The changes in the tax code in 2017 affected the discount rate. Assume the tax rate stated in the case applies. Also, there is an error at the bottom of Exhibit 2. The last line should read: Shares outstanding (in millions). 1. What does the CAPM result say about equity cost in 2010? 2. Lets assume that Heinzs expected growth in earnings is 3% per year. (This rate is not too inconsistent with some of the numbers in Exhibit 1.) Apply the stock price model to estimate the required return on equity in 2010. How does this rate compare to the rate resulting from application of the CAPM? 3. What does your calculated interest rate, compared to the coupon rate on the bonds, imply about changes in interest rates and why? In qualitative terms, what happened to the Heinz bond rate between 2009 and 2010? 4. Calculate the WACC using the cost of equity you found by applying the CAPM. What does the WACC say about overall financing cost? 5. To what use might Heinz put the WACC? 6. How do you characterize Heinzs business risk? Is it relatively high or low? 7. How would you characterize Heinzs financial risk? Is it higher or lower than that of comparable firms? 8. How are business risk and financial risk reflected in the CAPM?

Does this question have answers posted? Tough case, have a few questions I was trying to check.