Ross et al.: Fundamentals
of Corporate Finance, Sixth
Edition, Alternate EditionVI. Cost of Capital and
Long−Term Financial
Policy(^552) 15. Cost of Capital © The McGraw−Hill
Companies, 2002
Treasury bills? Assuming a 9.1 percent market risk premium, what is the cost of
equity for Dell using CAPM?
15.3 Cost of Debt You now need to calculate the cost of debt for Dell. Go to
http://www.bondsonline.com, follow the “Bond Search” link, and the “Corporate”
link. Enter Dell as the company and find the yield to maturity for each of Dell’s
bonds. What is the weighted average cost of debt for Dell using the book value
weights and using the market value weights? Does it make a difference if you
use book value weights or market value weights?
15.4 WACC You now have all the necessary information to calculate the weighted
average cost of capital for Dell. Calculate the weighted average cost of capital
for Dell using book value weights and market value weights assuming Dell has
a 35 percent marginal tax rate. Which number is more relevant?
Spreadsheet Templates15–4, 15–10, 15–23
524 PART SIX Cost of Capital and Long-Term Financial Policy
A B C D
E F G H
321
654
987
112110
1143
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