rket Price =$103.18

# Shares (mm, or millions) = 2,897

Long term debt ($mm from balance sheet) = $45,396

Tax rate (T) = 25%

Walmart beta () = 0.66

Current risk free rate (rf) = 2.59%

Estimated market risk premium = 6.00%

Estimated underwriter spread = 1.0%

Estimated additional flotation costs = 0.5%

Estimated total flotation cost (as a % of debt face value) = 1.50%

Dividend payout ratio (dividends paid out as a % of net income) 2015 = 38.02% 2016 = 42.89% 2017 = 45.59% 2018 = 62.04% 2019 = 91.68%

Net income ($ millions) 2015 = $16363 2016 = $14694 2017 = $13643 2018 = $9862 2019 = 6670

Common equity $ (millions, book value) 2015 = $85937 2016 = $83611 2017 = $80535 2018 = $80822 2019 = 79634

ROE (net income/common equity or NI/CE) 2015 = 19.04% 2016 = 17.57% 2017 = 16.94% 2018 = 12.20% 2019 = 8.38%

Dividend history ($/share) 2015 = $1.91 2016 = $1.96 2017 = $2.00 2018 = $2.04 2019 = $2.08

Dividend estimates ($/share) 2020 = $2.14 2021 = $2.05 2022 = $2.40 2023 = $2.48

Dividend estimates ($/share)2020 = $2.142021= $2.052022= $2.402023= $2.48

Value of equity (market capitalization) =$298912.46

Value of long term debt =$45396

Weight of equity =0.87

Weight of debt=0.13

3 year growth rate (2020-2023) ofexpecteddividends =5.04%

4 year growth rate (2015-2019) ofactualdividends =2.15%

Calculate anddescribe how you arrived at your answer (what were the inputs).

1)What are the difficulties in estimating the "constant" growth rate for Walmart using the firm's ROE and payout ratio? [g = ROE*(1-payout ratio].discuss of specific input values and issues here.

2)Using the CAPM equation for the required cost of capital, r = rf + (market risk premium), what is the required cost of equity (r_e)?