...Heinz Capital Structure Debt Accounts payable Short-term debt Current portion of long-term debt Other current liabilities Total current liabilities Long-term debt Other noncurrent liabilities 2008 1,247,479 124,290 328,418 969,873 2,670,060 $ $ $ $ $ $ 4,730,946 $ 1,276,217 $ 6,007,163 $ 1,887,820 $ 10,565,043 311.45 Equity Total liabilities and equity Shares outstanding (in millions) Share price (as of close april 30) Market Value of Equity Total long term debt + current long-term Weight of debt Weight of equity $ 5,059,364 Cost of Debt Required return = risk-free rate + Risk Premium 2032 Bond 2009 Future Value = pesent value = Maturity date Current Date Date Dif Year Dif Semi-annual periods Coupon Payment (semi annual) Yield to Maturity 100 91.4 15/03/2032 01/05/2009 8354 22.88767123 45.77534247 6.75% 3.375 7.545% Income before taxes interest 2009 $ 1,319,883 275,485 EBIT Taxes Paid Tax rate Before tax cost of debt tax rate after tax cost of debt $ 1,044,398 375,483 36.0% 7.545% 36.0% 4.832% Cost of common Equity 2009 kj = krf+(km-krf)bj krf km bj kj 4.17% 6.00% 0.569 5.21% $ $ $ $ $ $ $ $ $ $ 2009 1,113,307 61,297 4,341 883,901 2,062,846 $ $ $ $ $ 2010 1,129,514 43,853 15,167 986,825 2,175,359 4,559,152 1,392,704 5,951,856 1,948,496 10,075,711 5,076,186 $ 1,246,047 $ 6,322,233 $ 1,279,105 $ 9,664,184 $ WACC = wdkd(1-T)+wsks 314.86 $34.42 $10,837,481.20 $ 317.69 $46.87 $14,890,130.30 4,574,319 23.5% 76.5% 5,080,527...
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...At the time of the case (May 2010), H. J. Heinz was experiencing uncertain economic times. Most notably, this uncertainty manifested in discussion about the company’s weighted average cost of capital (WACC). This was an important discussion to have since the cost of capital greatly influenced how the company chose to invest, and stood to influence the company’s corporate strategies and competitiveness in the future. The uncertainty of the times was significantly reflected in the company stock price over the period 2008 to 2010. Over this period, the price fluctuated from $47 at FYE 2008, down to $34 at FYE 2009 and back up to $47 at FYE 2010. Accordingly, Heinz was considering whether or not to adjust their cost of capital to reflect these changes as they occurred. This gives rise to two questions: To what degree should these stock price changes affect cost of capital? How often should the cost of capital be re-estimated? To address these questions, we first estimated Heinz’s WACC at the time under the given market conditions In order to prepare our estimation for the WACC, we first made educated assumptions for the variable inputs of the WACC equation. Our assumptions and source behind each are as follows: Table 1: The assumptions and corresponding source, used in the Heinz WACC estimation Assumption Source Risk Free Rate: 4.5 % Based on the 30-year Treasury Yield as of April 2010 (Exhibit 3 of case) Market Risk Premium: 7.5% Based on long-term estimates...
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...H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES The report that follows endeavors to determine an appropriate Weighted Average Cost of Capital (WACC) for the H. J. Heinz Company at the end of the 2010 fiscal year. Further, the report attempts to provide reasonable explanations for the decisions and assumptions that were made throughout the required calculations, specifically around the firm’s capital structure, cost of debt and cost of equity. Finally, the report offers an opinion on the validity of the derived WACC figure and the role it could potentially play in the decision making process at H. J. Heinz. The Capital Structure Arriving at an appropriate capital structure upon which to base the WACC calculation is a foundational undertaking because the structure represents the basis from which the other relevant proportions are drawn. Figure 1 presents the Liability and Equity sections from the fiscal 2008, 2009 and 2010 H. J. Heinz balance sheets. | 2008 | 2009 | 2010 | | | | | Accounts payable | 1,247,479 | 1,113,307 | 1,129,514 | Short-term debt | 124,290 | 61,297 | 43,853 | Current portion of long-term debt | 328,418 | 4,341 | 15,167 | Other current liabilities | 969,873 | 883,901 | 986,825 | Total current liabilities | 2,670,060 | 2,062,846 | 2,175,359 | | | | | Long-term debt | 4,730,946 | 5,076,186 | 4,559,152 | Other noncurrent liabilities | 1,276,217 | 1,246,047 | 1,392,704 | | 6...
