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?

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

3. What is your best estimate of the WACC for Kraft Foods, Campbell Soup Company, and Del Monte Foods? How do these WACCs influence your thinking about the WACC for Heinz?

193 Case 12 H.J. Heinz: Estimating the Cost of Capital in Uncertain Times EXHIBIT 12.1 Income Statement (numbers in thousands except per-share a pe fiscal year ends in April) 2008 2009 2010 10,494,983 6,700,677 9,885,556 6,233,420 3,652,136 2,081,801 1,570,335 323,289 (16,283) 1,230,763 372,587 858,176 (13,251) 844,925 2.61 1.52 10,011,331 6,442,075 3,569,256 2,066,810 1,502,446 275,485 92,922 1,319,883 375,483 944,400 Revenu Costs of goods sold 3,794,306 2,235,078 1,559,228 250,574 (18,200) 1,290,454 358,514 931,940 Gross profit SG&A expense Operating income Interest expense Other income (expense) Income before taxes Income taxes Net income after taxes Adjustments to net income (67,048) 864,892 2.71 1.68 (21,328) 923,072 Net income Diluted EPS Dividends per share 2.89 1.66 Data source: H. J. Heinz SEC fillings, 2008-10. Balance Sheet (numbers in thousands except per-sh fiscal year ends in April) Part Three Estimating the Cost of Capital EXHIBIT 12.2 Balance I 2009 2008 373,145 617,687 1,171,797 Cash Net recelvables Inventories Other current assets 1,161,481 1,378,216 168,182 1,237,613 162,466 2,945,021 1,978,302 4,740,861 9,664,184 1,113,307 61,297 4,341 883,901 2,062,846 3,051,125 3,325,566 2,104,713 5,134,764 10,565,043 1,247,479 124,290 328,418 969,873 2,670,060 Total current assets Net fixed assets Other noncurrent assets 0,075,711 Total assets Accounts payable Short-term debt Current portion of long-term debt Other current liabilities ,129,514 15, Total current liabilities 2,175,359 4,559,152 1,392,704 5,951,856 1,948,496 10,075,711 Long-term deb Other noncurrent liabilities 5,076,186 4,730,946 ,276,217 6,007,163 1,887,820 10,565,043 ,246,047 6,322,233 1,279,105 9,664,184 314.86 Total liabilities and equity Shares outstanding (in millions of dollars) 311.45 317.69 Data source: H. J. Heinz SEC filings, 2008-10 Case 12 H.J. Heinz: Estimating the Cost of Capital in 195 12.3 Capital Market Data tyields and prices as of the last trading day in April of the year indicated) 2003 2004 2005 2006 2007 2008 2009 Average Historie Yields 2010 1.22% 2.85% 3.89% 4.79% 1.55% 3.63% 4.53% 5.31% 5.87% 658% 3.33% 3.90% 4.21% 4.61% 5.21% 597% 498% 4.92% 5.07% 5.17% 5.95% 674% 489% 4.51% 4.63% 4.89% 5.400% 631% 185% 3.03% 3.77% 4.49% 5.51% 6.87% 049 % 2.02% 3.16% 405% 5.45% 8.24% 0.41% 2.43% 3.69% 4.53% 5.13% 6.07% 10-year Moody's Aas Moody's Ba Month commercial paper 5.53% 665% 1.21% 1.08% 2.97% 4.90% 522% 1.91% O22% 024% Capital Market Prices of Typical Issues 2009 2010 Heinz stock price Bond price: 6.750% $34.42 $46.87 coupon, semiannual bond due 3/15/32 (Baa rated) 91.4 116.9 116.5 13.7 6625% coupon, semiannual bond due 10/15/12 Bea rated) bond data were slightly moditfied for teaching purposes. Note that Federal Reserve, Value Line, Morningstar, and case writer estimates The 20-year yield is used for 2003-05, when the 30-year was not issued EXHIBIT 12.4 I Comparable Firm Data Campbell Del Monte Kraft Financial Summary Revenues (in millions of dollars) Book value of equity (in milions of dollars) Book value of debt (in millions of dollars) Market Data Beta Shares outstanding (in millions of dollars) Share price (dollars as of close April 30, 2010) Typical Standard & Poor's bond rating Representative yield on long-term debt 40,386 25,972 18,990 7,589 728 2,624 3,739 1,827 1,290 0.65 1,735 29.90 