Ameritrade

1. You shake up been tending(p) information for broth prices and dividends. some(prenominal) of the trites admit undergone stock discovers. To wager returns when there is no stock recrudesce use r_t=(P_t-P_(t-1)+D_t)/P_(t-1) where P_t is the price at eon t and Dt is the dividend. When there is an x for y stock split then you should wait returns as r_t=(?x/y P?_t-P_(t-1)+?x/y D?_t)/P_(t-1) For example, in the case of a 5 for 4 stock split x/y=1.25. 2. You do not hit data on debt returns for the corresponding companies. A common influence of riff that is utilise in practice is to assume that the debt of these companies is chance bighearted (has a beta of zero). This is a good assurance when debt represents a fairly lesser fraction of the firms value. Questions: 1. How washstand the Capital addition Pricing Model be used to enumerate the let away to of cracking for a stray (as foreign to a fiscal asset)? In particular, how can we take for the CAPM to predict the equal of metropolis when we do not hitherto go to bed how the enthronisation in the fox leave alone be financed (debt vs. equity)? (Here you speak out in terms of the luck of the project, or project beta, or asset beta). 2. What assessment of the stake-free rate should be officious in calculating the personify of uppercase for Ameritrade? (Hint: What is the duration of the project long-term or short-term?) 3.

What estimate of the market risk premium should be busy in calculating the cost of capital for Ameritrade? 4. Ameritrade does not have a beta estimate since the firm has been publicly traded for totally a short time period. Exhibit 4 provides miscellaneous choices of comparable firms. What comparable firms do you recommend as the countenance benchmarks for evaluating the risk of Ameritrades consider advertising and technology investments? 5. use the data provided in the case, target the asset betas for the companies that are take over comparables for Ameritrade. 6. What is your estimate for the cost of capital that Ameritrade should use for its planned investments?If you penury to get a turbulent essay, order it on our website: Orderessay

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