Case Motivation

objectives

  • Introduce Valuation using Dividend Discount Model (DDM) techniques
  • Introduce valuation using PE multiples
  • Appreciate variations in DDM
  • Application of Capital Asset Pricing Model (CAPM)

background

  • Investment advisor considering whether Wal-Mart is a good investment for her clients
  • Discussion of the methods that may be used (DDM, relative valuation)
  • Collection and presentation of data required

required knowledge

  • Technical content:

–Video introducing DDM and PE multiples

–Other reading per links

your task

Prepare a brief report addressing the following and for discussion in class and be prepared to justify your views:

1.Analyse and briefly explain Walmart’ and it’s performance history?

2.What is the role of equity analysts and how they  how do they add value if the market is efficient?

3.What is the value of Walmart using a relative valuation approach either forward or historical?  How did you choose your ratio?

  1. What is the value of Walmart using the perpetual dividends/single stage approach? What were your main assumptions?

5.What is the value of Walmart using a 3 stage approach?

What is your recommendation for Walmart in terms of a buy or sell, justify.

submission

  • You may work in groups but document and submit individually:

– Penalties will apply if we spot collusion

You must document:

– The assumptions you have made if any that are not in the case  – Show calculations and results as an appendix (not always required)

 

Depending on your formatting, about 3 pages and not exceeding 1,000   words (excluding executive summary and appendix). All reports must adopt the following formatting requirements; 1.5 spacing and 12 point font.