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...Study II Weighted Average Cost of Capital Company chosen in the S&P 500 : Name HEINZ Ticker HNZ Price 72.47 A. Estimating the proportion of debt D /D+E Market capitalization = number of shares * share price = 320,650 millions*72.47 E = 23.24 billions Working capital = Total current asset – Total current liabilities = 1234.275 millions The working capital being positive, implies that all the cash and cash equivalent is considered as excess cash and should be deducted from the debt in the risk calculation. In our case the trades payables are an integral part of doing business, and thus should be counted as a negative operating asset and not considered as debt. (Trades payables= 1,202,398) Since other accounts payable are composed of derivatives products for hedging purposes, their main purpose is financial, and thus they have to be considered as debt. The calculation we made to compute the debt is as follows: = Total current liabilities + Total long-term debt and other non-current liabilities - Cash and cash equivalents - Trades payables = 2647961 + 6410751 - 1330441 - 1202398 D = 11.5915 billions The proportion of debt is then: D/D+E = 0.3328 B. Estimation of the cost of debt rD According to the financial statement, the average interest rate for Debt and Financing Arrangements, which corresponds actually to long-term notes, was 4.28% for the fiscal year 2012. After that we wanted to estimate the cost of bonds. To do so we found...
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...The purpose of this paper, prepared by Jessica Chan under the supervision of Robert F. Bruner is about analyzing the companies Coca Cola and Pepsi after Pepsi has announced a merger with Quaker Oats Company with a deal at around $14 billion. With this deal Pepsi would have access to 83.6% of the sport drink market and around 33% of the U.S. noncarbonated-beverage market, followed by Coke with 21%. The paper wants to answer the questions how the latest announcement of Pepsi has an effect on the two companies´ prospects for value creation by showing the company background of both companies, giving a briefly industry overview of the beverage market and competitive events and establishing a financial comparison, especially with ratio and economic profit analysis. In the world Coca Cola and Pepsi have towered as the two leading brands of beverages. In the year 2000, Coca Cola was the largest manufacturer, distributor, marketer of soft-drink concentrates and syrups in the world and its market value reached $110.01 billion. On the other side Pepsi was a $20 billion worth company in 2000, acting in the snack food, soft drink and noncarbonated beverage market. Both companies have reached worldwide expansion of their markets, which include a large product range of beverages, apparel and paraphernalia with their respective logos. Both have grown into longstanding global and social industry leaders. Coca Cola´s annual sales were $20.5 billion which were earned also through a variety of...
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...1 The TOWS Matrix --A Tool for Situational Analysis Heinz Weihrich*, Professor of Management, University of San Francisco This article has two main purposes One is to review general considerations in strategic planning and the second to introduce the TOWS Matrix for matching the environmental threats and opportunities with the company's weaknesses and especially its strengths. These factors per se are not new; what is new is systematically identifying relationships between these factors and basing strategies on them. There is little doubt that strategic planning will gain greater prominence in the future. Any organization—whether military, product oriented, service-oriented or even governmental—to remain effective, must use a rational approach toward anticipating, responding to and even altering the future environment. Situational Analysis: A New Dimension in Strategic Planning Today most business enterprises engage in strategic planning, although the degrees of sophistication and formality vary considerably Conceptually strategic planning is deceptively simple: analyze the current and expected future situation, determine the direction of the firm and develop means for achieving the mission. In reality, this is an extremely complex process, which demands a systematic approach for identifying and analyzing factors external to the organization and matching them with the firm's capabilities. The purpose of this article is twofold: first, the concept of strategy and a model...
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...1 The TOWS Matrix --A Tool for Situational Analysis Heinz Weihrich*, Professor of Management, University of San Francisco This article has two main purposes One is to review general considerations in strategic planning and the second to introduce the TOWS Matrix for matching the environmental threats and opportunities with the company's weaknesses and especially its strengths. These factors per se are not new; what is new is systematically identifying relationships between these factors and basing strategies on them. There is little doubt that strategic planning will gain greater prominence in the future. Any organization—whether military, product oriented, service-oriented or even governmental—to remain effective, must use a rational approach toward anticipating, responding to and even altering the future environment. Situational Analysis: A New Dimension in Strategic Planning Today most business enterprises engage in strategic planning, although the degrees of sophistication and formality vary considerably Conceptually strategic planning is deceptively simple: analyze the current and expected future situation, determine the direction of the firm and develop means for achieving the mission. In reality, this is an extremely complex process, which demands a systematic approach for identifying and analyzing factors external to the organization and matching them with the firm's capabilities. The purpose of this article is twofold: first, the concept of strategy and a model...
