I'll help you perform an enterprise valuation of Walmart using their 2009-2010 financial statements. This will involve several steps:

1. First, we'll need to:

• Adjust the income statement to calculate NOPAT (Net Operating Profit After Taxes)
• Reorganize the balance sheet to calculate Invested Capital
• Remove non-operating items
• Make necessary tax adjustments

1. Then we can:

• Calculate the free cash flows
• Determine an appropriate growth rate and WACC
• Perform DCF analysis to get enterprise value
• Adjust for debt and cash to arrive at equity value

Please upload Walmart's:

• Income statements for 2009-2010
• Balance sheets for 2009-2010

Once you upload these statements, we can start with the adjustments to calculate NOPAT and Invested Capital. The key adjustments we'll make include:

For NOPAT:

• Adding back interest expense (net of tax shield)
• Removing non-operating income/expenses
• Adjusting for operating leases if present
• Normalizing tax rates

For Invested Capital:

• Net working capital
• Net PP&E
• Other operating assets
• Capitalizing operating leases if present
• Removing non-operating assets

Please upload the financial statements and we can begin the analysis step by step.

Thank you for the clarifications. Here's my revised plan:

For NOPAT Calculation:

1. Start with Operating Income:
   • Net Sales (excluding Other Income)
   • Less: COGS
   • Less: Operating, selling, and general administrative expenses
2. Calculate Adjusted Tax Rate:
   • Remove impact of other income and interest expense from tax calculation
   • Tax Rate = Income Tax / (Earnings before tax - Other Income + Interest Expense)
3. Apply adjusted tax rate to operating income
4. Deduct Minority Interest (as it represents operating claims of minority shareholders)

For Invested Capital Calculation:

1. Operating Working Capital:
   • Current Assets (excluding cash and discontinued operations)
   • Less: Non-interest-bearing current liabilities (accounts payable and accrued liabilities)
2. Long-term Operating Assets:
   • Net PPE
   • Property under capital leases
   • Add: Obligations under capital leases (since this is operating financing)
   • Goodwill
3. Exclude:
   • Other assets
   • Other income
   • Cash and cash equivalents
   • Discontinued operations

The treatment of capital leases: Since these are operating assets, I plan to include both the asset value and the corresponding lease obligations in invested capital, as they represent operating assets and their financing.

Would you like me to proceed with these adjustments? Please let me know if you'd like any modifications to this revised approach.

Thank you for the clarification. Here's my final revised plan:

For NOPAT Calculation:

1. Start with Operating Income:
   • Net Sales (excluding Other Income)
   • Less: COGS
   • Less: Operating, selling, and general administrative expenses
2. Calculate Adjusted Tax Rate:
   • Remove impact of other income and interest expense from tax calculation
   • Tax Rate = Income Tax / (Earnings before tax - Other Income + Interest Expense)
3. Apply adjusted tax rate to operating income
4. Deduct Minority Interest (as it represents operating claims of minority shareholders)

For Invested Capital Calculation:

1. Operating Working Capital:
   • Current Assets (excluding cash and discontinued operations)
   • Less: Non-interest-bearing current liabilities (accounts payable and accrued liabilities)
2. Long-term Operating Assets:
   • Net PPE
   • Property under capital leases (included as operating assets)
   • Goodwill
3. Exclude:
   • Other assets
   • Other income
   • Cash and cash equivalents
   • Discontinued operations

For Final Equity Value Calculation: Will subtract from Enterprise Value:

• Short-term borrowings
• Long-term debt
• Obligations under capital leases
• Add back: Cash and cash equivalents

Would you like me to proceed with these calculations? Please let me know if you'd like any modifications to this final approach.

