Case Solution Cost of Capital at Ameritrade | | • Executive summary: Formed in 1971 and listed in March 1997‚ Ameritrade has been one of the most successful players in the deep- discount brokerage sector. Ameritrade’s two major sources of revenue‚ Transaction income (brokerage commissions‚ clearing fees‚ and payment for order flow) and Net interest revenues that were generated from net balance
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Ameritrade: Cost of Capital What factors should Ameritrade Management consider when evaluating the proposed advertising program and technology upgrades? Why? When considering the proposed advertising program and technology upgrades‚ we have to ensure that the project will likely add value to the company‚ so we need to consider the return on investment versus the cost of capital. If the return on investment‚ measured by the net present value and internal rate of return‚ exceeds the cost of capital
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Ameritrade is formed in 1971‚ and is a pioneer in the deep-discount brokerage sector. In march 1997‚ Ameritrade raised $22.5 million in an initial public offering. Management at Ameritrade is considering substantial investments in technology and advertising‚ but is unsure of the appropriate cost of capital. Estimating the cost of capital 1. Since we do not have the beta for Ameritrade‚ we need to find comparable firms for which we could compute the betas. There are several candidates in the
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1) What factors should Ameritrade management consider when evaluating the proposed advertising program and technology upgrades? Why? Strategic evaluation 2) Ameritrade does not have a beta estimate as the firm has been publicly traded for only a short time period. What comparable firms do you recommend as the appropriate benchmarks for evaluating the risk of Ameritrade’s planned advertising and technology investments. Beta: 1) which firms to use as a benchmark and why 2) Calculate beta
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Group Case 1: Ameritrade – Cost of Capital Executive Summary: As a deep-discount brokerage‚ Ameritrade planned to improve its competitive position by price cutting‚ technology enhancements‚ and increased advertising in mid-1997. Before initiating the plan‚ Ameritrade needed know whether the investment returned more than it cost. We were hired to estimate the cost of capital correctly. The key question is to find suitable comparable firms to estimate Ameritrade’s asset beta‚ since it was a recently-listed
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capital structure. They might have a certain debt to equity ratio they wish to maintain‚ or perhaps there would be covenants put on their contracts requiring them to maintain a certain debt to equity ratio while their loan was outstanding. Ameritrade should use a 6.10% risk free rate when calculating its cost of capital. This is the average of the 20 year bond annualized yield to maturity (on August 31‚ 1997) and the long term historical average annual return (from 1929 1996). The long term
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Chemistry Introduction Objective: The goal of the chemistry unit is to teach students how to identify when a chemical reaction has occurred. The students should be able to watch a process and determine if a chemical reaction has occurred. They will see (and usually perform) reactions demonstrating every type of chemical change. Background: Chemistry is the study of chemical reactions as a result of molecular interaction. There are four ways to determine if a chemical reaction has occurred
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Academic Records: Master of Business Administration (MBA): Dhaka. Result : CGPA: 3.52 Area of concentration : Finance. University : Stamford University of Bangladesh. Year of passing : 2012 Computer Literacy: Language Proficiency: ( Have reasonable command both in Bengali‚ English and Hindi (in spoken). Personal Profile: Name
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When It was proposed that full inclusion of children with disabilities is a civil right‚ it makes one want to research the topic more by going through the various websites and reading what human rights advocates were discussing. The Learning Disabilities Association of America were quoted as saying “that they do not support ‘full inclusion’ or any policies that mandate the same placement‚ instruction‚ or treatment for ALL students with learning disabilities.” There are no two disabilities that are
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1.How is it possible‚ as Braddock noted‚ to have a great deal of data but little information? How does the SAP database and business intelligence component change this? Fresh Direct is a New York online grocery firm aiming to offer higher quality food with the best price which is 10-15% less than the local competitors and home delivery. The Fresh Direct has 300‚000-square-foot headquarter and 1‚500 employees. 8‚500 products and 200‚000 customers active in every day transaction. So every second
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