Essay about Heinz

The cost of equity was found using CAPM, with the given market risk premium of 5%, a beta of .88, and risk-free rate of 4.03%. The beta was found by running a regression of Southwest’s percent change in stock price versus the S&P 500’s percent change in stock price for two years (June 28, 2000 to June 28, 2002). The risk-free rate was the return on a ten-year treasury note issued on June 28, 2002, according to the U.S. Treasury’s website. The tax rate of 39% was used to account for tax savings from leverage. In order to calculate the firm’s leverage, the market value of equity was found from the price per share on July 24, 2002 (Yahoo Finance) and the shares outstanding on the balance sheet of the July 10-Q report, as shown in Exhibit X. The debt value was approximated at the book value since data could not be found regarding its market value. This analysis resulted in a debt weight of 11.74% and equity weight of 88.26%. The final approximation for the weighted average cost of capital was 8.64%.

4. The case indicates that the company’s “market value” of equity at June 30, 1999 was $460 billion. Compare this to the company’s “book value” of equity. What factors likely explain the difference between these two values?

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 of the recession that started at the end of 2007—the central topic of discussion was

The weights of debt and equity are calculated using the market values of debt and equity as follows:

This paper focuses on a company analysis of Molson Coors Brewing Company. The second part of the project will give a better understanding of the company by analyzing their stock price, total cost of

However, as discussed before, According to the Key Industrial Financial Ratio U.S. Industrial Long-Term Debt table, a company whose ratio is ranked as A has the long-term debt/capital ratio and Total debt/Capitalization of 33.9% and 42.5% respectively. Thus, 40% of the debt ratio was used for valuation model for Target

As a financial analyst at the H. J. Heinz Company (Heinz) in its North American

3. What was the WACC for Heinz at the start of fiscal year 2010? What was the WACC one year earlier?

Considering UST only had short-term debt issues prior to the recapitalization, and that credit ratings depend on maturity of debt issued, we cannot simply rely on the commercial paper ratings to extrapolate. We assume that rating will be A based on competitors’ ratings as well as UST’s overall financial standing. We then use this assumption to calculate the value of the company using the two methods above.

Cost of Equity is the return that stockholders require for a company. A company’s cost of equity represents the compensation that the market demands in exchange for owning the assets and bearing the risk of ownership. Based on capital markets the cost of equity varies in direct relation to the assumed risk in that specific market. The distinctive of the firm is the sensitivity to market risk (β) which depends on everything from management to its business and capital structure. Therefore past performances and present conditions have a direct effect on the overall value. Applying calculations at a divisional level allows specified markets to be analysis based on present market conditions for that service or product. The formula used to calculate Cost of Equity is:

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

1. Cohen calculated Nike’s weighted average cost of capital (WACC) to be 8.3%. I find error in this calculation as a result of the following points of disagreement:

Introduction. This paper discusses the value of a one-year Cardinal Health bond. The approximate value of such a bond is determined, reflecting knowledge of time value of money, and the bond's value is discussed in relation to the operating statistics of the company. There is also discussion of competitor's similar bonds and the relative value of those compared with the Cardinal bond.

Before recapitalisation Wrigley’s WACC was equal to it’s cost of equity (ke), which was calculated at 10.95%. After capitalisation it was found that Wrigley’s WACC decreased to 10.29%. This follows the general pattern of increasing debt resulting in a lower WACC.

1a. Please use the capital asset pricing model to estimate the cost of equity. At the date of the case, the 74 over T-bonds. Which beta, risk-free rate, and risk premium did you use? Why? Financing Components Debt Equity Market Values Weight Cost of Capital (After Tax) $ 6,823,736,197 0.85 3.72% $ 1,176,263,803 0.15 28.18% Total: $ 8,000,000,000 1.00 WACC WACC Inputs: Beta: Risk-Free Rate: Market Risk Premium: Pre-tax Cost of Debt: Income Tax Rate: