Homework 1 - 1) Data from quarter that ended on April 29th,...

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1) Data from quarter that ended on April 29 th , 2011. * All numbers in millions Book value of debt : $31,418 Book value of equity: $8,370 2) Cost of Equity Stock Price (from 6/3/11): $15.62 Shares Outstanding: 1.89B Market Capitalization: 22.48B Beta: 1.38 3 Month Treasury Bill Yield: .01 Historical Market Risk Premium: 5.4% (average used by professors, analysts, and companies in 2011 according to study “US Market Risk Premium Used in 2011 by Professors, Analysts and Companies: A Survey with 5.731 Answers”) R S = R F + B (R M - R F) --> .01 + 1.38(.054) .0845 or 8.45% 3) Competitors
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Competitors Beta Apple 1.33 Hewlett-Packard 1.02 Acer Incorporated 1.02 Toshiba Corporation ---- Sony Corporation 1.59 Lenova Group Limited 1.82 International Business Machines 0.73 Samsung Electronics Co. Ltd. 0.55 Oracle Corporation 1.12 Average Beta 1.15 R S = R F + B (R M - R F) .01 + 1.15 (.054) = .0721 or 7.21% In this case it does matter whether you use Dell’s beta or the industry average beta
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This note was uploaded on 08/07/2011 for the course MRKT 630:301 taught by Professor Bhatia during the Fall '10 term at Rutgers.

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Homework 1 - 1) Data from quarter that ended on April 29th,...

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