soup Monte Kraft Financial Summary Revenues in millions of dollars) 40,386 7.589 3.739 Book value of equity in millions of dollars) 25.972 728 1827 Book value of debt in millions of dollars) 18.990 2,624 1.290 Market Data Beta 0.65 055 0.70 Shares outstanding in millions of dollars) 1.735 363 182 Share price dollars as of close April 30, 2010) 29.00 35 64 15.11 Typical Standard & Poor's bond rating BBB A BB Representative yield on long term debt 5.123 4.36% 6.19% Data sources: Value Line: J. Heinz SEC filings. 2008-10: case writer estimates: Morningstar. Cost of Capital Considerations Recorded werken met hen at the recent downturn had been rely precipitated by turned in the capital of surprising to the rest rate picture at the timewa www. Ext. 12.3 prisinformation est rate yields. As of April 2010, er gert rates and even commercial paper for these companies that could it were swingly low levels. Evenem te which were typically less volatile, were low by storie de Credit reads, which had drifted pada 200 and wurde din 2009, and settled down but we all lighby wie standard Interesting the low level of long termales lad mure of the main credit reeds und bewers with cendere hallow borrowing costs RE 16 LIR Me The body o prieten wiede per of food products com o ensitive toward conditionen bere the meter This was close CFO Art Winkel, who inely 2009 had rem Twe're who washing machines are welcom www. mally programe de could drive prie brand that represepdows from the end. While in die version les in mid-2010, was clear de concern With price for a betely why we charges in the new did dem wiring is the third of 2008, price ranger med 12 plote i sad prie apiruthe SAP de valid to He's the price at the start of the 2005 fracy). The low price to start of ladom characterized by events with recovery, it was comid Sedert data shown in the 12 tad stone Motoren wied the company's brother and date about Sheppard bedre for two ballondered wife' dar 2013 des 2013. How to play with per is the posterely dried up for the computador eri Sportif Bacolo.2014 We pred Sheppard was de diversity of operate in regarding the risk alto adige required to corpory's equity wing the placed the wted the real returned fasting in a broad ride of contes is bond When we over long period of time, the preme. when werd over de pries, the pressionario paly.roceny te permited eco und by www Meltin were twofarvey of CFOs indicating that postimer for a lower premium in the water to 5.0%. On the other hand, come wted that contain 2010 deceifach higher premium close to 1 Aseppard pepared for safety and, lehted recer date for Iris'te mjerUS. IL. This information wallow Sheppard Page 1 eing in the world and med denned in the Italian market well-known handed the core offees with ep 15 brug for about 70% of events, and each SE 12 H. J. Heinz Estimating the Cost of Capital in Uncertain Times L. Weider Henry Jolie en Ascially when Company Work Acura di Shpend wir weinig wie the performance of www products and watowej. But the competed in 2010 final you the wall April wifi ilin mart of the received twend of 2009 dece of disco de company's wedge cotofapital (WACO Altheim, we were the cost of all of it, piedupped from 547 in 2008 14 in the row back in 2016, dvig debates were weight in a cost of capital de poder reflect these changes as they declined qually begrebere but pleting the completed www wodower the cost of forei of Thinlere was recentemen, te werk is the real but there was weer this should the cost of capite company, Helpwa pesan 200 cois. The company was credito Bhed primary region North American Conner Products, US Foodservice, Europe Ana Pacific, and Rest of About of res were from outside the sited States and the North Anri Coats and were of comparable increasing the company was Bring me, which had eerstede ofrece grand comprised 15% of alles The main obal food companies based in the third Suleinladedral Food, the largest us. howed food and bevege corp Campbell Soup Copene codiced food maker, and De Meer Foads of largest producers and des of quality branded food and put predats focused on de US and a few days. He le competed with a father global players white world leader in and deve, e chce pode conforte Recent Performance wie die wyn wye recovery and deep concer ojob w over the perview yan.com lebenso e value in their purchases and to enlyst how This for companies in food prodat menyap food producers and wins to focus encore des Asse. Hellad done well in both 2009 and 2010, with positive sales who shows heart, al 2010 profits were lower than in 2009. Then we were is the price for an increase is the cost of people price for dois pas vers les party is Ail, ledwo pively feed company's op 121 122 for the 2005, 2009, 2010 When Stepped wived works of Maryle felt the very of the debate Menester, Steppi er stod derende fora WACC by North Awan revenda dy was baie numbers Heinz and the Food Industry In te lewe. Hunched a food company by making here for me. As the weder will be the entreprenew bestellen 37 Vietinis adversely 2010, de company levy fundedecorated wito und 29.00 places and the Hented produs in de compris Kapal Sex, Meals and Snacks, and Na Hutoa leader in the develop prior con la The new full of the coprends leder te bere bere position in their respective. The Hei Kathe, with sales of 15 ribes www still the undisputed world leader Oher well-known buscaledige Washers a leader in dicury products Hein Beans in 2010, the brand sold over 1.5 curs a day in Britain, the biggest be SIT 12 lehet ber is the laws writ paid postage pence, un 80% increase over the sale price. Although the share price suffered a substantial price reversal in mid-2014, over the first six mof 2015 Royal Mail shares had recovered and closed on July 20th 311 pene. E provides a history of return to Royal Mail equity investors relative to return in the hrad FTSE 100 Index in October 2013. Despite the strong and growing profits and sets, there was still substantial certainty about the value of the shares TIBILI The the EXHIBIT 3 Cut Teal Stock Rom Wall PE 100 MONEY M AM Now, do to the