Here's the final plan:

For NOPAT Calculation:

1. Start with Operating Income:
   • Net Sales (excluding Other Income)
   • Less: COGS
   • Less: Operating, selling, and general administrative expenses
2. Calculate Adjusted Tax Rate:
   • Remove impact of other income and interest expense from tax calculation
   • Tax Rate = Income Tax / (Earnings before tax - Other Income + Interest Expense)
3. Apply adjusted tax rate to operating income (No deduction of minority interest from NOPAT)

For Invested Capital Calculation:

1. Operating Working Capital:
   • Current Assets (excluding cash and discontinued operations)
   • Less: Non-interest-bearing current liabilities (accounts payable and accrued liabilities)
2. Long-term Operating Assets:
   • Net PPE
   • Property under capital leases (included as operating assets)
   • Goodwill
3. Exclude:
   • Other assets
   • Other income
   • Cash and cash equivalents
   • Discontinued operations

For Final Equity Value Calculation: Will subtract from Enterprise Value:

• Short-term borrowings
• Long-term debt
• Obligations under capital leases
• Minority interests

• Add back: Cash and cash equivalents

Would you like me to proceed with these calculations? Please let me know if you'd like any modifications to this final approach.

Here's the final revised plan:

For NOPAT Calculation:

1. Start with Operating Income:
   • Net Sales (excluding Other Income)
   • Less: COGS
   • Less: Operating, selling, and general administrative expenses
2. Calculate Adjusted Tax Rate:
   • Effective Tax Rate = Income Tax / (Earnings before tax - Other Income)
   • Apply this tax rate to operating income (No deduction of minority interest from NOPAT)

For Invested Capital Calculation:

1. Operating Working Capital:
   • Current Assets (excluding cash and discontinued operations)
   • Less: Non-interest-bearing current liabilities (accounts payable and accrued liabilities)
2. Long-term Operating Assets:
   • Net PPE
   • Property under capital leases (included as operating assets)
   • Goodwill
3. Exclude:
   • Other assets
   • Other income
   • Cash and cash equivalents
   • Discontinued operations

For Final Equity Value Calculation: Will subtract from Enterprise Value:

• Short-term borrowings
• Long-term debt
• Obligations under capital leases
• Minority interests

• Add back: Cash and cash equivalents

Would you like me to proceed with these calculations? Please let me know if you'd like any modifications to this final approach.

I'll explain each line of the NOPAT calculation:

1. Net Sales: Pure operating revenue

   • 2009: $401,087M
   • 2010: $405,046M
   • Note: Excludes other income as it's non-operating

2. Cost of Goods Sold: Direct costs of products sold

   • 2009: $304,056M
   • 2010: $304,657M

3. Operating, Selling, and G&A Expenses: Operating overhead

   • 2009: $77,520M
   • 2010: $79,607M

4. Operating Income: Net Sales - COGS - Operating Expenses

   • 2009: $401,087M - $304,056M - $77,520M = $19,511M
   • 2010: $405,046M - $304,657M - $79,607M = $20,782M

Tax Rate Calculation: 5. Income Before Tax: From income statement

• 2009: $20,898M
• 2010: $22,066M

1. Less: Other Income: Removed as non-operating

   • 2009: $3,287M
   • 2010: $3,168M

2. Adjusted Income Before Tax: Income Before Tax - Other Income

   • 2009: $20,898M - $3,287M = $17,611M
   • 2010: $22,066M - $3,168M = $18,898M

3. Income Tax: Actual taxes paid

   • 2009: $7,145M
   • 2010: $7,139M

4. Effective Tax Rate: Income Tax / Adjusted Income Before Tax

   • 2009: $7,145M / $17,611M = 40.57%
   • 2010: $7,139M / $18,898M = 37.78%

NOPAT Calculation: 10. Operating Income: Same as line 4 - 2009: $19,511M - 2010: $20,782M

1. Less: Taxes on Operating Income: Operating Income × Effective Tax Rate

   • 2009: $19,511M × 40.57% = $7,916M
   • 2010: $20,782M × 37.78% = $7,851M

2. NOPAT: Operating Income - Taxes on Operating Income

   • 2009: $19,511M - $7,916M = $11,595M
   • 2010: $20,782M - $7,851M = $12,931M

This shows how we:

1. Started with pure operating performance (excluding other income)
2. Calculated a tax rate based on operating income (by removing other income from the denominator)
3. Applied this tax rate to operating income to get NOPAT
4. Did not deduct minority interest (as agreed, this will be handled in enterprise to equity value conversion)

I'll explain each line of the Invested Capital calculation:

