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1. After looking at the at the financial statement for fiscal year ending January 30, 2009, the book value of debt, total liabilities, is $22,229. The book value of equity for this company is $4,271. Dell’s long-term debt for the fiscal year end is $1,898 (sec.gov).

2. -The most recent stock price listed for Dell is 14.44.

-The market value of equity, or market capitalization for Dell is 28.24 B

-Beta equals the expected rate of return minus the risk free rate divided by the expected market return minus the risk free rate. The beta for Dell is 1.36.

-The yeild on 3-month Treasury bills is 0.01.

-The cost of equity for Dell using the CAPM is 44.12%.

7.93% + 17.26% = 25.19%, Market Risk Premium.

rs=rf + Beta (rm-rf); =.10 + 1.36 (.2509); = .4412; = 44.12%

3. The key competitors of Dell are Apple, IBM, and Hewlett-Packard. The beta for the following companies respectively is 1.58, 0.81, and 1.05 (reuters.com/finance).

-The industry average beta is 1.15.

-Using the industry average beta, the cost of equity is 38.85%

rs=rf + Beta (rm-rf); =.10 + 1.15 (.2509); = .3885; = 38.85%

-Because the beta for Dell and the average beta are different, it does matter which one you use because they will create different cost of equities.

4. The cost of debt for Dell is Interest/1,898.

Bond Yield Book Value Market Value

Dell.GJ 1.739 100 104.155

Dell.GF 2.535 100 107.100

Dell.GI 3.029 100 110.716

Dell.GG 5.025 100 104.250

Dell.GK 4.912 100 107.296

Dell.GB 6.264 100 109.051

Dell.GH 6.242 100 103.400

Total 700 745.968

The weighed cost of debt by using the book value is 4.249. The weighed cost of debt when the book value is used is so close to the weighed cost of debt when the market value is used, that it would not