User Account

All Pages

TD Ameritrade-Cost of Capital-What does Ameritrade do

Assignment Help Operation Management
Reference no: EM132385145

TD Ameritrade; Cost of Capital - Complete this assignment as a group outside of class. Provide a typed written report of your analysis (not a list of answers to the questions). This should include a statement of the problem along with any issues you believe are relevant for your analysis. Use Exhibits, Tables or Figures to illustrate any calculations. Label and format them correctly. See the resources provided in the team case folder. Participation and team attendance are required for the case presentation and discussion on Wednesday, October 9th
and are worth 10% of your grade.

1. Briefly describe the situation presented in the case. In doing this, be sure to address the following:

a. What does Ameritrade do?

b. Who is Joe Ricketts and what is his role in the company and regarding this WACC analysis?

c. Summarize recent developments with Ameritrade. Why do they want to calculate their cost of capital, and why are they hiring a consultant to do the calculation?

2. Discuss the following issues related to WACC (cost of capital):

a. What is the WACC and why is it important for Joe Ricketts and Ameritrade?

b. Is a firm's WACC set by managers or investors? Explain.

c. Is it possible to determine the exact cost of capital? Why or why not?

Assume your team is hired as the consultant to calculate the cost of capital for Ameritrade:

3. Calculate Ameritrade's cost of equity using the SML (CAPM). In doing so, it is necessary for you to identify the appropriate risk-free interest rate, the appropriate beta, and the appropriate value for the market risk premium. Use the information provided in the case, discuss the alternatives for each and make your decisions. Use your textbook as a reference and use what you have learned in class. Justify your choices. Show your calculations in Tables or Exhibits.

a. Ameritrade had a recent IPO (just before the case was written) and does not have sufficient stock returns to estimate their beta.

i. Use the Pure Play method to estimate Ameritrade's beta. Market value capital structure ratios (Debt/Value) are given in the case for competitors. Note that this is the Debt Ratio, NOT the Debt/Equity ratio.

ii. Comparable firm betas (in 1997): Charles Schwab = 2.00, Quick & Reilly = 2.23, Waterhouse = 1.85

iii. Comparable firm tax rates (in 1997): 25% for all three comparable firms

iv. Ameritrade currently does not have any LT Debt. However, they expect to raise funds using LT Debt for their planned technology investment. Use this value (provided in the case) for the market value of debt for both this calculation and WACC.

b. A Pure Play example is posted on BbLearn with the case questions.

4. Ameritrade is not currently paying a dividend so the DDM calculation for cost of equity is not useful. Explain why Ameritrade may not be paying a dividend currently (in 1997).

5. Find Ameritrade's cost of debt using the information provided in the case. Use the information given in the case to find the company tax rate and calculate after-tax cost of debt.

Use the average tax rate from the last three years.

6. Calculate Ameritrade's WACC using your results from parts 3. and 5. (above) and case information. Describe and explain what you have done. Show all calculations in a Table or Exhibit.

7. Be prepared to explain your results (in class) to Joe Ricketts when you present him your estimate for Ameritrade's cost of capital (WACC).

a. Prepare a 1-2 minute summary to present your WACC findings to Joe Ricketts, and advise him whether or not Ameritrade should make the investment. Justify your WACC and advice regarding the investment. Include your presentation summary here
that you will present in class.

b. All members should be prepared to discuss the team's WACC analysis including justification for assumptions made and inputs used in your calculations.

Attachment:- TD Ameritrade- Cost of Capital.rar

Attachment:- GroupCase-Ameritrade.rar

Attachment:- Pure Play Method for Estimating Project Betas.rar

Reference no: EM132385145

Questions Cloud

Examples of BMW entering new national market : Examine 3 examples of BMW entering new national market. Find examples of export, turnkey, licensing, joint venture and acquisition and/or greenfield strategies.
Highlight your concerns about the current inventory system : Analyze the potential issues the company faces with its current inventory system. Highlight your concerns about the current inventory system.
Select famous celebrity who is spokesperson : Select a famous celebrity who is a spokesperson, or who you believe would make a good spokesperson.
Transactional vs. transformational characteristics : This individual paper should particularly address leadership styles, including a comparative analysis of transactional vs. transformational characteristics,
TD Ameritrade-Cost of Capital-What does Ameritrade do : TD Ameritrade-Cost of Capital-What does Ameritrade do? What is the WACC and why is it important for Joe Ricketts and Ameritrade?
MGMT 601-Organizational culture and communication : MGMT 601-Organizational culture and communication. How to change status quo to new model. Trends in organizational behavior and how to adapt it in organization.
Create graphics aid in the understanding of the parameters : Create graphics (minimum of one) to aid in the understanding of the parameters used in the table. Each parameter must be represented graphically.
Everyone is going to write white paper : For this assignment, everyone is going to write a white paper. A paper that explains how a firm might do a better job of identifying customers.
Describe the operation process of the production system : Describe the nature of operations management in the organization. In doing this, first describe the operation process of the production system.

Reviews

Write a Review

Operation Management Questions & Answers

  Book review - the goal

Operations Management is about a book review. Title of the book is "Goal". This book has been written by Dr. Eliyahu Goldartt. The book has been appreciated by many as one of those books which offers an insight into the operations and strategic capac..

  Operational plan in hospitality enterprise

Operational plan pertaining to a hospitality enterprise is given in detail in the solution. The operational plan is an important plan or preparation which gives guidelines regarding the role and responsibilities of each and every operation at all lev..

  Managing operations and information

Recognise the importance of a strategic approach to the development and deployment of organisational information systems. Demonstrate an understanding of the importance of databases and their integration to the organisation's overall information mana..

  A make-or-buy analysis

An analysis of the holding costs, including the appropriate annual holding cost rate.

  Evolution and contributor of operations management

Briefly explain Evolution and contributor of Operations management.

  Functions and responsibilities of an operations manager

A number of drivers of change have transformed the roles, functions and responsibilities of an operations manager over recent years. These drivers have not only been based on technological innovations but also on the need for organisations to develop..

  Compute the optimal order quantity

Compute the Optimal Order quantity of DVD players. Determine the appropriate reorder point.

  Relationship to operations practice in the organisation

Evaluate problems in operations and identify approaches to overcoming them. Critically evaluate operating plans and identify areas for improvement. Justify, implement and evaluate changes to operations in line with modern approaches.

  A make or buy analysis

Develop a report for Figi Fabricating that will address the question of whether the company should continue to purchase the part from the supplier or begin to produce the part itself.

  Prepare a staffing plan

Prepare a staffing plan showing the change of your unit from medical/surgical staffing to oncology staffing.

  Leadership styles in different organizations

Ccompare the effectiveness of different leadership styles in different organizations

  Risk management tools and models

Be able to understand the concept of risk, roles and responsibilities for risk management and risk management tools and models.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd