Using a three stage DDM provide a valuation of Wal-Mart. You may use the example shown in Exhibit 4 as a rough template for what to hand in but please keep in mind that this exhibit and the assumptions made therein do not pertain to Wal-Mart itself. Please be specific about any assumptions that you made in your model.
|Initial Growth of EPS|
|Long-Term Growth||IG-2%||Initial Assumption (IG)||IG+2%|
|Initial Assumption (G)|
Value Wal-Mart using a market multiple approach based on the information given in the case. (I realize that this question is somewhat ambiguous and there is no single right answer to it.) Be careful to justify your choice of model as well as some of the assumptions you will make.
Take a very careful look at the case exhibits. Do you think Sabrina Gupta’s use of DDM models is advisable? If not, what alternative(s) would you suggest?