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    Compute the cost of equity for Dell.

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    Calculate the industry average beta for Dell, and then using the industry average beta compute the cost of equity for Dell. Does it matter if you use the beta for Dell or the beta for the industry in this case?

    Company Beta

    Dell 1.37

    Competitors

    Apple 1.29
    HP 1.15
    Acer Incorporated 1.05
    Toshiba 1.45
    Sony 1.63
    Lenovo Group Limited 1.76
    IBM .76
    Samsung Electronics Co. LTD 005930.KS .61
    Samsung Electronics Co. LTD 005935.KS .61
    EMC Corporation 1.08

    Assume risk-free rate (Rf) as 5% and expected market return (Rm) as 10% .

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    https://brainmass.com/business/business-math/compute-cost-equity-dell-420033

    Solution Preview

    To compute the industry average beta, we will compute the average of beta values of Dell and it's competitors.

    Industry average beta = (1.37 + 1.29 + 1.15 + 1.05 + 1.45 + 1.63 + 1.76 + 0.76 + 0.61 + 0.61 + 1.08) / 11
    = 12.76 / 11
    = ...

    Solution Summary

    The cost of equity is computed using Capital Asset Pricing Model.

    $2.19