Corporate Bonds

Archive for May, 2009

Question: Calculate the weighted average cost of debt for Dell?

You now need to calculate the cost of debt for Dell. Go to http://cxa.marketwatch.com/finra/BondCenter/Default.aspx and follow the "Bond Search" link and the "Corporate" link. Enter Dell as the company and find the yield to maturity for each of Dell’s bonds. What is the weighted average cost of debt for Dell using the market value weights? (I am not sure what info on the table on the website to use)

Answer: From Bond Search, list the Yield (which is YTM) for each of Dell's bonds. Then click on each bond to bring up Bond Detail. Near the bottom of the page you will find total amount outstanding.

Using an Excel spreadsheet (or manually) -
1 - List each bond, its YTM, and amount o/s.
2 - Multiply YTM by amt o/s.
3 - Sum the amounts o/s from step 1and the product of each bond in step 2.
4 - Divide Total Step 2 by Total Step 1 to get WACD

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