I need help with these two problems

Assignments H. J. Heinz Compute the WACC with the book value of debt for 2009 and 2010 2009 Weight of Debt Cost of Debt Typical S & P Bond Rating Yield on long-term debt Tax rate Cost of Equity Beta Market risk premium Risk free rate Cost of equity WACC Compute the WACC with the book value of debt for 2009 and 2010 for Kraft, Campbell Soup, and Del Monte Weight of Debt 2009 Cost of Debt Typical S & P Bond Rating Yield on long-term debt Tax rate Cost of Equity Beta Market risk premium Risk free rate Cost of equity WACC 2010 Directions WACC for Heinz 1.Weight of debt. See the balance sheet on page 194. For debt, use the figure for long term debt. Weight of debt = Long term debt/(Long term debt + Equity) See the balance sheet on page 194. For debt, use the figure for long term debt. For equity use the equity figures for 2009, and 2010. 2.Cost of debt. The typical S & P bond rating is BB. Look on page 195, Exhibit 12.3. Use the Moody’s Baa rating for 2009, and 2010, for the yield on long-term debt. Compute the cost of debt, using the formula, yield on long-term debt(1-tax rate), where the tax rate is 40%. 3.Cost of equity. On page 192, you will find the beta, and market risk premium. Use 2% for the risk free rate. Substitute in the CAPM formula, to get the cost of equity for Heinz. This is CAPM cost of equity = risk free rate + beta(market risk premium) 4.WACC = weight of debt*cost of debt + weight of equity*cost of equity WACC for Kraft, Campbell Soup, and Del Monte 1.Weight of debt, and weight of equity. See page 195, Exhibit 12.4. For debt, use the figure for book value of debt. Weight of debt = book value of debt/(book value of debt + Equity) Weight of equity = book value of equity/(book value of debt + book value of equity) 2. Cost of debt. Exhibit 12.4 shows Kraft’s bond rating as BBB-, A for Campbell, BB for Del Monte. Use the Moody’s Baa rating for Kraft, and Del Monte, Aaa for Campbell Soup. Compute the cost of debt, using the formula, yield on long-term debt(1-tax rate), where the tax rate is 40%. 3.Cost of equity. On page 195, Exhibit 12.4, , you will find the beta, and market risk premium. Use 2% for the risk free rate. Substitute in the CAPM formula, to get the cost of equity for all 3 firms. This is CAPM cost of equity = risk free rate + beta(market risk premium) 4.WACC = weight of debt * cost of debt + Weight of equity * cost of equity m. Use 2% for the risk free rate.

Collepals.com Plagiarism Free Papers

Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.

Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS

Why Hire Collepals.com writers to do your paper?

Quality- We are experienced and have access to ample research materials.

We write plagiarism Free Content

Confidential- We never share or sell your personal information to third parties.

Support-Chat with us today! We are always waiting to answer all your questions.