Question

WACC

Kraft Wacc- 7.26%

Campbell Soup- 7.03%

Del Monte- 7.51%

At 5.70% Heinz Wacc was below from his competitor meaning that it was doing better.

How do these competing company WACCs influence your thinking about the WACC for Heinz? Is it valid to compare the WACCs of competing companies? Why or why not?

Answer 1

Since WACC of Heinz is lower than its competitors it is to be seen whether the debt ratio of Heinz is higher or does it finance through retained earnings . WACC is one of the indicators but other need to be checked to understand about the company.

WAC alone cannot determine whether they are better than their competitors.
NPV and cash flow analysis has to be done to determine to know about HEINZ completely. Lower WACC company might have lower NPV and company with higher WACC which might have higher NPV of its projects.

Please Discuss in case of Doubt

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