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Weighted Average Cost of Capital Case Study

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Prepare responses to the questions posed by the "What's on the Web?" exercises 12.1, 12.2 (in 12.2 you can find the beta for Dell by going to the web site yahoo.finance.com under Stock Price History), 12.3 (for simplicity assume that the company's long-term debt consists of $200 million in long term bonds and $300 million in debentures, assume the book value and market value of the Dell debentures are the same and that the coupon rate is also the yield to maturity). You can figure out the market value of the $200 million Dell bonds by multiplying the book value by the Price column value found in www.bondsonline.com and 12.4 found at the end of Chapter 12 of the text. Your end product of these exercises will be the Dell Computer's WACC. Include exhibits that show all of the calculations used to calculate Dell's WACC.

b. Describe the implications of WACC in relation to Dell's goal of shareholder wealth maximization. Include a brief discussion of how internal and external factors can impact the organization's WACC.

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Prepare responses to the questions posed by the "What's on the Web?" exercises 12.1, 12.2 (in 12.2 you can find the beta for Dell by going to the web site yahoo.finance.com under Stock Price History), 12.3 (for ...

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