Essay about Heinz: Estimating the Cost of Capital
Cost of Capital in Times of Uncertainty
Group 10
Alan Ho 20349978
Saraniya Paramanathan 20332829
Christopher Abeleda 20335744
Nathanael Cheung 20345672
Reuban Nadesan 20346511
To: Board of Directors Committee, H.J. Heinz Company
From: Group 10 Consulting
Date: July 7, 2011

Subject: Weighted Average Cost of Capital Recommendation

Heinz has reached an unstable point in its business cycle and must calculate an appropriate cost of capital during these uncertain times. The cost of capital is an essential measure in determining the cost of a company’s capital structure. It is the …show more content…
The riskfree rate recommended under the CAPM model is the yield on longterm (i.e. 10+ years) Tbills. When choosing the Tbill term, it is important for it to closely represent the time frame used for Heinz’ required rate of return.
A common practice to determine the firm’s beta is to draw from historical data from published sources or compare numbers to competitors. In this case, Heinz can compare to Kraft, Campbell Soup and Del Monte and use professional judgement in determining the stock’s sensitivity to the market. A stock’s beta can be determined using a formula as well.
As mentioned earlier, the theory uses a forwardlooking risk premium which reflects current market conditions that are sensitive to changes. Although this is the case, research on various companies demonstrates that experts infer future

Case Studies in Finance: Estimating the Cost of Capital
2017 Words  9 PagesCASE STUDIES IN FINACE CASE STUDY 3: ESTIMATING THE COST OF CAPITAL QUESTION 1: a)b)c) The Capital Assets Price Model (CAPM) is used to describe the relationship between risk and expected return and is often used to estimate a cost of equity (Investopedia, 2009). The cost of equity(COE) of the discount rate is: R = Rf + β*(E  Rf) (1) Rf = Risk free rate of return, usually U.S. treasury bonds β = Beta for a company E = Expected return of the market…

Best Practices in Estimating the Cost of Capital: Survey and Synthesis
1254 Words  6 PagesOverview This case study focuses on where financial theory ends and practical application of the weighted average cost of capital (WACC) begins. It presents evidence on how some of the most financially complex companies and financial advisors estimated capital costs and focuses on the gaps found between theory and application. The approach taken in the paper differed from their predecessors in several various respects. Prior published information was solely based on written, closedend surveys sent…

H. J. Heinz: Estimating the Cost of Capital in Uncertain Times
2748 Words  11 Pages￼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 coworkers, 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…

Time and Cost Estimating Techniques Essay
1233 Words  5 PagesTime and Cost Estimating Techniques Estimating work times provides several benefits for the project manager. It gives an idea of the level of effort required to complete a project. This information then enables the project manager to produce a realistic plan based upon that effort. Estimating also helps the project manager anticipate the budget for the project. There are many formal techniques available to estimate time and cost for activities. Please refer to the Project Management Reference…

Cost Estimating
1500 Words  6 PagesProject managers must take cost estimates seriously if they want to complete software projects within budget constraints. After developing a good resource requirements list, project managers and their software development teams must develop several estimates of the costs for these resources. There are several different tools and techniques available for accomplishing good cost estimation. Software development project managers should prepare several types of cost estimates for most projects. Three…

Estimating Cost of Capital in Uncertain Times
2035 Words  9 PagesH.J. HEINZ: ESTIMATING COST OF CAPITAL IN UNCERTAIN TIMES Case Analysis San Ramon Section I (Early Class) 05/23/2014 Animesh Dalakoti Kimberly Donellan Mark Garcia Priit Newlin Kevin Stupfel Case Summary: In this case study, we estimate the weighted average cost of capital (WACC) for H. J. Heinz Company by analyzing its financial conditions as well as macroeconomic variables post 20072009 recession years. H. J. Heinz also known, as Heinz in the consumer market, is a US based food giant with billions…

Best Practices in Estimating the Cost of Capital: An Update
8714 Words  35 Pages“BEST PRACTICES” IN ESTIMATING THE COST OF CAPITAL: AN UPDATE 15 “Best Practices” in Estimating the Cost of Capital: An Update W. Todd Brotherson, Kenneth M. Eades, Robert S. Harris, and Robert C. Higgins “Cost of capital is so critical to things we do, and CAPM has so many holes in it—and the books don’t tell you which numbers to use… so at the end of the day, you wonder a bit if you’ve got a solid number. Am I fooling myself with this Theories on cost of capital have been around for…

Techniques for Estimating the Cost of Capital
919 Words  4 PagesPart I. Estimating the cost of capital is challenging, because the cost of capital effectively puts a price on the risk of the project. If we know the risk, it would not be risk, it would be certainty. Inherently, then, there is a philosophical challenge with finding a good estimate of the firm's cost of capital. It is assumed, however, that the market view of the firm is a fairly accurate reflection of the company's risks. The main techniques for estimating the cost of capital, therefore, are market…

H.J.Heinz: Estimating the Cost of Capital in Uncertain Times
3062 Words  13 PagesFor 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 coworkers, reviewed investment proposals involving a wide range of food products. Most discussions…

Essay on Case 13  Best Practices in Estimating the Cost of Capital
1342 Words  6 PagesPractices in Estimating the Cost of Capital: Survey and Synthesis Case 13 Teaching Notes Introduction “Each year in the US, corporations undertake more than $500 billion in capital spending” (Bruner 184). This case presents a reasonably analyzed set of teaching notes describing how these financially sophisticated corporations estimate their capital costs. Understanding the estimation of capital costs helps identify the uncertainty of the costofcapital theory, sets a benchmark for costofcapital…
More about Essay about Heinz: Estimating the Cost of Capital

Case Studies in Finance: Estimating the Cost of Capital
2017 Words  9 Pages 
Best Practices in Estimating the Cost of Capital: Survey and Synthesis
1254 Words  6 Pages 
H. J. Heinz: Estimating the Cost of Capital in Uncertain Times
2748 Words  11 Pages 
Time and Cost Estimating Techniques Essay
1233 Words  5 Pages 
Cost Estimating
1500 Words  6 Pages 
Estimating Cost of Capital in Uncertain Times
2035 Words  9 Pages 
Best Practices in Estimating the Cost of Capital: An Update
8714 Words  35 Pages 
Techniques for Estimating the Cost of Capital
919 Words  4 Pages 
H.J.Heinz: Estimating the Cost of Capital in Uncertain Times
3062 Words  13 Pages 
Essay on Case 13  Best Practices in Estimating the Cost of Capital
1342 Words  6 Pages