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You are part of Solomon Sheppards team.

1. Calculate the following items for Heinz (as of the end of April). Carry work out to 2 decimal places (so xx.xx%)

	2009	2010
Short-term debt (bond) yield
Long-term debt (bond) yield
Cost of equity (CAPM)
Cost of equity (Dividend Model)

2. Calculate the WACC for Heinz for fiscal year 2009 and 2010. What did you use for the cost of debt, the cost of equity, the weights and the tax rate in the calculation? Briefly explain why you selected those inputs (i.e. if you selected the long-term debt yield, why did you use that over the short-term debt yield or vice versa).
3. What is your best estimate of the WACC for the three competitors? Are all three competitors a good fit relative to Heinz? Explain.
4. As part of Solomons team, what is your recommendation for a WACC to use with the North American Consumer Products division? Briefly justify your recommendation. (i'm responsible for this question- i need a detailed answer with calculation)

Eshibit 2 H. J. Heinz: Estimating the cost of capital in Uncertain Times Balance Sheet numbers in thousands except per-share amounts, fiscal year ends in April Cash Net receivables Inventones Other current assets Total current assets 2008 617,687 1,161,481 1,378,216 168,182 3,325,566 2009 373,145 1,171,797 1,237,613 162,466 2,945,021 2010 483,253 1,045,338 1,249,127 273,407 3,051,125 Net fixed assets Other noncurrent assets Total assets 2,104,713 5,134.764 10,565,043 1,978,302 4,740,861 9,664,184 2,091,796 4.932,790 10,075,711 Accounts payable Short-term debt Current portion of long-term debt Other cutent habilities Total cutent habilities 1,247,479 124,290 328,418 969,873 2.670,060 1,113,307 61,297 4,341 883,901 2,062,846 1,129,514 43,853 15,167 986,825 2,175,359 Long-term debt Other moncurrent liabilities 4,730,946 1.276.217 6,007,163 5,076,186 1.246,047 6,322,233 4,559,152 1,392,704 5,951,856 Equity Total Habilities and equity 1.887.820 10,565,043 1.279,105 9,664,184 1,948,496 10,075,711 Shares outstanding (in millions of dollars) 311.45 314.86 317.69 Eshibit 4 H. J. Heinz: Estimating the cost of capital in Uncertain Times Comparable Firm Data Campbell Soup Del Monte Kraft Financial Summary Revenues in millions of dollars) Book value of equity in millions of dollars) Book value of debt (in millions of dollars) 40,386 25,972 18.990 7,589 728 2,624 3,739 1.827 1,290 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 0.65 1,735 29.90 BBB- 5.12% 0.55 363 35.64 0.70 182 15.11 BB 6.199 4.36% Dus sources: VaLine H. J. Hein SEC filings, 2008-10, case water estimates, Momingar Eshibit 3 H. J. Heinz: Estimating the cost of capital in Uncertain Times Capital Market Data (Fields and prices as of the last trading day in April of the year indicated) Average Historic Yields 1-year 5-year 10-year 2003 1.22% 2.85% 3.89% 2004 1.55% 3.63% 4.53% 2005 3.33% 3.90% 4.21% 2006 4.98% 4.92% 5.07% 2007 4.89% 4.51% 4.63% 2008 1.85% 3.03% 3.77% 2009 0.49% 2.02% 3.16% 2010 0.41% 2.43% 3.69% 30-year Moody's Ana Moody's Baa 3-month commercial paper 4.79% 5.53% 6.65% 5.31% 5.87% 6,58% 4.61% 5.21% 5.97% 5.17% 5.95% 6.74% 4.89% 5.40% 6.31% 4.49% 5.51% 6.87% 4.05% 5.45% 8.24% 4.53% 5.13% 6.07% 1.21% 1.08% 2.97% 4.90% 5.22% 1.91% 0.22% 0.24% Heinz Capital Market Prices of Typical Issues Heinz stock price Bond price: 6.750% coupon, semiannual bond due 3/15/32 (Baa rated) Bond price: 6.625% coupon, semiannual bond due 10/15/12 Baa rated) 2009 $34.42 91.4 116.5 2010 546.87 116.9 113.7 Note that bonds were slightly modified for teaching purposes r Federal Reserve, Value Line, Moments, and case water estimates D Exhibit 1 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 Reverne Costs of goods sold Gross profit 2008 9,885,556 6,233,420 3,652,136 2009 10,011,331 6,442,075 3,569,256 2010 10,494,983 6,700,677 3,794,306 