1. 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.) (Answer the bold part only)

SOLUTION: 1) Bond (Due in 2032) 2009 Settlement date 4/30/2009 Maturity date 3/15/2032 Coupon 6.75% price 91.4 frequency 2 yield 7.54% Bond (Due in 2032) 2009 Settlement date 4/30/2009 Maturity date 10/15/2012 Coupon 6.63% price 116.5 i frequency 2 1 yield 1.69% H.J.Heinz Market value of Equity. 2009 Shares outstanding (M) 314.86 stock price $34.42 E (market cap) $10,837.48 2010 4/30/2010 3/15/2032 6.75% 116.9 2 5.42% 2010 4/30/2010 10/15/2012 6.63% 113.7 2 0.97% 2010 317.69 $46.87 $14,890.13 2009 2010 43853 H.J.Heinz Market value of Debt,D cash short-term debt long-term debt current portion of long-term debt Net debt H.J.Heinz corporate tax rate ,T income before taxes income taxes Tax rate Cost of equity-CAMP beta riskfreerate market premium Cost of equity Cost of debt Net debt interest expense Cost of debt 2008 617 687 3 73 1 4 5 124 290 61 29 7 4730946 5 076 1 8 6 328 418 4565967 2008 1230 763 1319 883 372 5 87 375 483 30.27% 4341 1516700 4768679 4134919 2009 2010 1290 454 358 5 14 28.45% 27.78% 28.83% 0.65 3.69% 7.50% 8.57% 2008 2009 4837750 5121 764 $323,289.00 $275,485.00 5.53% 2010 4589578 250574 5.16% SOLUTION: 1) Bond (Due in 2032) 2009 Settlement date 4/30/2009 Maturity date 3/15/2032 Coupon 6.75% price 91.4 frequency 2 yield 7.54% Bond (Due in 2032) 2009 Settlement date 4/30/2009 Maturity date 10/15/2012 Coupon 6.63% price 116.5 i frequency 2 1 yield 1.69% H.J.Heinz Market value of Equity. 2009 Shares outstanding (M) 314.86 stock price $34.42 E (market cap) $10,837.48 2010 4/30/2010 3/15/2032 6.75% 116.9 2 5.42% 2010 4/30/2010 10/15/2012 6.63% 113.7 2 0.97% 2010 317.69 $46.87 $14,890.13 2009 2010 43853 H.J.Heinz Market value of Debt,D cash short-term debt long-term debt current portion of long-term debt Net debt H.J.Heinz corporate tax rate ,T income before taxes income taxes Tax rate Cost of equity-CAMP beta riskfreerate market premium Cost of equity Cost of debt Net debt interest expense Cost of debt 2008 617 687 3 73 1 4 5 124 290 61 29 7 4730946 5 076 1 8 6 328 418 4565967 2008 1230 763 1319 883 372 5 87 375 483 30.27% 4341 1516700 4768679 4134919 2009 2010 1290 454 358 5 14 28.45% 27.78% 28.83% 0.65 3.69% 7.50% 8.57% 2008 2009 4837750 5121 764 $323,289.00 $275,485.00 5.53% 2010 4589578 250574 5.16%