VALUING WAL-MART - 2010 Case Study

1. Based on the given information in the case, what is your estimated Walmart stock value using the three stage dividend discount model?

2. Do the sensitivity analysis.

Page 3 9B11N004 Anticipated dividend growth (g) is often estimated in a variety of ways. First, observed historical dividend growth can be assumed to continue in a perpetual fashion. Second, future dividend growth can be estimated on the basis of recent estimates of analysts. Gupta noted that the consensus annual Wal-Mart dividend for fiscal year 2011 was $1.21, and one respected analyst had estimated the expected constant dividend growth (in perpetuity) at approximately 5.0 per cent When a firm achieves its steady state (i.e., when the annual return on equity is just equal to its cost of equity capital), the sole determinant of the growth in dividends is the annual dividend payout ratio. If all dividends are paid out, the firm's assets do not increase and therefore the dividend stream will not grow On the other hand, if some of the earnings are retained (i.e., the dividend payout ratio