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...Consolidated Rail Corp. by Benjamin C. Esty Airbus A3XX: Developing the World’s Largest Commercial Jet by Benjamin C. Esty American Chemical Corp.by William E. Fruhan, John P. Goldsberry American Home Products Corp.by David W. Mullins AQR’s Momentum Funds by Daniel B. Bergstresser, Lauren H. Cohen, Randolph B. Cohen, Christopher Malloy Arundel Partners: The Sequel Project by Timothy A. Luehrman AXA MONY by Andre F. Perold, Lucy White Beta Management Co. by Michael E. Edleson Butler Lumber Co. by Thomas R. Piper Cartwright Lumber Co.by Thomas R. Piper Citigroup 2007: Financial Reporting and Regulatory Capital by Edward J. Riedl, Suraj Srinivasan Clarkson Lumber Co. by Thomas R. Piper Cooper Industries, Inc. by Thomas R. Piper Cost of Capital at Ameritrade by Erik Stafford, Mark L. Mitchell Debt Policy at UST, Inc. by Mark L. Mitchell Dell’s Working Capital by Richard S. Ruback DermaCare: Zapping Zits Directly by Richard G. Hamermesh, Lauren Barley Diageo plc by George Chacko, Peter Tufano Dimensional Fund Advisers–2002 by Lauren H. Cohen Dividend Policy at FPL Group, Inc.by Benjamin C. Esty Dividend Policy at Linear Technology by Malcolm P. Baker, Alison Berkley Wagonfeld Equity International: The Second Act by Nicolas P. Retsinas, Ben...
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...Homework Chapter 3 Questions 1. Utah Bank’s bid price for Canadian dollars is $.7938 and its ask price is $.81. What is the bid/ask percentage spread? 2. Of what use is a forward contract to an MNC? 3. If a euro is worth $.80, what is the value of a dollar in euros? 4. What is the function of the Eurocurrency market? 5. Why do interest rates vary among countries? Why are interest rates similar for those European countries that use the euro as their currency? Small Business Dilemma Use of the Foreign Exchange Markets by the Sports Exports Company (see textbook, 8th edition) Chapter 4 Questions 1. Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal, how should this affect the (a) U.S. demand for Canadian dollars, (b) supply of Canadian dollars for sale, and (c) equilibrium value of the Canadian dollar? 2. Assume that the U.S. income level rises at a much higher degree than does the Canadian income level. Other things being equal, how should this affect the (a) U.S. demand for Canadian dollars, (b) supply of Canadian dollars for sale, and (c) equilibrium value of the Canadian dollar? 3. What is the expected relationship between the relative real interest rates of two countries and the exchange rate of their currencies? 4. Explain why a public forecast by a respected economist about future interest rates could affect the value of the dollar today. Why do some forecasts by well respected economists have no...
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...growww.businessmonitor.com Q4 2010 AUStrALiA food & drink report INCLUDES 5-YEAR FORECASTS TO 2014 iSSn 1749-2580 published by Business Monitor international Ltd. AUSTRALIA FOOD & DRINK REPORT Q4 2010 INCLUDING 5-YEAR INDUSTRY FORECASTS BY BMI Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: July 2010 Business Monitor International Mermaid House, 2 Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2010 Business Monitor International. All rights reserved. All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors...
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...This page intentionally left blank Quantitative Models in Marketing Research Recent advances in data collection and data storage techniques enable marketing researchers to study the characteristics of a large range of transactions and purchases, in particular the effects of household-specific characteristics and marketing-mix variables. This book presents the most important and practically relevant quantitative models for marketing research. Each model is presented in detail with a self-contained discussion, which includes: a demonstration of the mechanics of the model, empirical analysis, real-world examples, and interpretation of results and findings. The reader of the book will learn how to apply the techniques, as well as understand the latest methodological developments in the academic literature. Pathways are offered in the book for students and practitioners with differing statistical and mathematical skill levels, although a basic knowledge of elementary numerical techniques is assumed. PHILIP HANS FRANSES is Professor of Applied Econometrics affiliated with the Econometric Institute and Professor of Marketing Research affiliated with the Department of Marketing and Organization, both at Erasmus University Rotterdam. He has written successful textbooks in time series analysis. RICHARD PAAP is Postdoctoral Researcher with the Rotterdam Institute for Business Economic Studies at Erasmus University Rotterdam. His research interests cover applied (macro-)econometrics...