0.55 363 35.64 0.70 182 15.11 5.12% 4.36% 6.19% Data sources: Value Line; H. J. Heinz SEC filings, 2008-10; case writer estimates; Morningstar 193 Case 12 H.J. Heinz: Estimating the Cost of Capital in Uncertain Times EXHIBIT 12.1 Income Statement (numbers in thousands except per-share a pe fiscal year ends in April) 2008 2009 2010 10,494,983 6,700,677 9,885,556 6,233,420 3,652,136 2,081,801 1,570,335 323,289 (16,283) 1,230,763 372,587 858,176 (13,251) 844,925 2.61 1.52 10,011,331 6,442,075 3,569,256 2,066,810 1,502,446 275,485 92,922 1,319,883 375,483 944,400 Revenu Costs of goods sold 3,794,306 2,235,078 1,559,228 250,574 (18,200) 1,290,454 358,514 931,940 Gross profit SG&A expense Operating income Interest expense Other income (expense) Income before taxes Income taxes Net income after taxes Adjustments to net income (67,048) 864,892 2.71 1.68 (21,328) 923,072 Net income Diluted EPS Dividends per share 2.89 1.66 Data source: H. J. Heinz SEC fillings, 2008-10. Balance Sheet (numbers in thousands except per-sh fiscal year ends in April) Part Three Estimating the Cost of Capital EXHIBIT 12.2 Balance I 2009 2008 373,145 617,687 1,171,797 Cash Net recelvables Inventories Other current assets 1,161,481 1,378,216 168,182 1,237,613 162,466 2,945,021 1,978,302 4,740,861 9,664,184 1,113,307 61,297 4,341 883,901 2,062,846 3,051,125 3,325,566 2,104,713 5,134,764 10,565,043 1,247,479 124,290 328,418 969,873 2,670,060 Total current assets Net fixed assets Other noncurrent assets 0,075,711 Total assets Accounts payable Short-term debt Current portion of long-term debt Other current liabilities ,129,514 15, Total current liabilities 2,175,359 4,559,152 1,392,704 5,951,856 1,948,496 10,075,711 Long-term deb Other noncurrent liabilities 5,076,186 4,730,946 ,276,217 6,007,163 1,887,820 10,565,043 ,246,047 6,322,233 1,279,105 9,664,184 314.86 Total liabilities and equity Shares outstanding (in millions of dollars) 311.45 317.69 Data source: H. J. Heinz SEC filings, 2008-10 Case 12 H.J. Heinz: Estimating the Cost of Capital in 195 12.3 Capital Market Data tyields and prices as of the last trading day in April of the year indicated) 2003 2004 2005 2006 2007 2008 2009 Average Historie Yields 2010 1.22% 2.85% 3.89% 4.79% 1.55% 3.63% 4.53% 5.31% 5.87% 658% 3.33% 3.90% 4.21% 4.61% 5.21% 597% 498% 4.92% 5.07% 5.17% 5.95% 674% 489% 4.51% 4.63% 4.89% 5.400% 631% 185% 3.03% 3.77% 4.49% 5.51% 6.87% 049 % 2.02% 3.16% 405% 5.45% 8.24% 0.41% 2.43% 3.69% 4.53% 5.13% 6.07% 10-year Moody's Aas Moody's Ba Month commercial paper 5.53% 665% 1.21% 1.08% 2.97% 4.90% 522% 1.91% O22% 024% Capital Market Prices of Typical Issues 2009 2010 Heinz stock price Bond price: 6.750% $34.42 $46.87 coupon, semiannual bond due 3/15/32 (Baa rated) 91.4 116.9 116.5 13.7 6625% coupon, semiannual bond due 10/15/12 Bea rated) bond data were slightly moditfied for teaching purposes. Note that Federal Reserve, Value Line, Morningstar, and case writer estimates The 20-year yield is used for 2003-05, when the 30-year was not issued EXHIBIT 12.4 I Comparable Firm Data Campbell Del Monte Kraft Financial Summary Revenues (in millions of dollars) Book value of equity (in milions of dollars) Book value of debt (in millions of dollars) Market Data Beta Shares outstanding (in millions of dollars) Share price (dollars as of close April 30, 2010) Typical Standard & Poor's bond rating Representative yield on long-term debt 40,386 25,972 18,990 7,589 728 2,624 3,739 1,827 1,290 0.65 1,735 29.90 0.55 363 35.64 0.70 182 15.11 5.12% 4.36% 6.19% Data sources: Value Line; H. J. Heinz SEC filings, 2008-10; case writer estimates; Morningstar