Estimating Walmart’s

Cost of Capital

Suraj Das : G23110

Ritesh Kumar : G23095
Vidit Rawat : G23114
1962: Opened 1st store in Rogers, Arkansas
2009: Serving 275 Million customers per week
11300 Stores opened so far

58 E-commerce websites with different names

Reach in 27 countries

Jan 2019: Invested $ 10 Billion on remodelling

$ 5 Billion on E-commerce, tech and SCM
Over $ 2.7 Billion internationally
 Estimating Walmart’s Cost of Capital

Cost of Debt
Component 2019 2018
Long Term Debt & Capital 50,203 36,825 =>Using Dividend growth model ,
Interest Expense 2,129 2,178 Growth rate =11.75 (from 2007 to 2019)
Tax Expense 4281 4600 Ke={2.08(1+.1175)/102.20}+.1175=14.02%
PAT 11,460 15,123
Effective Tax Rate 37.36% 30.42%
Average Debt 43,514 The debt portion is 37% (from avg of the last two years)
Average Tax Expense 4440.5
Average Tax Rate 33.89% Hence, the portion funded by Equity = (1-0.37) = 0.63
Average Interest Expense 2153.5
Kd 3.27%
We calculate the WACC to find the WACC

WACC= ka= (WTd x AT kd ) + (WTe x ke )

If Tax is 27% ,Kd=3.61 WACC =0.37*3.61+0.63*14.02=10.16%

The Cost of capital for Walmart is 10.16%

Thank You!!!