Equity Evaluation Case

Case 2 TaskEstimate the value of H. J. Heinz Company using the Discounted Cash Flow method.NOTE THE FOLLOWING:CASE FORMAT: Your case submission must follow the layout articulated in “Guide to Case Study” (see Blackboard Case tab – “Background for Material for Cases” file..RELATIVE VALUATION: Do not perform Relative Valuation analysis and Reconciliation; This will be used in the case 3 assignment.SYNERGY: Note the case states there will be no synergy resulting from this acquisition. Therefore do not factor any synergies into your calculations..HISTORICAL ANALYSIS: The assumptions variables used to forecast the projections necessary for DCF (e.g., sales, COGS, operating expense) starts with analyzing historical financial performance. This analysis must utilize the following process:Analyze the historical trends (analyze trends in sales growth and cost of products sold, SG & A expenses etc as % of sales);Identify factors that have contributed to historical trends; andConsider whether/to which extent those factors will affect the company in the future, and whether new factors will emerge.FORECAST ASSUMPTIONS RATIONALE; State the rationale for each of the assumption variables that will be used in your DCF. This involves looking at the economic and competitive environment as well as the Heinz’s internal setting (i.e strengths and weaknesses). Articulating why you have increased or decreased your assumptions versus historical trends.Note that articulating your rationale of forecast assumption variables is CRITICAL to you submission. Missing these rationales is equivalent to not answering a question on an exam.CASE DATE: The estimate must be as of December 2012. In other words, you are in December 2012 when working on this case, and NOT supposed to know what happened thereafter.All DCF calculations are based on your own forecasts assumptions. Consequently the resulting Heinz’s FCFF calculations is your own estimate of the value of the company, as of December 2012EXTERNAL SOURCES: Cases (in general) contain sufficient information to analyze and complete answering the case. However external sources of information (information from the Bloomberg terminal, websites, etc.) can be used to analyze the case.All external information must be dated on or before the case date of December , 2012.You can not use actual or realized financial numbers as forecast assumptions (e.g., you can not use the realized revenue growth of Heinz in 2013 as your forecast assumption)All external sources must be referenced.