Your Perfect Assignment is Just a Click Away
We Write Custom Academic Papers

100% Original, Plagiarism Free, Customized to your instructions!


Estimating Walmart Cost of Capital Worksheet

Estimating Walmart Cost of Capital Worksheet

Question Description

Walmart Cost of Capital

  1. Title Page (Name of Case, your name, date)
  2. Introduction: Summarize why the cost of capital is so important in finance and all other disciplines. Feel free to cite your notes or other articles you have secured throughout this course. (about 1-2 pages). Define the cost of capital
  3. Before Tax Cost of Long Term Debt: Walk through how to calculate the cost of debt. As you read the case, last year’s net interest expense is $2,129 million and the total amount of interest-bearing debt is short term borrowings of $5,225 million plus the current portion of long-term debt and capital leases of $2,605 million, plus long-term debt and capital leases of $50,203 million – totalling $58,033 million (see case Exhibit 2). Divide the interest expenses by the total amount of interest – bearing debt to find the before-tax interest cost of debt. (About 1 page)
  4. After Tax Cost of Long Term Debt:
    1. Note that the income tax expense for the fiscal year ending 2019 is $4,281 million compared with inocme before taxes of $11,460 million. Now you can calculate the tax rate.
    2. But, what does the case say about corporate tax rates due to declines via U.S. regulations? (About 1 -2 pages)
  5. Short Term Borrowing: In Exhibit 2, Walmart has about $5 billion in short term borrowings used to finance operations, make capital expenditures, and fund other cash requirements. Review this and determine if you want to add to the cost of debt to account for this? (About 1 page)
  6. Cost of Equity using Gordon: To figure out the cost of equity, use the Gordon dividend growth model (D1 divided by r-g, or r = (D1/Po) + g
    1. Growth can be approximated as the Return on Equity (ROE) x (1- Dividend payout ratio). Please note that ROE is provided in the case)
    2. Dividends in the previous year are presented in the case and it is $2.08 (that is LAST year’s dividend)
    3. The price of Walmart at this time was $102.20 (about 1 page)
  7. Cost of Equity using CAPM
    1. The risk-free rate is presented in the case (10 year government bond yield)
    2. The case describes beta and you hae choices so would you like to use the historical “raw” beta or a forward looking beta
    3. The case describes the market risk premium and you have choices. You can take a geometric averge from 1928 – 2018, as an example. (about 1 page)
  8. Weights for WACC
    1. If you look at Exhibit 2, you could use the book value wieghts based upon information from the consolidated balance sheet.
    2. You could also use market value weights (about 1 page)
  9. What is the WACC that you created (answers may vary). If Target’s WACC is 4.3% and Amazon’s WACC is 8%, how does Walmart compare? (about 1 page) see excel page attached
  10. What did you learn from this final exam case about WACC? (about 1 page

Order Solution Now

Our Service Charter

1. Professional & Expert Writers: DESTINY PAPERS only hires the best. Our writers are specially selected and recruited, after which they undergo further training to perfect their skills for specialization purposes. Moreover, our writers are holders of master's and Ph.D. degrees. They have impressive academic records, besides being native English speakers.

2. Top Quality Papers: Our customers are always guaranteed papers that exceed their expectations. All our writers have +5 years of experience. This implies that all papers are written by individuals who are experts in their fields. In addition, the quality team reviews all the papers before sending them to the customers.

3. Plagiarism-Free Papers: All papers provided by DESTINY PAPERS are written from scratch. Appropriate referencing and citation of key information are followed. Plagiarism checkers are used by the Quality assurance team and our editors just to double-check that there are no instances of plagiarism.

4. Timely Delivery: Time wasted is equivalent to a failed dedication and commitment. DESTINY PAPERS is known for the timely delivery of any pending customer orders. Customers are well informed of the progress of their papers to ensure they keep track of what the writer is providing before the final draft is sent for grading.

5. Affordable Prices: Our prices are fairly structured to fit in all groups. Any customer willing to place their assignments with us can do so at very affordable prices. In addition, our customers enjoy regular discounts and bonuses.

6. 24/7 Customer Support: At  DESTINY PAPERS, we have put in place a team of experts who answer all customer inquiries promptly. The best part is the ever-availability of the team. Customers can make inquiries anytime.