WAL-MART

Wal-Mart

Wal-Mart

Cost of Equity Wal-Mart

Exp. (Rs) = (Rf) + beta (Rerp)

The expected return on a stock (Wal-Mart) is equal to the risk free rate (e.g. 5%) plus the specific stock's beta (e.g. 0.97) times more than the equity risk premium (e.g. 3.0%)." In numbers it looks like this: Expected Return on Wal-Mart's Stock = 5% + 0.97(3.0%) = 7.91%

This cost of equity is higher than the expected cost of equity. The expected cost of equity was 10.1%. The average cost of capital for a firm in the S&P 500 is 10.2 percent. The company's cost of equity should be lower than ...