FIN 419 Week 3 Team Assignment - Capital Valuation Paper

Apr 24th, 2015
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FIN 419 Week 3 Team Assignment - Capital Valuation Paper

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Capital Valuation PaperFinance for Decision MakingWeek 3: Capital Valuation Paper - Wal-MartThe market price of an asset is the price at which it can be sold. Valuation is the process of determining the current value of an organization or its assets. Valuation models allow an organization a framework for estimating stock value. These estimates do not take into consideration the various elements, which could drastically differ from actual stock values. Therefore, estimates should always be conservative, rounding them to the nearest tenth (Gitman, 2006) whenever possible. Walmart is the largest organization in the world. According to its 2010 financial reports the company had $170,706 million in total liabilities and stockholder equity (Walmart, 2010). The stock price in March 2010 was $56.05 at the high and $52.77 at its lowest. In this paper Team A, will analyze and justify the current market price Walmart's debt and equity using the free cash flow model, the capital cash flow model and the return on equity formula.Free Cash FlowDetermining the value of a firm using the free cash flow (FCF) valuation method requires knowledge of the firm's value, the weighted average cost of capital, the market value of debt, and the market value of preferred stock (Gitman, 2006). According to Walmart (2010), "[the company] generated positive free cash flow of $14.1 billion, $11.6 billion and $5.7 billion for the years ended January 31, 2010, 2009 and 2008, respectively" (p. 22

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