Estimating Walmart's Cost of Capital Case Study How should Dale and Lee estimate the cost of long-term

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"Estimating Walmart's Cost of Capital” Case Study

How should Dale and Lee estimate the cost of long-term debt? Should short-term debt be considered in calculating the cost of capital?

How should Dale and Lee estimate the cost of equity?

a. Use the dividend discount model to estimate the cost of equity. Calculate growth rate using historical dividend growth rate and ROE*retention ratio formula (This means you will have two estimates for cost of equity using dividend discount model. One will use the growth rate that you estimate using historical numbers. The other one will use the growth rate you estimate using the ROE*retention ratio formula)

b. Use the capital asset pricing model to estimate the cost of equity.

c. Discuss which model is more appropriate in this case