date changes in postalrices down the beginning of the 21st century, it was once prin information at Reyal Mail. In 2006, the British overlademed Royal Mail's poly walipoping and monilin the United Kingdom with the centration was reduced, and Royal Mail was freed to its own postage rates. Over the years, Royal Mail spended by sing the price of Fine Class postage from 32 pene penee. Ia 2011, and the importanostal Services Act. In this Act, the Postal Services Comission wurdened and the replay purview of police in Kinded to the Of The wally legs of Royal Mail Despite increased libis, however, the Act designed to Royal Mail was required to maintain pricepereal service for leden of beach A decision to privatotherischillende i Royal Mail was less the disciplined the many other post offices where in and that it meded comida, capital, care price kly and effectively. This need sed worldwide de volume twenty-five few of Vince ped his before the Home of "The des sales practical lagitisa er decision designed to Royal Mail longe be Over the years dep, the fruil performance of Royal Mail roveland in pengawas Per 199 pli Cash flow for the company ludowe GPS million in final year 2009 GP22 milies in Eucal year 2013 The private of Royal Mail cane ise 2013, when the gods of its Marof Royal Mile puble for 30 The transaction proceeds of GBP2 Mies or the sees old, 19% werewolves and 23% wereld 690,000 individual Two wes of uncertainty were competition and regulations. In April 2012, the Dutch postal service o INT deered the UK door-to-doce postal services market with a subsidiary business at would eventually become on a WiOver the coming years, the financial viability of the venture and proved challenge. Just let me Whisperer deed that the company would be wapending its door to-door business to feni bulk wil processing rice in Britain. It would rely on Royal Mail's instructure for "famile of delivery service. Two thousand Winployees were laid of The British prenent responded by calling into question Olom's repory policies. In response, Ofcom win a high profile review of the postal services murais effort to imate competition concern was the Royal Mail maintained pricing power in the market share it could noge in competitive pricing Such allegations raised the question of what was the appropriate level of profitability for a firmsches Royal Mail. May Gree, choof Royal Mail, expressed the company's willingness to fully comply with the review She also indicated that Royal Mail was facing difficulties of its own but was determined to continue to put better She specifically led Os Raya Mufint day of dinge do Suchangiare prices 455 perce Depp profileries by postal workers who were dopped the private dhe price for Royal Mail me in the following the way lwy 2014, the care price was vading lever 600 Om enple was the recentemente company wieliciency objective by purchasing 76,000 har eid same devices from Zebra Technologies. Other initiatives included Page 20 generate cost-of-capital estimates for these competitors as well as for Heinz Arguably, if market conditions for Heinz were unusual at the time, the results for competitors could be more representative for other companies in the industry. At the very least, Sheppard knew he would be more comfortable with his recommendation if it were aligned with what he believed was appropriate for the company's major competitors. EXHIBIT 12.4 Comparable Firm Data Del Campbell Soup Monte Kraft Financial Summary Revenues in millions of dollars) 40,386 7.589 3.739 Book value of equity in millions of dollars) 25.972 728 1827 Book value of debt in millions of dollars) 18.990 2,624 1.290 Market Data Beta 0.65 055 0.70 Shares outstanding in millions of dollars) 1.735 363 182 Share price dollars as of close April 30, 2010) 29.00 35 64 15.11 Typical Standard & Poor's bond rating BBB A BB Representative yield on long term debt 5.123 4.36% 6.19% Data sources: Value Line: J. Heinz SEC filings. 2008-10: case writer estimates: Morningstar. Cost of Capital Considerations Recorded werken met hen at the recent downturn had been rely precipitated by turned in the capital of surprising to the rest rate picture at the timewa www. Ext. 12.3 prisinformation est rate yields. As of April 2010, er gert rates and even commercial paper for these companies that could it were swingly low levels. Evenem te which were typically less volatile, were low by storie de Credit reads, which had drifted pada 200 and wurde din 2009, and settled down but we all lighby wie standard Interesting the low level of long termales lad mure of the main credit reeds und bewers with cendere hallow borrowing costs RE 16 LIR Me The body o prieten wiede per of food products com o ensitive toward conditionen bere the meter This was close CFO Art Winkel, who inely 2009 had rem Twe're who washing machines are welcom www. mally programe de could drive prie brand that represepdows from the end. While in die version les in mid-2010, was clear de concern With price for a betely why we charges in the new did dem wiring is the third of 2008, price ranger med 12 plote i sad prie apiruthe SAP de valid to He's the price at the start of the 2005 fracy). The low price to start of ladom characterized by events with recovery, it was comid Sedert data shown in the 12 tad stone Motoren wied the company's brother and date about Sheppard bedre for two ballondered wife' dar 2013 des 2013. How to play with per is the posterely dried up for the computador eri Sportif Bacolo.2014 We pred Sheppard was de diversity of operate in regarding the risk alto adige required to corpory's equity wing the placed the wted the real returned fasting in a broad ride of contes is bond When we over long period of time, the preme. when werd over de pries, the pressionario paly.roceny te permited eco und by www Meltin were twofarvey of CFOs indicating that postimer for a lower premium in the water to 5.0%. On the other hand, come wted that contain 2010 deceifach higher premium close to 1 Aseppard pepared for safety and, lehted recer date for Iris'te mjerUS. IL. This information wallow Sheppard
