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1. Now estimate the cost of equity for Apple Stock market. You will also need the three-month treasury bill yield, which we will use as our measure of the risk-free rate. This rate should be listed on the Fidelity Fixed Income Web page linked above. Finally, you will need the equity risk premium. You can find estimates of this on many Web pages including Fidelity Fixed Income or Gutenberg Research. It is usually around 5%. Once you have this information, you can estimate the cost of equity as the three-month treasury bill yield rate plus beta multiplied by the equity premium:

Cost of Equity = risk-free rate + Beta * (Equity Premium).

Show your calculations. We will call the cost of equity RE.

3. Now find out how much of the Apple stock market capital is equity and how much is debt. For the total value, look at the balance sheet for Apple Inc. as found on Google Finance or a similar Web page. The total value of Apple inc. will be total liabilities and shareholders equity. The proportion of debt will be total liabilities divided by total value, which we will call D/V. The proportion of equity will be shareholders equity divided by total value, or E/V. If you calculate them correctly, the proportions will add up to one.

4. Now we have all the information we need to get at least a rough ballpark estimate of WACC. Lets assume a corporate tax rate of 35%. So the formula we will use is WACC = (E/V)* RE +(D/V)* RD *(1-.35)

Calculate WACC and show your computations. As a reality check on your calculations, the WACC should likely be in the single digits and positive. Compare what you found to the average WACC in

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