Question
What is Berry Plastics WACC?
# diluted shares (in millions)
123.4
Company Berry Plastics Analyst Name Jenny FYE = 29-Sep ($in millions) 3 Yr 5 Yr Common Sized Income Statement Summary 2010 2011 2012 2013 2014 2015 Growth Growth 2010 2011 2012 2013 2014 2015 Net Sales 5 4,561 4,766 4,647 4,958 4,881 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Sales Growth 91120.0% 4.5% -2.5% 6.7% -1.6% 0.8% 296.2% Cost of Sales 1 3,908 3,984 3,835 4,190 4,012 20.0% 85.7% 83.6% 82.5% 84.5% 82.2% Gross Profit 4 653 782 812 768 869 80.0% 14.3% 16.4% 17.5% 15.5% 17.8% SG&A Expense 1 284 317 307 320 357 20.0% 6.2% 6.7% 6.6% 6.5% 7.3% Research & Development 1 106 109 105 102 91 -5.8% 146.5% 20.0% 2.3% 2.3% 2.3% 2.1% 1.9% Nonrecurring Expenses 221 31 14 30 13 0.0% 4.8% 0.7% 0.3% 0.6% 0.3% Operating Income 2 42 325 386 316 408 40.0% 0.9% 6.8% 8.3% 6.4% 8.4% Operating Profit Growth 2000.0% 673.8% 18.8% -18.1% 29.1% 7.9% 189.7% Interest Expense 1 327 328 244 221 191 20.0% 7.2% 6.9% 5.3% 4.5% 3.9% Other Income/(Expense) 1 -61 7 -57 -28 -95 20.0% -1.3% 0.1% -1.2% -0.6% -1.9% Earnings Before Tax 2 -346 4 85 67 122 40.0% -7.6% 0.1% 1.8% 1.4% 2.5% Pre-Tax Profit Growth -17400.0% -101.2% 2025.0% -21.2% 82.1% 212.4% 127.5% Taxes 1 -47 2 28 4 36 20.0% -1.0% 0.0% 0.6% 0.1% 0.7% Tax Rate 50% 14% 50% 33% 6% 30% Net Income from Continuing Operations 1 -299 2 57 63 86 20.0% -6.6% 0.0% 1.2% 1.3% 1.8% Profit Growth -30000.0% -100.7% 2750.0% 10.5% 36.5% 250.3% 143.7% Extraordinary Income/(Expense) 0 -25 1 29 -26 -76 0.0% -0.5% 0.0% 0.6% -0.5% -1.6% Net Income 1 -324 3 86 37 10 20.0% -7.1% 0.1% 1.9% 0.7% 0.2% Preferred Dividend 0 0 0 0 0 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Net Income Attributable to Common 1 -324 3 86 37 10 20.0% -7.1% 0.1% 1.9% 0.7% 0.2% Earnings Per Share (diluted) 0.52 -3.55 0.02 0.48 0.51 0.70 EPS Growth -782.7% -100.6% 2300.0% 6.3% 37.3% 227.1% 6.1% ` Dividend Per Share (diluted) 0.00 0.00 0.00 0.00 0.00 DPS Growth #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Dividend Payout 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
# diluted shares (in millions)
84.1 86.6 119.5 121.5
123.4
Explanation / Answer
Berry Plastics Group Inc's market capitalization (E) = $4260 millions (yahoo finance)
Debt = $338 (shot term debt ) + $3648 (Long Term Debt) = $3986 millions
a) weight of equity = E / (E + D) = $4260/($4260 + $3986) millions = 51.66%
b) weight of debt = D / (E + D) = $3986/($4260 + $3986) millions = 48.34%
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
10-Year Treasury Constant Maturity Rate as the risk-free rate = 1.82 %(Economic Indicator)
Beta = 1.08
Expected Market Return = 7%
Cost of Equity = 1.82% + 1.08 x (7% - 1.82%) = 7.41%
Cost Of Debt = 191( Interest Exp.)/ $3986 millions (total debt) = 4.79%
Tax = 30%
WACC = Weights Equity x Cost of Equity + Weights Debt x Cost of Debt x (1- tax rate)
WACC = 51.66% x 7.41% + 48.34% x 4.79% x (1-30%) = 1.98% + 1.621% = 3.60%
