H. J. Heinz: Estimating the Cost of Capital in Uncertain TimesWACC Calculation for Heinz

H. J. Heinz: Estimating the Cost of Capital in Uncertain Times
WACC Calculation for Heinz
2009 2010
Weight of Debt
Shares outstanding (Million of $) 315 318
Share price 34.42 46.87
Market value equity 10837 14890
Short term Debt 61 44
Long term Debt (including current
portion) 5081 4574
Book value of debt 5142 4618
Scaled total (LTD scaled by price of LTD)
4705 5391
Weight of debt 32.18% 23.67%
Weight with scaled debt 30.27% 26.58%
Cost of Debt
Typical S&P bond rating BBB BBB
Yield on long-term debt (from bond
terms) 7.54% 5.43%
Tax rate 40% 40%
Cost of Equity
Beta 0.65 0.65
MRP 6% 6%
Rf 3.16% 3.69%
Cost of equity 7.06% 7.59%
WACC
With book value of debt 6.24% 6.56%
With scaled book value of debt (Market
value) 6.29% 6.44%

H. J. Heinz: Estimating the Cost of Capital in Uncertain Times
WACC Calculation for Comparable Firms
Kraft Campbell
Weight of Debt
Shares outstanding (Million) 1735 363
Share price (April 30,2010) 29.9 35.64
Market value equity 51877 12937
Book value of debt (millions) 18900 2624
Weight of debt 26.70% 16.86%
Cost of Debt
Typical S&P bond rating BBB- A
Yield on long-term debt 5.12% 4.36%
Tax rate 40% 40%
Cost of Equity