Answer To: Please show your work in excel. Ameritrade case questions 1) What estimate of the risk-free rate...
Sanjeev answered on Jan 28 2021
Exhibit 1
Exhibit 1 Consolidated Annual Income Statements for the Fiscal Year Ending in September
1997 1996 1995
Net Revenues
Transaction Income $51,936,902 $36,469,561 $23,977,481
Net Interest 18,193,946 11,477,878 8,434,584
Other 7,107,492 6,391,314 2,607,538
Total Net Revenues 77,238,340 54,338,753 35,019,603
Expenses Excluding Interest
Employee Compensation 19,290,808 14,049,642 8,481,977
Commissions and Clearance 3,320,262 2,530,642 2,516,796
Communications 5,623,468 3,685,535 2,352,590
Occupancy and Equipment Cost 5,422,839 2,889,654 1,626,725
Advertising and Promotion 13,970,834 7,537,265 4,842,392
Provision for Losses 59,000 148,014 1,428,663
Amortization of Goodwill 363,002 363,002 94,152
Other 7,763,014 4,717,406 2,846,280
Total Expenses Excluding Interest 55,813,227 35,921,160 24,189,575
Income Before Income Taxes 21,425,113 18,417,593 10,830,028
Taxes 7,602,964 7,259,248 3,798,881
Net Income $13,822,149 $11,158,345 $7,031,147
EPS $1.00 $0.87 $0.55
Shares Outstanding 13,768,889 12,813,823 12,813,823
Source: Ameritrade Annual Report, 1997.
&P
Exhibit 2
Exhibit 2 Consolidated Annual Balance Sheets for the Fiscal Year Ending in September
1997 1996
ASSETS
Cash and Cash Equivalents $53,522,447 $15,767,170
Cash and Investments Segregated in Compliance with Federal Regulations 319,763,921 175,668,497
Receivable from Brokers, Dealers, and Clearing Organizations 17,823,640 15,096,862
Receivable from Customers and Correspondents 325,407,147 166,075,055
Furniture, Equipment, and Leasehold Improvements 8,709,923 3,746,178
Goodwill 6,346,763 6,709,765
Equity Investments 7,597,972 7,157,783
Other Investments 5,000,000 5,000,000
Deferred Income Taxes 39,314 444,378
Other Assets 13,145,616 6,013,544
Total Assets $757,356,743 $401,679,232
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to Brokers, Dealers, and Clearing Organizations 1,404,999 1,193,479
Payable to Customers and Correspondents 666,279,440 356,942,970
Accounts Payable and Accrued Liabilities 19,252,931 7,221,008
Notes Payable to Bank -- 4,853,000
Income Taxes Payable 3,430,279 806,711
Total Liabilities 690,367,649 371,017,168
Stockholders' Equity:
Class A Common Stock 131,534 114,494
Class B Common Stock 13,644 13,644
Additional Paid in Capital 23,297,506 809,665
Retained Earnings 43,546,410 29,724,261
Total Stockholders' Equity 66,989,094 30,662,064
Total Liabilities and Stockholders' Equity $757,356,743 $401,679,232
Source: Ameritrade Annual Report, 1997.
&P
Exhibit 3
Exhibit 3 Capital Market Return Data (Historical and Current)
Prevailing Yields on U.S. Government Securities (August 31, 1997)
Annualized Yield to Maturity
3-Month T-Bills 5.24%
1-Year Bonds 5.59%
5-Year Bonds 6.22%
10-Year Bonds 6.34%
20-Year Bonds 6.69%
30-Year Bonds 6.61%
Historic Average Total Annual Returns on U.S. Government Securities and Common Stocks (1950-1996)
Average Annual Return Standard Deviation
T-Bills 5.2% 3.0%
Intermediate Bondsa 6.4% 6.6%
Long-term Bondsb 6.0% 10.8%
Large Company Stocksc 14.0% 16.8%
Small Company Stocksd 17.8% 25.6%
Historic Average Total Annual Returns on U.S. Government Securities and Common Stocks (1929-1996)
Average Annual Return Standard Deviation
T-Bills 3.8% 3.3%
Intermediate Bondsa 5.4% 5.8%
Long-term Bondsb 5.5% 9.2%
Large Company Stocksc 12.7% 20.3%
Small Company Stocksd 17.7% 34.1%
Sources: Yields are from Datastream, historical data are from Ibbotson Associates, SBBI 2000 Yearbook.
aPortfolio of U.S. Government bonds with maturity near 5 years.
bPortfolio of U.S. Government bonds with maturity near 20 years.
cStandard & Poor's 500 Stock Price Index.
dA subset of small cap stocks traded on the NYSE (1926-1981); Dimensional Fund Advisor's Small Company Fund (1982-1997).
