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Guidelines for the “Cost of Capital at Ameritrade” Case

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FIN 5439 – Capital Structure and Risk Management
Nimlendran

Guidelines for the “Cost of Capital at Ameritrade” Case

This is a group assignment: * Each group will provide answers to the questions given below
Note: You do NOT have to provide a full case report * Submit only one report per team. Submit a word document on Canvas course site. * The report should be well formatted and using 12 point font. Double spaced. All the tables should have their headings and all the units (% , million etc.) clearly indicated.
A Word document should be submitted on the course website by one team member before the deadline: All calculations and estimates using Excel should be in formatted tables and inserted directly into the Word document. Note: From the Excel output, only include the important estimates and relevant statistics such as t-stats and standard errors.
GRADIN RUBRIC
Grade

Item | Points out of 100 | Presentation including grammar and style, tables, follow instructions) | 20 | Q1 | 10 | Q2 | 10 | Q3 | 10 | Q4 | 20 | Q6 | 30 |

Learning Objectives

The case provides an opportunity to understand how capital market data and asset pricing model(s) can be used to estimate the cost of capital (or the required rate of return) for real investments. You do NOT have to write a formal report, but you should provide concise answers with all the assumptions stated clearly for the questions given below. * Estimate stock returns from prices by adjusting for stock splits and stock dividends * Use the EXCEL to estimate stock betas from regression models using the appropriate market returns * Estimate asset betas by unlevering equity betas * Estimate the appropriate inputs for the CAPM (Risk free rate, market risk premium, and beta) * Use of pure play companies to estimate cost of capital for firms * Learn how to use

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