Using the data in Exhibits 1 and given calculations, estimate asset betas for WFM, KR, SFM, and SVU using five years of returns (or from origination, in the case of SFM) and the value-weighted market index. How do the companies asset betas differ? What might explain the differences in the companies asset betas?

2. Estimate the cost of equity capital for WFM, KR, and SFM. a. How does the estimated cost of equity compare to the average returns from the past 5 years? b. How are expected returns different from average past returns?

3. Estimate WFMs weighted average cost of capital

	WFM	KR	SFM	SVU	Value-Weighted Market Index
Average Return	0.08%	1.99%	-0.30%	1.10%	1%
Standard Deviation	8%	6%	10%	16%	3%
Variance	0.007028142	0.003935628	0.010839933	0.026227747	0.000781
COVARIANCE WFM	0.000694151		COVARIANCE KR	0.000533323
COVARIANCE SFM	0.000398586		COVARIANCE SVU	0.001744759
	WFM	KR	SFM	SVU
BETA	0.098767378	0.13551155	0.03677011	15.03230056

Exhibit 1: Multiples Comparison of Whole Foods Markets with Competitors Whole Foods Markets (WFM) Competitors Pre-bid 33.06 319.5 10563 2107 12670 At bid 42.00 319.5 13419 2107 15526 Kroger Co (KR) 30.25 913 27618 17141 44759 Sprouts Farmers Market (SEM) 24.42 137 3346 553 3899 Supervalu (SVU 3.76 268 1008 1289 2297 As of 15/2017 Price per share () Number of shares (millions) Stock market capitalization (Smm) Interest-bearing debt (book) Enterprise value (market value) Key FY 2016 metrics: Book value of assets Revenues (Smm) Earnings (Smm)*** EPS EBITDA Cash flow from operations** (Smm) 6341 15741 507 1.59 1325 1005 6341 15741 507 1.59 1325 1005 36505 27611 1957 2.14 4297 4067 1439 4046 124 0.91 279 205 3580 12480 650 2.43 861 888 9.6 Key multiples: Market value Book value 2.0 2.4 1.2 Market value/Revenues 0.8 1.0 1.6 Enterprise value to EBITDA 11.7 10.4 Enterprise value to cash flow 12.6 15.4 11.0 PE (price to EPS) 20.8 14.1 * Defined here as pre-tax income plus depreciation ** Defined here as PAT plus depreciation SVU had a tax benefit *** Kroger Co's earnings include comprehensive income from non-controlling interests. (Some figures are modified slightly for the case.) 2.7 1.0 14.0 19.0 27.0 0.6 0.2 2.7 2.6 1.6 26.5 Exhibit 1: Multiples Comparison of Whole Foods Markets with Competitors Whole Foods Markets (WFM) Competitors Pre-bid 33.06 319.5 10563 2107 12670 At bid 42.00 319.5 13419 2107 15526 Kroger Co (KR) 30.25 913 27618 17141 44759 Sprouts Farmers Market (SEM) 24.42 137 3346 553 3899 Supervalu (SVU 3.76 268 1008 1289 2297 As of 15/2017 Price per share () Number of shares (millions) Stock market capitalization (Smm) Interest-bearing debt (book) Enterprise value (market value) Key FY 2016 metrics: Book value of assets Revenues (Smm) Earnings (Smm)*** EPS EBITDA Cash flow from operations** (Smm) 6341 15741 507 1.59 1325 1005 6341 15741 507 1.59 1325 1005 36505 27611 1957 2.14 4297 4067 1439 4046 124 0.91 279 205 3580 12480 650 2.43 861 888 9.6 Key multiples: Market value Book value 2.0 2.4 1.2 Market value/Revenues 0.8 1.0 1.6 Enterprise value to EBITDA 11.7 10.4 Enterprise value to cash flow 12.6 15.4 11.0 PE (price to EPS) 20.8 14.1 * Defined here as pre-tax income plus depreciation ** Defined here as PAT plus depreciation SVU had a tax benefit *** Kroger Co's earnings include comprehensive income from non-controlling interests. (Some figures are modified slightly for the case.) 2.7 1.0 14.0 19.0 27.0 0.6 0.2 2.7 2.6 1.6 26.5