Purpose: To apply the Capital Asset Pricing Model, the Bond Pricing Model and the Dividend Growth Model to obtain estimates of the cost of capital for Ecolab corporation, both under its current capital structure and its target capital structure. Problem Facts and Information: It is the beginning of November 2016, and the Ecolab (ECL Corporation is considering a major investment project that will have a life of 10 years. You are on the team to find the Net Present value of the project. Others are estimating the cash flows required for the analysis. Your job is to estimate ECL's cost of capital to be used to discount the cash flows. Because of the estimated 10-year life of the project, you are to estimate the cost of capital for financing over a horizon of approximately 10 years. ECL has previously issued long term bonds to fund at least a part of this kind of project. Recently, however, the Board of Directors has established a target capital structure that is less highly leveraged than the current actual capital structure. You will be asked to compute ECL's weighted average cost of capital at both the current amount of leverage, and the target amount. To compute the weighted average cost of capital, you will need to compute the cost of equity and the cost of debt. As a "reality check' you are asked to calculate each of these costs by two different methods: Cost of Debt Method 1: Capital Asset Pricing Model Method 2: Estimating the Yield to Maturity on a current ECL long-term bond