SG&A expense Operating income 2,081,801 1.570,335 2,066,810 1,502,446 2,235,078 1,559,228 Interest expense Other income (expense) Income before taxes 323,289 (16,283) 1.230,763 275,485 92.922 1,319,883 250,574 (18,200) 1,290,454 Income taxes Net income after taxes 372,587 858,176 375,483 944,400 358,514 931,940 Adjustments to net income Net income (13,251) 844.925 (67,048) (21,328) 923,072 864,892 2.61 Dited EPS Drividends per share E H.J. Hein SEC filings, 2008-10 1.52 2.89 1.66 2.71 1.68 D Eshibit 2 H. J. Heinz: Estimating the cost of capital in Uncertain Times Balance Sheet numbers in thousands except per-share amounts, fiscal year ends in April Cash Net receivables Inventones Other current assets Total current assets 2008 617,687 1,161,481 1,378,216 168,182 3,325,566 2009 373,145 1,171,797 1,237,613 162,466 2,945,021 2010 483,253 1,045,338 1,249,127 273,407 3,051,125 Net fixed assets Other noncurrent assets Total assets 2,104,713 5,134.764 10,565,043 1,978,302 4,740,861 9,664,184 2,091,796 4.932,790 10,075,711 Accounts payable Short-term debt Current portion of long-term debt Other cutent habilities Total cutent habilities 1,247,479 124,290 328,418 969,873 2.670,060 1,113,307 61,297 4,341 883,901 2,062,846 1,129,514 43,853 15,167 986,825 2,175,359 Long-term debt Other moncurrent liabilities 4,730,946 1.276.217 6,007,163 5,076,186 1.246,047 6,322,233 4,559,152 1,392,704 5,951,856 Equity Total Habilities and equity 1.887.820 10,565,043 1.279,105 9,664,184 1,948,496 10,075,711 Shares outstanding (in millions of dollars) 311.45 314.86 317.69 Eshibit 4 H. J. Heinz: Estimating the cost of capital in Uncertain Times Comparable Firm Data Campbell Soup Del Monte Kraft Financial Summary Revenues in millions of dollars) Book value of equity in millions of dollars) Book value of debt (in millions of dollars) 40,386 25,972 18.990 7,589 728 2,624 3,739 1.827 1,290 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 0.65 1,735 29.90 BBB- 5.12% 0.55 363 35.64 0.70 182 15.11 BB 6.199 4.36% Dus sources: VaLine H. J. Hein SEC filings, 2008-10, case water estimates, Momingar Eshibit 3 H. J. Heinz: Estimating the cost of capital in Uncertain Times Capital Market Data (Fields and prices as of the last trading day in April of the year indicated) Average Historic Yields 1-year 5-year 10-year 2003 1.22% 2.85% 3.89% 2004 1.55% 3.63% 4.53% 2005 3.33% 3.90% 4.21% 2006 4.98% 4.92% 5.07% 2007 4.89% 4.51% 4.63% 2008 1.85% 3.03% 3.77% 2009 0.49% 2.02% 3.16% 2010 0.41% 2.43% 3.69% 30-year Moody's Ana Moody's Baa 3-month commercial paper 4.79% 5.53% 6.65% 5.31% 5.87% 6,58% 4.61% 5.21% 5.97% 5.17% 5.95% 6.74% 4.89% 5.40% 6.31% 4.49% 5.51% 6.87% 4.05% 5.45% 8.24% 4.53% 5.13% 6.07% 1.21% 1.08% 2.97% 4.90% 5.22% 1.91% 0.22% 0.24% Heinz Capital Market Prices of Typical Issues Heinz stock price Bond price: 6.750% coupon, semiannual bond due 3/15/32 (Baa rated) Bond price: 6.625% coupon, semiannual bond due 10/15/12 Baa rated) 2009 $34.42 91.4 116.5 2010 546.87 116.9 113.7 Note that bonds were slightly modified for teaching purposes r Federal Reserve, Value Line, Moments, and case water estimates D Exhibit 1 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 Reverne Costs of goods sold Gross profit 2008 9,885,556 6,233,420 3,652,136 2009 10,011,331 6,442,075 3,569,256 2010 10,494,983 6,700,677 3,794,306 SG&A expense Operating income 2,081,801 1.570,335 2,066,810 1,502,446 2,235,078 1,559,228 Interest expense Other income (expense) Income before taxes 323,289 (16,283) 1.230,763 275,485 92.922 1,319,883 250,574 (18,200) 1,290,454 Income taxes Net income after taxes 372,587 858,176 375,483 944,400 358,514 931,940 Adjustments to net income Net income (13,251) 844.925 (67,048) (21,328) 923,072 864,892 2.61 Dited EPS Drividends per share E H.J. Hein SEC filings, 2008-10 1.52 2.89 1.66 2.71 1.68 D

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