Cost of Capital Ameritrade Case Solution

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201-046

Cost of Capital at Ameritrade

Exhibit 1 Consolidated Annual Income Statements for the Fiscal Year Ending in September
1997 Net Revenues Transaction Income Net Interest Other Total Net Revenues Expenses Excluding Interest Employee Compensation Commissions and Clearance Communications Occupancy and Equipment Cost Advertising and Promotion Provision for Losses Amortization of Goodwill Other Total Expenses Excluding Interest Income Before Income Taxes Taxes Net Income EPS Shares Outstanding Source: Ameritrade Annual Report, 1997. $ $ 51.936.902,00 $ 18.193.946 7.107.492 77.238.340 1996 36.469.561,00 $ 11.477.878 6.391.314 54.338.753 1995 23.977.481,00 8.434.584 2.607.538 35.019.603

19.290.808 3.320.262 5.623.468 5.422.839
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201-046

Cost of Capital at Ameritrade

Exhibit 3 Capital Market Return Data (Historical and Current)
Prevailing Yields on US Government Securities (August 31, 1997) Annualized Yield to Maturity 3-Month T-BiIls 1-Year Bonds 5-Year Bonds 10-Year Bonds 20-Year Bonds 30-Year Bonds 5,24% 5,59% 6,22% 6,34% 6,69% 6,61%

Historic Average Total Annual Returns on US Government Securities and Common Stocks (1950 -1996) Average Annual Return Standard Deviation T-Bills 5,2% 3,0% Intermediate Bonds a 6,4% 6,6% Long Term Bonds b 6,0% 10,8% Large Company Stocks c 14,0% 16,8% Small Company Stocks d 17,8% 25,6%

Historic Average Total Annual Returns on US Government Securities and Common Stocks (1929 - 1996) Average Annual Return Standard Deviation T-Bills 3,8% 3,3% Intermediate Bonds a 5,4% 5,8% Long Term Bonds b 5,5% 9,2% Large Company Stocks c 12,7% 20,3% Small Company Stocks d 17,7%

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