Estimating Share Value Using the DCF Model Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 31, 2013, for Wal-Mart Stores, Inc.

	Reported	Horizon Period
(In millions)	2013	2014	2015	2016	2017	Terminal Period
Sales	$469,162	$492,620	$517,251	$543,114	$570,269	$575,972
NOPAT	19,056	20,197	21,207	22,268	23,381	23,615
NOA	128,612	134,964	141,713	148,798	156,238	157,801

Answer the following requirements assuming a discount rate (WACC) of 7%, a terminal period growth rate of 1%, common shares outstanding of 3,314 million, net nonoperating obligations (NNO) of $46,874 million, and noncontrolling interest (NCI) on the balance sheet of $5,395 million.

(a) Estimate the value of a share of Wal-Mart's common stock using the discounted cash flow (DCF) model as of January 31, 2013.

Rounding instructions:

• Round your answers to the nearest whole number except for the discount factors and the stock price per share.

• Round the discount factors to five decimal places and the stock price to two decimal places.

• Use your rounded answers for subsequent calculations.

Do not use negative signs with any of your answers below.

	Reported	Forecast Horizon
WMT (In millions)	2013	2014	2015	2016	2017	Terminal Period
Increase in NOA
FCFF (NOPAT - Increase in NOA
Discount factor [1/(1+rw)t]	(round 5 decimal places)
Present value of horizon FCFF
Cm present value of horizon FCFF
Present value of terminal FCFF
Total firm value
NNO
NCI
Firm equity value
Shares outstanding (millions)
Stock price per share		(round two decimal places)

(b) Assume Wal-Mart (WMT) stock closed at $74.77 on March 26, 2013, the date the 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? What do you believe are some reasons for the difference?

Stock prices are a function of many factors. It is impossible to speculate on the reasons for the difference.

Our stock price estimate is higher than the WMT market price, indicating that we believe that WMT stock is undervalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our higher stock price estimate might be due to more optimistic forecasts or a lower discount rate compared to other investors' and analysts' model assumptions.

Our stock price estimate is higher than the WMT market price, indicating that we believe that WMT stock is undervalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our higher stock price estimate might be due to more pessimistic forecasts or a higher discount rate compared to other investors' and analysts' model assumptions.

Our stock price estimate is higher than the WMT market price, indicating that we believe that WMT stock is overvalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our higher stock price estimate might be due to more pessimistic forecasts or a higher discount rate compared to other investors' and analysts' model assumptions.