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...PUNJAB TECHNICAL UNIVERSITY KAPURTHALA Scheme and Syllabus of Masters in Business Administration (MBA) Batch 2012 onwards By Board of Studies Business Administration Punjab Technical University Scheme of (MBA) Batch 2012 Onwards First Semester Course Code Course Title Load Allocation L T P 4 1 4 4 4 4 3 3 28 1 1 1 1 2 2 7 - Contact Hours: 36Hrs. Marks Distribution Internal 40 40 40 40 40 40 40 280 External 60 60 60 60 60 60 60 50 470 Total Marks 100 100 100 100 100 100 100 50 750 Total Marks 100 100 100 100 100 100 100 50 750 Total Marks 100 100 100 100 100 100 100 50 750 Credits MBA 101 MBA 102 MBA 103 MBA 104 MBA 105 MBA 106 * MBA 107 * MBA 108 Principles and Practices of Management Organizational Behaviour Accounting for Management Quantitative Techniques Managerial Economics Business Communication Information Technology for Management Viva Voce Total Course Title 5 5 5 5 5 5 5 2 37 Credits Second Semester Course Code Contact Hours: 34 Hrs Load Marks Distribution Allocation L T P Internal External 4 1 40 60 4 1 40 60 4 4 4 4 3 27 1 1 1 1 6 40 40 40 40 40 280 60 60 60 60 60 50 470 MBA 201 MBA 202 MBA 203 MBA 204 MBA 205 MBA 206 BTHU 101* MBA 207 Business Environment Production and Operation Management Human Resource Management Marketing Management Financial Management Research Methodology Human Values and Professional Ethics Viva Voce Total Course Title 5 5 5 5 5 5 3 2 35 Credits Third Semester Course Code Load Allocation L T P 4 1 4 4 4 4 4 3 27 1 1 1 1 1 6 Marks...
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...Mergers, Acquisitions and Corporate Restructuring II MERGERS, ACQUISITIONS AND CORPORATE RESTRUCTURING Mergers, Acquisitions and Corporate Restructuring Edited by Chandrashekar Krishnamurti Vishwanath S.R. Copyright © Chandrashekar Krishnamurti and Vishwanath S.R., 2008 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2008 by Response Books Business Books from SAGE B1/I-1 Mohan Cooperative Industrial Area Mathura Road, New Delhi 110 044, India SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320, USA SAGE Publications Ltd 1 Oliver’s Yard, 55 City Road London EC1Y 1SP, United Kingdom SAGE Publications Asia-Pacific Pte Ltd 33 Pekin Street #02-01 Far East Square Singapore 048763 Published by Vivek Mehra for Response Books, typeset in 9.5/13 pt Berthold Baskerville by Star Compugraphics Private Limited, Delhi and printed at Chaman Enterprises, New Delhi. Library of Congress Cataloging-in-Publication Data Mergers, acquisitions and corporate restructuring/edited by Chandrashekar Krishnamurti, Vishwanath S.R. p. cm. Includes references and index. 1. Consolidation and merger of corporations. Corporate reorganizations. I. Vishwanath, S.R., 1971– II. Krishnamurti, Chandrashekar, 1956– HG4028.M4 .M44 658.1/6 22 2008...
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...A Blueprint for Corporate Governance Fred R. Kaen AMACOM AMERICAN MANAGEMENT ASSOCIATION A Blueprint for Corporate Governance This Page Intentionally Left Blank A Blueprint for Corporate Governance Strategy, Accountability, and the Preservation of Shareholder Value Fred R. Kaen American Management Association New York • Atlanta • Brussels • Buenos Aires • Chicago • London • Mexico City San Francisco • Shanghai • Tokyo • Toronto • Washington, D. C. Special discounts on bulk quantities of AMACOM books are available to corporations, professional associations, and other organizations. For details, contact Special Sales Department, AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019. Tel.: 212-903-8316. Fax: 212-903-8083. Web site: www.amacombooks.org This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Library of Congress Cataloging-in-Publication Data Kaen, Fred R. A blueprint for corporate governance : strategy, accountability, and the preservation of shareholder value / Fred R. Kaen. p. cm. Includes bibliographical references and index. ISBN 0-8144-0586-X 1. Corporate governance. 2. Corporate governance—United...
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...Marketing Chapter 1: Defining Marketing for the 21st Century * Marketing plays a key role in addressing challenges such as helping firms to prosper financially and survive in the face of an unforgiving economic environment * The broader importance of marketing extends to society as a whole => it helps introduce and gain acceptance of new products that have eased/enriched people’s lives * Good marketers seek new ways to satisfy their customers and beat their competition => if they don’t carefully monitor their customers and competitors and don’t continuously improve their value offerings and marketing strategies, don’t satisfy their employees, stockholders, suppliers and channel partners in the process, the firm is at risk to fail * What is marketing? => identifying and meeting human/social needs meeting needs profitably * Selling is not the most important part of marketing the aim is to know and understand the customer so well that the product/service fits him and sells itself * What is marketed? => 10 main types of entities 1) Goods => physical goods such as canned, bagged, fresh, and frozen food products and other tangible items 2) Services => e.g. airlines, hotels, car rentals, barbers, etc. => mixes of good and services are also possible such as restaurant because they offer food and service at the same time 3) Events => 4) Experiences => e.g. Walt Disney World 5) Persons => e.g. artists, musicians, etc...
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