In 2001, Puerto Rico enacted a law that requires specific labels on cement sold in Puerto Rico and imposes fines for any violations of these requirements. The law prohibits the sale or distribution of cement manufactured outside Puerto Rico that does not carry a required label warning that the cement may not be used in government-financed construction projects. Antilles Cement Corp., a Puerto Rican firm that imports foreign cement, filed a complaint in federal court, claiming that this law violated the dormant commerce clause. (The dormant commerce clause doctrine applies not only to commerce among the states and U. S. territories, but also to international commerce.) Did the 2001 Puerto Rican law violate the dormant commerce clause? Why or why not? The Commerce Clause is intended to prevent states from establishing 1. Select: agencies, laws, government officers and 2. Select: agencies, regulations, government officers that would interfere with trade among the states.
Select: Article I Section 8, The 10th Amendment, The 1st Amendment of the Constitution gives the power to regulate interstate commerce to Select: the convention of governors, the Congress, the President of the United States.
The Commerce Clause originally meant that only Select: interstate, intrastate could be regulated but now it means Select: both interstate and intrastate, only interstate, only intrastate, only international, the level of anger on the part of business people. Puerto Rico enacted a law prohibiting the 1. Select: sale, manufacture, advertising and 2. Select: manufacture, distribution, advertising of cement manufactured outside of Puerto Rico that does not carry a label that the cement cannot be used in government-funded projects. The requirement of the label, and the restriction from non-Puerto Rican cement Select: does commerce can be regulated. State Select: police powers, commerce powers include items related to 1. Select: commerce, health, bankruptcy 2. Select: commerce, safety, bankruptcy 3. Select: commerce, bankruptcy, general welfare. The United States Supreme Court has interpreted the commerce clause to give Select: Congress, the states the Select: partial, concurrent, exclusive power to regulate commerce that substantially affects trade among the states. To determine if Select: a state, Congress has violated this "dormant commerce clause" a court will evaluate 1. Select: the state's interest in the regulation, the free association rights of the companies impacted, the level of anger on the part of business people and 2. Select: the burden on interstate commerce, the free association rights of the companies impacted, does not affect interstate commerce. The Puerto Rican regulation Select: does, does not give Puerto Rican cement manufacturers a benefit over out-of-state manufacturers. Cement manufactured within Puerto Rico Select: does, does not have to carry a label and can be used in government-funded projects. Because this regulation Select: does, does not discriminate against non-Puerto Rican manufacturers, it likely Select: does, does not violate the dormant commerce clause. What if Puerto Rico required all cement to carry a label with the location where it was manufactured and the date it was packaged? Does that regulation discriminate against interstate manufacturers?
Select: Yes, No This labeling scheme likely Select: will, will not violate the dormant commerce clause if Puerto Rico still requires Puerto Rican cement to be used in government-funded activities. If Puerto Rico does not require Puerto Rican cement to be used in government-funded activities, but does require the label because cement from some other states is known to not last in Puerto Rican weather, the courts will balance
1. Select: the state's interest in cement that lasts, the right of Puerto Rican companies to have a preference, the right of all cement companies to have government contracts with 2. Select: the burden on interstate commerce, the right of Puerto Rican companies to have a preference, the right of all cement companies to have government contract.

Sabrina gupta, an investment advisor with a major brokerage firm, was examining wal-mart stores, inc. (wal-mart) stock and its valuation. gupta wondered whether to recommend the stock to any of her new clients or to existing clients who did not currently have wal-mart in their portfolios.her key task was to use an intrinsic value approach to price the shares and to then compare the resulting price with the price at which the stock was traded in the market. gupta wanted to use alternative valuation methods and assumptions to produce intrinsic value estimates for wal-mart stock.she was interested in seeing if the alternative methods would point to a consensus regarding the valuation of the stock and to see if the valuations suggested an investment opportunity given the current market price. methods she contemplated to use were: multi-stage growth modelprice earnings multiplemost valuation methods gupta considered required a common set of inputs: future cash flows to wal-mart investorsgrowth rate of future cash flowsdiscount factor or required rate of return by wal-mart investorsgupta gathered data to determine each of the above.gupta thought that dividends to wal-mart shareholders would adequately capture the cash flows to wal-mart shareholders; she also thought that this approach would simplify her task and she would revisit more complex valuation models if she felt the need.gupta thought that capm would provide her a relatively reliable estimate of the required rate of return. capm based required rate of return can be estimated by using a risk free rate, systematic risk of the firm and equity market risk premium. gupta thought that in a valuation exercise that involve long term cash flows, 10-year government bond yield would be an appropriate risk free rate of return estimate. she checked the 10 year note rate and found out that it was about 3.68%. gupta searched for wal-mart beta in bloomberg. bloomberg estimates betas by regressing the s& p 500 returns on the firm returns over the past two years and arrives at a “raw” beta estimate. bloomberg makes an adjustment in raw beta based on some academic research. gupta is confident that bloomberg adjustment is justified and she uses wal-mart beta estimate of 0.66 in her analysis.while gupta is aware of the importance of emrp assumption, she thinks that bloomberg’s historical estimate of 5.05% is a safe assumption. she is aware of the fact that some studies suggest a larger risk premium of approximately six per cent, while others suggest a much lower forward-looking premium of less than four per cent. she is mindful of the arbitrariness of her assumption, and she takes a note to revisit this issue if her valuations produce unreasonable estimates.anticipated dividend growth (g) is often estimated in a variety of ways.first, observed historical dividend growth can be assumed to continue in a perpetual fashion.second, future dividend growth can be estimated on the basis of recent estimates of analysts.gupta noted that the consensus annual wal-mart dividend for fiscal year 2011 was $1.21, and one respected analyst had estimated the expected constant dividend growth (in perpetuity) at approximately 3%.as the chart suggests, both earnings and dividend growth rates are declining but they seem to be higher than the “respected analyst’s” estimates. gupta decides to use several alternative perpetual growth assumptions to see the impact on price. since gupta decided to use variants of dividend discount model (ddm), she checked the anticipated earnings for 2011. analyst’s estimates suggested $4.10 earnings per share. gupta decided to use 10% growth rate from 2011 to 2012 and assumed a steady decline to 3% in 13 years (until 2024) where the perpetual growth rate of 3% resumes. she also assumed that walmart will increase its dividend payout ratio from 30% to 55% from years 2012 to 2024. you are asked to reproduce gupta’s analysis of multi-stage growth model and double check her valuation by using an earnings multiple. you have all the data you need to conduct the multi stage discounted growth model analysis, but you will need to do some research about the multiples valuation.