EXECUTIVE SUMMARY

Walmart is a company that had humble beginnings. It is a chain of company of hypermarkets

and grocery stores. It was founded by Sam Walton in 1962 in Rogers, Arkansas. It grew to be the world’s
largest retail store, and its first stock is sold at $16.50 per share in 1980. In 2019, Walmart’s revenue
reached $514.4 billion and it employs over 2.2 million associates worldwide. Today, it is serving 275
customers weekly from more than 11,300 stores and numerous e-commerce websites under 58 banners
in 27 countries. Based on the result, we found out that that we cost of capital Is extremely important
because it is a critical factor to consider when making investment decisions as it represents the
minimum rate of return, we learned about the important related factors in cost of capital and on how to
estimate. Also, we found out that the weighted average cost of capital (WACC) is the sum of the debt
and equity costs. We should be concerned about proportion and determine the cost for each debt when
estimating the cost of debt, including short-term and long-term debt. We believed that long-term debt is
structured by bonds for long-term debt, then we weighted them with each of capital market value in
order to calculate WACC. And if Walmart has preferred stock, the capital proportion will be altered,
affecting WACC. Furthermore, when making investment decisions, we considered WACC to be an
appropriate hurdle rate. We have concluded that the deferred tax of the company won’t affect the
company’s WACC but may affect the company’s valuation value due to the fact that deferred tax is not
an interest-bearing debt.

What is the cost of capital? Why do Dale and Lee care about cost of capital?

The cost of capital is the required rate of return when it comes to a capital budgeting or in
investment decisions that a certain company has to deal, because as we all know the every company
need a capital or money to finance their day to day operations. It usually refers to the weighted average
of a company's funding sources, such as debt and equity, combined. In general, a firm raises funds from
a wide range of sources and then uses those funds to conduct business. A company owes its financing
providers a return on their investment. If a company only has one source of funding, its cost is the bare
minimum it would receive from the business. Many firms, however, use multiple sources of funds to
finance their operations, and their overall cost of capital is calculated using the weighted average cost of
all capital, also known as the weighted average cost of capital (WACC). Dale and Lee  care about the cost
of capital because they want to know what the appropriate minimum rate is for Walmart to use as a
benchmark when making investment decisions for various projects. They may also use WACC as a
discount rate in the discounted cash flow model for valuation.