GOFF Computer, INC - The weighted average cost of debt, by...

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4) The portfolio of bonds that Dell holds is as follows: Bond Symbol Book Value (US$) Market Value (US$) Yield to Maturity (%) DELL.GJ 100 104.130 3.399 DELL.GF 100 108.814 1.317 DELL.GI 100 113.150 5.644 DELL.GG 100 113.100 3.671 TOTAL 400 439.194 The weighted average cost of debt, by using book values is: = (100/400*3.399)+ (100/400*1.317)+(100/400*5.644)+(100/400*3.671) =0.84975+0.32925+1.411+0.91775 =3.50775% or 3.51%
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Unformatted text preview: The weighted average cost of debt, by using market values is: =(104.130/439.194*3.399)+(108.814/439.194*1.317)+(113.150/439.194*5.644)+(113.100/439.1 94*3.671) =0.8058+0.3262+1.4540+0.9453 =3.5313% I would say that it does not make a difference whether or not we use the book value or market value weights considering both will still be 3.5% in both cases....
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GOFF Computer, INC - The weighted average cost of debt, by...

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