Grand Metropolitan Plc

Published 01 Jan 1992
Reference 4387
Region Asia

In April 1992 this multinational consumer foods company is the focus of take-over rumors, which prompts an assessment of the firm's returns. The task for the student is to estimate the weighted average cost of capital (WACC) for the company and its three main business segments.

Teaching objectives

The case was written to provide a problem in capital-cost estimation. Specific discussion points include: Relative merits of dividend-growth and capital-asset-pricing models Whether currency matters in estimating capital costs Use of market value weights Estimating capital costs for business segments.