Operating Working Capital:

1. Current Assets (excl. cash and disc. ops):

   • 2009: $41,479M = Inventory ($34,511M) + Accounts Receivable ($3,905M) + Prepaid Expenses ($3,063M)
   • 2010: $40,284M = Inventory ($33,160M) + Accounts Receivable ($4,144M) + Prepaid Expenses ($2,980M)
   • Note: Excludes cash and discontinued operations as non-operating

2. Less: Non-interest Current Liabilities:

   • 2009: $47,638M = Accounts Payable ($28,849M) + Accrued Liabilities ($18,789M)
   • 2010: $50,550M = Accounts Payable ($30,451M) + Accrued Liabilities ($20,099M)
   • Note: Excludes short-term debt as it's financing, not operating

3. Net Operating Working Capital: Current Assets - Non-interest Current Liabilities

   • 2009: $41,479M - $47,638M = -$6,159M
   • 2010: $40,284M - $50,550M = -$10,266M
   • Note: Negative working capital is common in retail due to inventory turnover and supplier financing

Long-term Operating Assets: 4. Net PPE: Property, Plant & Equipment net of depreciation

• 2009: $92,856M
• 2010: $99,544M

1. Property under Capital Leases: Operating assets financed through leases

   • 2009: $2,797M
   • 2010: $2,763M
   • Note: Included as operating assets while lease obligations will be treated as debt

2. Goodwill: From acquisitions

   • 2009: $15,260M
   • 2010: $16,126M

3. Total Invested Capital: Sum of Net Operating Working Capital and Long-term Operating Assets

   • 2009: -$6,159M + $92,856M + $2,797M + $15,260M = $104,754M
   • 2010: -$10,266M + $99,544M + $2,763M + $16,126M = $108,167M

Key observations:

• Negative working capital reduces the total invested capital needed
• PPE is the largest component, reflecting Walmart's extensive store network
• Goodwill shows significant past acquisition activity
• Capital leases are included in assets but their financing will be treated as debt when converting enterprise to equity value
• Other assets were excluded as non-operating per our agreed approach

I'll propose a strategy using key financial ratios and sales growth to forecast both NOPAT and Invested Capital. Here's the detailed approach:

Sales Growth and Key Ratios from Historical Data (2009-2010):

1. Sales Growth:

   • 2010 Growth = (405,046/401,087) - 1 = 0.99% growth

2. NOPAT Drivers (as % of Sales):

   • COGS Margin = COGS/Sales

     • 2009: 304,056/401,087 = 75.81%
     • 2010: 304,657/405,046 = 75.22%

   • Operating Expense Margin = OpEx/Sales

     • 2009: 77,520/401,087 = 19.33%
     • 2010: 79,607/405,046 = 19.65%

   • Effective Tax Rate (already calculated)

     • 2009: 40.57%
     • 2010: 37.78%

3. Invested Capital Drivers:

   • Operating Working Capital / Sales

     • 2009: -6,159/401,087 = -1.54%
     • 2010: -10,266/405,046 = -2.54%

   • Net PPE / Sales

     • 2009: 92,856/401,087 = 23.15%
     • 2010: 99,544/405,046 = 24.58%

   • Capital Leases / Sales

     • 2009: 2,797/401,087 = 0.70%
     • 2010: 2,763/405,046 = 0.68%

   • Goodwill / Sales

     • 2009: 15,260/401,087 = 3.81%
     • 2010: 16,126/405,046 = 3.98%

Proposed Forecasting Approach:

1. For NOPAT:

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1. For Invested Capital:

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Implementation Strategy:

1. First, decide on assumptions:

   • Sales growth rate for future years
   • Whether to use latest year's ratios or average/trend
   • Any expected changes in margins or capital intensity
   • Tax rate expectations

2. Create a forecast model that:

   • Starts with 2010 as base year
   • Projects each line item using the ratios
   • Allows for ratio adjustments if business model is expected to change
   • Shows both absolute numbers and ratios for easy review

Would you like me to:

1. Create this forecast model in Excel?
2. Discuss specific assumptions for the forecast period?
3. Focus on particular aspects of the forecasting approach?