In Integrative Case $10\mathrm{.}1,$ we projected financial statements for Walmart Stores, Inc. $($Walmart$),$ for

Years $11$ through $15.$ The data in Chapter $12$s Exhibits $12\mathrm{.}17,12\mathrm{.}18,$ and $12\mathrm{.}19($pages $718721)$ include

the actual amounts for fiscal $2020$ and the projected amounts for Year $11$ to Year $16$ for the income

statements, balance sheets, and statements of cash flows, respectively, for Walmart. The market equity

beta for Walmart at the end of fiscal $2020$ was $0\mathrm{.}50.$ Assume that the risk$-$free interest rate was $3\mathrm{.}0\%$

and the market risk premium was $6\mathrm{.}0\%.$ Walmart had $2,821$ million shares outstanding at the end of

fiscal $2020$ and a share price of $$138\mathrm{.}69.$

REQUIRED

Part I$$Computing Walmart$$s Share Value Using the Residual Income Valuation Approach

a$.$ Use the CAPM to compute the required rate of return on common equity capital for Walmart.

b$.$ Derive the projected residual income for Walmart for Years $11$ through $16$ based on the projected

financial statements.

c$.$ Using the required rate of return on common equity from Requirement a as a discount rate, compute

the sum of the present value of residual income for Walmart for Years $11$ through $15.$

d$.$ Using the required rate of return on common equity from Requirement a as a discount rate, and

assuming a $3\mathrm{.}0\%$ long$-$run growth rate, compute the continuing value of Walmart as of the start

of Year $16$ based on Walmart$$s continuing residual income in Year $16$ and beyond. After comput$-$

ing continuing value as of the start of Year $16,$ discount it to present value at the start of Year $11.$

e$.$ Compute the value of a share of Walmart common stock.

$(1)$ Compute the total sum of the present value of all future residual income $($from Requirements

c and d$).$

$(2)$ Add the book value of equity as of the beginning of the valuation $($that is$,$ as of the end of fiscal

$2020,$ or the start of Year $11).$

$(3)$ Adjust the total sum of the present value of residual income plus book value of common equity

using the midyear discounting adjustment factor.

$(4)$ Compute the per$-$share value estimate.