Mini-Case #2: Whole Foods Market & Cost of Capital Using


Mini-Case #2: Whole Foods Market & Cost of Capital

  1. Using the data provided in the case and assuming a market return of 10%, compute the cost of equity for Wholefo ods, Sprouts, Fresh Market, and one other grocery store of your choosing. Show your work.
  2. Using market comparables and other information provided in the case, what would be the most appropriate cost of debt for Whole Foods if it were to take on more debt? Explain your answer.
  3. (Assuming you were looking in 2013) do Whole Foods seem to be growing at an adequate clip based on their equity cost and ROE? Explain your answer.
  4. Using the information provided in the case, compute Safeway’s overall cost of capital (WACC). Assume Safeway has common equity and debt, a 10% market return, and a similar tax rate to Whole Foods.
  5. In 2018, Amazon purchased Whole Foods. Since then, WF has initiated several new investment projects, like home delivery. Do you think WF’s cost of capital has increased or decreased since the investment? Explain your answer.

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