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The second strategy pertains the investment of solar panel technology that can be utilized to power over 20,000 US Walmart locations. The estimated initial cost for this investment is $2Mwith implementation to take up to four years. This technology is expected to generate net cash flow of $900,000 at an appropriate discount rate of 10% by the end of the fourth year. By utilizing the NPV analysis formula we can determine that PV = -$2m, PV = $900,000/(1.10)^1 = $818,182, PV = $900,000/(1.10)^2 = $743,802, PV = $900,000/(1.10)^3 = $676,183, PV = $900,000/(1.10)^4 = $614,712. When adding all of the PV values together and subtracting the initial investment, we end up with a total NPV of $852,879. The market value of the company’s assets has increased $852,879, which is a direct correspondent of the NPV for the second project.Since a project’s NPV calculates and compares the amount invested today against the present value of the future cash receipts from the investment, Walmart’s potential strategies are compared to the future cash amount after they are discounted by their specific rate of return (see proforma analysis in Appendix 6).Recommended Strategy and Long-term ObjectiveThe two proposed strategies above must first be evaluated by top management, comparedagainst the company’s benchmark, and a decision must be established based on the company’s long-term goals or objectives. The two proposed strategies are separate from one another, have no impact on one another’s acceptability, and can either be accepted together or independently. Our recommendation for Walmart is to accept both projects because they align perfectly with the company’s goals and enhance their sustainability. Additionally, having a positive NPV will be reflected on the incremental wealth created by accepting the projects, which also creates more value for the company in the long run. The first strategy seeks to improve Walmart’s e-commerce’s performance by paring with different suppliers to provide faster delivery timeframes, offer a larger amount of goods and services, improve the customer’s online experience, and enhance the company’s e-commerce supply chain. The project is expected to generate a net cash flow of $400,000 and a positive net present value of $273,205 over the next four years. The second strategy takes advantage of solar technology by proposing to install solar panels on top of more than 20,000 Walmart centers in the US in order to reduce the cost of electricity and continue to provide customers with the lowest prices. The solar panel strategy is
CASE 2- WALMART9estimated to generate a net cash flow of $900,000 and a NPV of $852,879 over the next four years.According to Doug McMillon, CEO of Walmart Inc., Walmart’s long-term objectives include a series of goals that expand over an 11-year sustainability journey that is set to be completed by 2025. During this 11 year period, the company plans to eliminate waste by achieving a zero waste to landfill in operational areas in the U.K., Canada, Japan, and the U.S.