H.J.Heinz: Estimating the Cost of Capital in Uncertain Times

3062 Words May 10th, 2015 13 Pages
For exclusive use at Institute of Management Technology - Dubai, 2015

UV5147
Rev. Nov. 15, 2013

H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES

To do a common thing uncommonly well brings success.
—H. J. Heinz Founder Henry John Heinz

As a financial analyst at the H. J. Heinz Company (Heinz) in its North American
Consumer Products division, Solomon Sheppard, together with his co-workers, reviewed investment proposals involving a wide range of food products. Most discussions in his office focused on the potential performance of new products and reasonableness of cash flow projections. But as the company finished its 2010 fiscal year at the end of April—with financial markets still in turmoil from the onset
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Recognizing its importance to capital budgeting decisions in the firm, he vowed to do an
“uncommonly good” job with this analysis, gathered the most recent data readily available, and began to grind the numbers.

This case was prepared by Associate Professor Marc L. Lipson. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright  2010 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.

This document is authorized for use only in Financial Management23 by Dr. Raj, at Institute of Management Technology - Dubai from January 2015 to July 2015.

For exclusive use at Institute of Management Technology - Dubai, 2015

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UV5147

Heinz and the Food Industry
In 1869, Henry John Heinz launched a food company by making horseradish from his mother’s recipe. As the story goes, Heinz was traveling on a train when he saw a sign advertising
21 styles of shoes, which he thought was clever. Since 57 was his lucky number,