CASE WRITE$-$UP $1$

Instructions: Answer all questions below. Make sure to show your work. Your answers must be typed. $($TOTAL $=100$ POINTS$)$

Estimating Walmart's Cost of Capital

What are some key issues raised in the discussion between Dale and Lee, as reported in the case?

How would Dale and Lee go about estimating the cost of long$-$term debt?

If Walmart had preferred shares, or planned to issue preferred shares, how would Dale and Lee deal with them?

How should Dale and Lee deal with deferred taxes?

How might Dale and Lee go about estimating the cost of equity?

What is the overall weighted average cost of capital $($WACC$)?$ What is the cost of capital for Walmart?

How does all of this relate to hurdle rates that Walmart might use?