Question
1. You now need to calculate the cost of debt for DELL. Go to finra-markets.morningstar.com, enter DELL as the company, and find the yield to
1. You now need to calculate the cost of debt for DELL. Go to finra-markets.morningstar.com, enter DELL as the company, and find the yield to maturity for each of DELL's bonds.
(I could not find bond information for Dell on finra-markets.morningstar.com. I only found stocks for dell on finra-markets.morningstar.com.)
1a) What is the weighted average cost of debt for DELL using the book value weights and the market value weights?
1b) Does it make a difference in this case if you use book value weights or market value weights?
2. You now have all the necessary information to calculate DELL's weighted average cost of capital.
2a) Calculate the WACC using book value weights and market value weights.
2b) What is Dell's tax rate? Which number is more relevant?
3. You used Dell as a pure-play company to estimate the cost of capital for TC.
Are there any potential problems with this approach in this situation?
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