Cost of Capital at Ameritrade Ppt

We are interested in obtaining the asset beta for Collinsville investment. Here from the reading material, we find there were altogether 6 chemical companies that produce sodium chlorates. They are Hooker, Pennwalt, American, Kerr-McGee, Brunswick and Southern. However, since we are evaluating the addition of a sodium chlorate plant, the two firms (Brunswick and Southern) who specialize in producing sodium chlorate are likely the best “twins”. To determine the asset betas of each company, we

The table below shows the equity betas for the firms presented in the case (using Jan-92 to Dec-96 equal weight NYSE/AMEX/NASDAQ as market portfolio):

We use Capital Asset Pricing Model (CAPM) approach to calculate the cost of equity. The formula of CAPM is re = rf + β × (E[RMkt] – rf).

Here we choose VW NYSE, AMEX, and NASDAQ data as market returns, because it’s value weighted and more reliable. The results show CSC’s equity beta = 2.27, QRG’s equity beta = 1.79.

A correct response requires that you find an appropriate industry beta and measure for levered/unlevered betas and requires that you define cost of equity capital and free cash flow (FCF) – you may need a formula for FCF.

The historical beta comes from historical data. This kind of beta would slope coefficient in a regression, and associated with company's stock returns and market returns. This approach is conceptually straightforward, and complications quickly arise in practice.

* Stock Beta: Exhibit 5 shows a detailed measurement of the company’s stock returns in relation to the rest of the market through 5-year historical price and index data. The analysis includes monthly returns of both the NYSE and the S&P 500 index in order to capture a comprehensive view of the market return. In each comparison, the monthly returns of the Target stock and market are plotted on Y-axis and X-axis respectively to get the regression line’s slope or beta. The analysis arrives at an average beta of 0.988 which indicates a similar movement of Target stock’s returns in comparison to the whole market over time.

The Equity beta for the whole company and for the commercial division is calculated in the appendix.

1.a) To value Spyder Active Sports Inc., we decided to use the WACC method since we can easily value its cost of assets with the data immediately available to us in the case. We first unlevered the beta’s of 7 comparable companies and took the average to get a comparable unlevered beta for Spyder (Exhibit 1). Since we are assuming Spyder is entirely equity financed, its unlevered asset beta is equal to the beta of its assets. We now have a rough estimate of Spyder’s asset beta, we can

C. What impact does Wiebold's stock split have on (1) total stockholders' equity, (2) total par value, (3) outstanding shares, and (4) book value per share?

By using the company return and the Value Weighted Returns of the Market, we derived the companies’ levered equity betas and then unlevered them.

First, in order to facilitate the calculations, I referred to betas from Exhibit 9 and selected the value for Boeing calculated in comparison to the S&P 500 Index for the

The equity valuation ratios as seen from portfolio compare the two shares I traded. This comparison enables me to compare a stock’s per-share price. It has become a major problem to control unnecessary volatility of

Ameritrade has been a pioneer in the deep-discount brokerage sector, since it formed in 1971. Ameritrade not only helped to create the deep discount market but it also was the first to offer many new services that changed the way individual managed their portfolio. The average return on equity during 1975 – 1996 was 40% and recent returns in the last five years were much larger than the 40% average. In March 1997, Ameritrade raised $22.5 million in an initial public offering allowing the company to continue adopting the latest advances in technology and to increase advertising to build its brand and improve market share.

This yields a daily return of 0.05% and an annualized return for the NASDAQ of 18.09%. After this has been carried out, the daily and annualized standard deviations are also found for both MSFT and NASDAQ. The daily standard deviation for the same period is considered which comes to around 2.74% and then this amount is annualized to yield an annualized standard deviation of 52.29%. The same process gives a daily standard deviation of NASDAQ as 1.43% and annualized standard deviation is 27.35% (Figure 1). In order to find the beta associated with the company, the same amounts are used and the covariance of MSFT and NASDAQ re divided by the variance of the market which is NASDAQ. This leads to a beta of 0.969 for the stock