Finance 5204 Managing Corporate Capital Investment and Capital Structure Case1 Cost of Capital at Ameritrade By: Elaine Huang Jonathan Hudson Christopher Lenker AMERITRADE DOES NOT HAVE A BETA ESTIMATE AS THE FIRM HAS BEEN PUBLICLY TRADED FOR ONLY A SHORT TIME 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 PLANNED INVESTMENTS? WHY? We recommend using the following
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LECTURE 10 COST OF CAPITAL CLASS QUESTIONS 1. Roland Corporation’s last dividend (D0)‚ which was paid yesterday‚ was $2.50. The firm has a constant growth of 18.8%. The firm’s beta coefficient is 1.2. The required return on an average stock in the market is 13 percent‚ and the risk-free rate is 7 percent. Roland’s A-rated bonds are yielding 10 percent‚ its risk premium is 4% and its current stock price is $30. Which of the following values is the most reasonable estimate of Roland’s cost of retained
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Ameritrade’s managers should also consider what taking on these programs would do to its 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)
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Telus: The Cost of Capital Telus needs to calculate the cost of capital from the variety of data given. The cost of capital is determined mostly by how the funds are used rather than where they were obtained from. It relies on the risk of investments Telus involves in‚ therefore‚ depending on cost of both equity of debt as described below. Also note that‚ even though the preferred shares are not attractive to issuers and may not get issued again‚ it is still on the company’s balance sheet and affect
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A much debated topic in today’s society and a rather controversial issue is capital punishment‚ or the execution of a convicted criminal as a punishment for crimes known as capital offences. These may include murder‚ treason‚ drug trafficking and human trafficking depending on the country that is being referred to. The two opposing arguments about this issue are whether or not it should be allowed. Both sides offer a credible and justified resolution to this debate. However‚ as an unbiased individual
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Toyota Cost of Capital Case: General Methodology We used the following framework to do the calculations for all the companies. Afterwards we will discuss their implications: To estimate the cost of equity (RE) we used the following CAPM model: RE = RF + βE (RM-RF) whereby‚ Market Premium = RM – RF = 6% (Given in case) RM = Return for S & P 500 (a market return that takes into account systematic risk associated with the market place where our company is traded‚ NYSE) Risk Free Rate
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PESTEL Analysis Political The main countries that Nike trades in are America (where Nike originated) and the United Kingdom and other European countries such as France and Germany. In these main countries that Nike sell products in there is stable political environments where there is a democracy meaning that the governments in this countries have been elected by the general public in that particular country. The majority of these countries home and export markets have been boosted with
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hurdle rates is critical to accepting or rejecting projects‚ Marriott should be precise by calculating and using division-specific rates on division-specific projects. We used the WACC method so that our hurdle rates would reflect appropriate cost of debt and cost of equity‚ as explained in our subsequent analysis. We found Marriott’s hurdle rates: 8.646% for hotels‚ 10.94% for restaurants‚ 11.094% for contracts‚ and 9.688% for the entire company. Marriott should use the division-specific hurdle rates
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Nike Inc. Cost of Captial Michael Tjandra Anna Ellie Du Background of Nike and North - Point Nike North-Point Revenue $9 Billion from 1997 Mutual Fund Management Firm Net income fallen from $800 Million to $580 Million Invests in fortune 500 companies Market Share fallen from 48% (1997) to 42% (2000) At end of June 2001‚ fund’s year to date returns tops at 6.4% Long term revenue targeted at 8-10% Funds performed extremely well Earning growth is targeted at 15% The stock market in decline
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former university track runners and coach‚ they were seeking to innovate in running shoes to give athletes a competitive advantage. In 1971‚ their first employee Jeff Johnson designed several shoes and started advertising the new brand that he called “Nike”. Co-founder Bill Bowerman’s philosophy is today’s vision of the company: “To bring inspiration and innovation to every athlete* in the world. (*And if you have a body‚ you are an athlete.) ». Mark Parker‚ actual president and CEO of Nike’s company
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