In the case study, H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES" by Marc Lipson:

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

H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES
Income Statement
(numbers in thousands except per-share amounts; fiscal year ends in April)
	2008	2009	2010
Revenue	9,885,556	10,011,331	10,494,983
Costs of goods sold	6,233,420	6,442,075	6,700,677
Gross profit	3,652,136	3,569,256	3,794,306
SG&A expense	2,081,801	2,066,810	2,235,078
Operating income	1,570,335	1,502,446	1,559,228
Interest expense	323,289	275,485	250,574
Other income (expense)	(16,283)	92,922	(18,200)
Income before taxes	1,230,763	1,319,883	1,290,454
Income taxes	372,587	375,483	358,514
Net income after taxes	858,176	944,400	931,940
Adjustments to net income	(13,251)	(21,328)	(67,048)
Net income	844,925	923,072	864,892
Diluted EPS	2.61	2.89	2.71
Dividends per share	1.52	1.66	1.68
Data source: H. J. Heinz SEC filings, 200810.

H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES
Balance Sheet
(numbers in thousands of dollars except per-share amounts; fiscal year ends in April)
	2008	2009	2010
Cash	617,687	373,145	483,253
Net receivables	1,161,481	1,171,797	1,045,338
Inventories	1,378,216	1,237,613	1,249,127
Other current assets	168,182	162,466	273,407
Total current assets	3,325,566	2,945,021	3,051,125
Net fixed assets	2,104,713	1,978,302	2,091,796
Other noncurrent assets	5,134,764	4,740,861	4,932,790
Total assets	10,565,043	9,664,184	10,075,711
Accounts payable	1,247,479	1,113,307	1,129,514
Short-term debt	124,290	61,297	43,853
Current portion of long-term debt	328,418	4,341	15,167
Other current liabilities	969,873	883,901	986,825
Total current liabilities	2,670,060	2,062,846	2,175,359
Long-term debt	4,730,946	5,076,186	4,559,152
Other noncurrent liabilities	1,276,217	1,246,047	1,392,704
	6,007,163	6,322,233	5,951,856
Equity	1,887,820	1,279,105	1,948,496
Total liabilities and equity	10,565,043	9,664,184	10,075,711
Shares outstanding (in millions of dollars)	311.45	314.86	317.69
Data source: H. J. Heinz SEC filings, 200810.

H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES
Capital Market Data
(yields and prices as of the last trading day in April of the year indicated)
Average Historic Yields
	2003	2004	2005	2006	2007	2008	2009	2010
1-year	1.22%	1.55%	3.33%	4.98%	4.89%	1.85%	0.49%	0.41%
5-year	2.85%	3.63%	3.90%	4.92%	4.51%	3.03%	2.02%	2.43%
10-year	3.89%	4.53%	4.21%	5.07%	4.63%	3.77%	3.16%	3.69%
30-year(1)	4.79%	5.31%	4.61%	5.17%	4.89%	4.49%	4.05%	4.53%
Moodys Aaa	5.53%	5.87%	5.21%	5.95%	5.40%	5.51%	5.45%	5.13%
Moodys Baa	6.65%	6.58%	5.97%	6.74%	6.31%	6.87%	8.24%	6.07%
3-month commercial paper	1.21%	1.08%	2.97%	4.90%	5.22%	1.91%	0.22%	0.24%
Heinz Capital Market Prices of Typical Issues
							2009	2010
Heinz stock price							$34.42	$46.87
Bond price: 6.750% coupon, semiannual bond due 3/15/32 (Baa rated)							91.4	116.9
Bond price: 6.625% coupon, semiannual bond due 10/15/12 (Baa rated)							116.5	113.7
(1) The 20-year yield is used for 200305, when the 30-year was not issued.
Note that bond data were slightly modified for teaching purposes.
Data sources: Federal Reserve, Value Line, Morningstar, and case writer estimates.

H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES
Comparable Firm Data
		Campbell	Del
	Kraft	Soup	Monte
Financial Summary
Revenues (in millions of dollars)	40,386	7,589	3,739
Book value of equity (in millions of dollars)	25,972	728	1,827
Book value of debt (in millions of dollars)	18,990	2,624	1,290
Market Data
Beta	0.65	0.55	0.70
Shares outstanding (in millions of dollars)	1,735	363	182
Share price (dollars as of close April 30, 2010)	29.90	35.64	15.11
Typical Standard & Poors bond rating	BBB	A	BB
Representative yield on long-term debt	5.12%	4.36%	6.19%
Data sources: Value Line; H. J. Heinz SEC filings, 200810; case writer estimates; Morningstar.