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Whole foods market

Whole foods market. Module 6 Cost of Capital and Valuation Ewa Nelip. Capital structure of whole foods. The company had no long-term debt amounts outstanding during fiscal year 2013 or 2012.

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Whole foods market

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  1. Whole foods market Module 6 Cost of Capital and Valuation Ewa Nelip

  2. Capital structure of whole foods • The company had no long-term debt amounts outstanding during fiscal year 2013 or 2012. • During fiscal year 2011, Whole Foods repaid the $490 million outstanding balance on the term loan agreement due in 2012. • Whole Foods’ $350 million line of credit expired in 2012. • Whole Foods has 372.14 millions of shares outstanding

  3. Betadata for regression

  4. Beta – regression model

  5. beta • βis the slope of the regression line 1.02 • Beta Estimates:

  6. Bloomberg Beta

  7. Cost of equity using caPM • Using CAPM: Cost of equity= RF + β(market risk premium) • Risk Free is a 30-year Treasury note being 3.59% • Market risk premium – the average return of S&P 500 above the risk free rate. Historical returns show the average 5% • Whole Foods β is 1.02 • Cost of equity using CAPM= 3.59% + 1.02x 5% = 8.69%

  8. Cost of debt: debt rating

  9. Cost of debt • According to S&P rating as of May 2013, Whole Foods has a positive outlook and its rating of BBB- was affirmed (www.standardpoors.com) • Companies with the same ratings issue bonds with a yield between 5% and 7% • Therefore assume that is Whole Foods were to issue bonds right now they would have to pay an average of 6%

  10. Cost of operating capital

  11. Bloomberg WACC

  12. DCF valuation

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