For Apple Estimate Apples WACC (simplified version of it) Assume only debt and (internal) equity financing.

1. For cost of debt: look in company's latest available 10-K, find total interest paid (can be called "Interest Expense") and see total debt used. Dividing interest paid by total debt will give you an approximation for the cost of debt. For tax shield adjustment, use 21% tax rate.

2. For cost of equity: use CAMP to estimate it, assuming market return is 12% and risk-free rate is 1%. Calculate beta for your company using 36 monthly returns (for company and S&P500) and then re-do cost of equity using beta based on 60 monthly returns. Refer back to Chapter 8 for beta calculation and how/where to obtain returns data.

a) Compare both WACC results (one using cost of equity from CAMP based on 36-mth beta and one using 60-mth beta). Is difference significantly large? Which WACC would you recommend using and why?

b) Give an example of valuating investment project where using this WACC metric "as-is" would be appropriate; and example of a project where using WACC as you show it above may lead to wrong investment decision. Provide Sources if any