1. Hershey Foods Corporation: Bitter Times in a Sweet Place

2. Milton Hershey and Hershey, PA

3. Hershey, PA, Today

4. The Milton Hershey School

5. Hershey Cost of Equity Hershey  = 0.55
Since value is over a long horizon, might want to use a l.t. risk-free rate (=4.73%)
Historical risk premium over l.t. govts. = 6.6%
RE = (6.6) = 8.36%

6. Hershey Cost of Debt
Yield on long-term Hershey bonds is currently 5.73%
Hershey Tax Rate = 39.5% (inferred from Exhibit 10)
RD(1-T) = 5.73(1-.395) = 3.47%

7. Hershey Capital Structure
Market value of equity = # shares x pre-announcement price = x 63 = 8455M
Book value of debt = M (not enough info. to adjust to mkt. value)
D/V = 884.9/( ) = 9.47%
E/V = 8455/( ) = 90.53%

8. Hershey WACC WACC = RE(E/V) + RD(1-T)(D/V)
= 8.36%(.9053) %(.0945) = 7.90%