Question

Using the firm you selected at the beginning of the semester and the methodology used for the labs on Walmart and Target:

a)Compute your firm’s required yield based on beta and CAPM

b)Based on the constant dividend growth model, compute the growth rate of dividends g and the firm’s required rate.

Answer 1

	Source: Reuters
Answer A)		Walmart			Target
	Beta	0.35			0.67
	Rf	3.50%			3.50%
	Risk premium	6%			6%
	Yield	5.600%			7.520%
	So Yield	5.600%			7.520%
Answer B)		Walmart			Target
	Divident paid recently	2.08			2.52
	Current stock price	97.53			80.26
	Growth rate G=	3.467%			4.380%
	required rate of return using WACC
	weight of equity	0.8427			0.7838
	weight of debt	0.1573			0.2162
	cost of equity	0.056			0.0752
	Cost of Debt	0.044891			0.040329
	Assuming tax rate of 33%	0.33			0.33
	WACC	5.192%			6.478%