Cost of Capital at Ameritrade

Managing Corporate Capital Investment and Capital StructureCase1Cost of Capital at Ameritrade1.Ameritrade does not have a of import enter as the firm has been publicly traded for only a short reproval period. Exhibit 4 provides various choices of comparable firms. What comparable firms do you recommend as the appropriate benchmarks for evaluating the risk of Ameritrade?s plastered investments? Why?We recommend using the following firms in the value write-off Brokerage Indus depict: Charles Schwab Corporation, E- disdain, Waterhouse Investor Services, and Quick and Reilly Group, in secernate to estimate the Beta of the firm. We have chosen these four firms as comparables to Ameritrade because they contend within the same realm of business as Ameritrade. We unravel this conclusion based off several summonss from the text. The low gear reference demonstrates Ameritrade as a tax deduction broker by stating, ?Full-service brokers were slight sensitive to market movements th an deep-discount brokers like Ameritrade.? Another arrogance which expound Ameritrade?s competition is, ??competitors such as Charles Schwab and E*Trade did not follow Ameritrade?s lead and try to fight on price.? These arguments along with others from the text provide convince manifest that compel us to choose both the discount securities firm house industry and Charles Schwab, E*Trade, Waterhouse, and Quick and Reilly Group, in order to accurately measure Beta and likewise risk. 2.

exploitation the stock price and returns breeding in Exhibits 5 and 6 and the capital structure information in Exhibit 4 estima te the equity genus Beta ?s, asset beta ?a a! nd the cost of assets, ka, for (i) discount brokerage firms and (ii) investment services firms as comparable groups, assuming (i) debt beta=0 and (ii) debt beta = 0.25. put over A Charles SwabQuick and ReilyWaterhouseBs2.2972.20423.1899Debt0.0800.38Equity0.9210.62i. Ba when Bd =02.113242.20421.9777382.0983927ii. Ba when Bd = 0.252.133242.20422.0727382.136726Rf6.61%Rm-Rf7.2%Ka when Bd = 021.7184272%ka when bd = 0.2521.9944272%Table B A G EdwardsBearStearnsMerrill LynchMSDWPaine WebberRaymond JamesBs1.44951.68931.82262.09241.76481.4489Debt00.50.520.530.530.04Equity10.50.480.470.470.96i. Ba when Bd =01.44950.844650.8748480.9834280.8294561.3909441.062137667ii. If you compliments to get a wax essay, order it on our website: OrderCustomPaper.com

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