&P
Exhibit 4
Exhibit 4 Selected Data for Comparable Firms
Debt/Value Debt/Capital
(Market Values) (Book Values)
Firm Name (Industry) Current Average
1992-1996 Current Average
1992-1996 Brokerage
Revenues (%)
A G Edwards (Investment Services)a 0.00 0.00 0.00 0.00 57
Bear Stearns (Investment Services) 0.60 0.50 0.69 0.60 35
Charles Schwab Corp (Discount Brokerage) 0.05 0.08 0.25 0.30 82
E*Trade (Discount Brokerage) 0.00 NA 0.00 NA 95
Lehman Brothers (Investment Services) 0.79 NA 0.80 0.79b 13
Mecklermedia (Internet) 0.00 0.00b 0.00 0.00b 0
Merrill Lynch & Co (Investment Services) 0.57 0.52 0.77 0.65 37
Morgan Stanley Dean Witter (Investment Services) 0.57 0.53 0.70 0.63 12
Netscape (Internet) 0.00 NA 0.00 NA 0
Paine Webber (Investment Service) 0.51 0.53 0.63 0.58 46
Quick & Reilly Group (Discount Brokerage) 0.00 0.00 0.00 0.00 81
Raymond James Financial (Investment Services) 0.05 0.04 0.07 0.06 51
Waterhouse Investor Srvcs (Discount Brokerage) NA 0.38 NA 0.70c 99
Yahoo! (Internet) 0.00 NA 0.00 NA 0
Source: Compustat; Standard & Poor's; company public filings.
aInvestment Services includes brokerage, asset management, investment banking, and trading.
bIndicates average over 1993-1996.
cIndicates average over 1992-1995.
&P
Exhibit 5
Exhibit 5 Stock Price Data for Discount Brokers
Ameritrade
Date Shares Price Dividend Stock Split
31-Mar-97 13,153 15.625 1.000
30-Apr-97 13,153 12.500 - 0
30-May-97 13,153 14.000 - 0
30-Jun-97 14,518 15.750 - 0
31-Jul-97 14,518 15.375 - 0
29-Aug-97 14,518 18.813 - 0
Charles Schwab
Date Shares Price Dividend Stock Split
30-Sep-87 29,121 15.875 - 0
30-Oct-87 29,121 7.875 - 0
30-Nov-87 29,121 6.625 - 0
31-Dec-87 25,388 6.000 - 0
29-Jan-88 25,388 6.500 - 0
29-Feb-88 25,388 9.000 - 0
31-Mar-88 25,388 7.375 - 0
29-Apr-88 25,388 7.625 - 0
31-May-88 25,388 6.875 - 0
30-Jun-88 25,294 7.250 - 0
29-Jul-88 25,294 7.500 - 0
31-Aug-88 25,294 6.750 - 0
30-Sep-88 25,328 6.750 - 0
31-Oct-88 25,328 7.500 - 0
30-Nov-88 25,328 6.750 - 0
30-Dec-88 25,354 6.750 - 0
31-Jan-89 25,354 10.250 - 0
28-Feb-89 25,354 8.625 - 0
31-Mar-89 25,354 8.875 - 0
28-Apr-89 25,354 10.125 - 0
31-May-89 25,354 11.750 0.030
30-Jun-89 25,352 11.000 - 0
31-Jul-89 25,352 16.500 0.030
31-Aug-89 25,352 15.750 - 0
29-Sep-89 25,386 14.000 - 0
31-Oct-89 25,386 13.000 0.030
30-Nov-89 25,386 12.500 - 0
29-Dec-89 25,332 13.875 - 0
31-Jan-90 25,332 13.500 0.030
28-Feb-90 25,332 15.250 - 0
30-Mar-90 25,332 17.000 - 0
30-Apr-90 25,332 15.125 0.030
31-May-90 25,332 15.750 - 0
29-Jun-90 25,099 15.250 - 0
31-Jul-90 25,099 13.625 0.030
31-Aug-90 25,099 12.625 - 0
28-Sep-90 25,255 11.375 - 0
31-Oct-90 25,255 12.625 0.040
30-Nov-90 25,255 11.875 - 0
31-Dec-90 24,464 11.375 - 0
31-Jan-91 24,464 16.000 0.040
28-Feb-91 24,464 18.250 - 0
28-Mar-91 24,464 20.250 - 0
30-Apr-91 24,464 18.125 0.040
31-May-91 24,464 22.500 - 0
28-Jun-91 24,435 24.750 - 0
31-Jul-91 24,435 27.500 0.050
30-Aug-91 24,435 28.375 - 0
30-Sep-91 25,596 31.125 - 0
31-Oct-91 25,596 37.750 0.060
29-Nov-91 25,596 32.750 - 0
31-Dec-91 38,394 30.375 - 0 3 for 2
31-Jan-92 38,394 31.875 0.040
28-Feb-92 38,394 33.250 - 0
31-Mar-92 38,479 34.625 - 0
30-Apr-92 38,479 28.500 0.060
29-May-92 38,479 28.875 - 0
30-Jun-92 38,626 23.500 - 0
31-Jul-92 38,626 24.625 0.060
31-Aug-92 38,626 22.500 - 0
30-Sep-92 38,149 18.000 - 0
30-Oct-92 38,149 20.250 0.060
30-Nov-92 38,149 24.875 - 0
31-Dec-92 37,741 26.125 - 0
29-Jan-93 37,741 30.250 0.060
26-Feb-93 37,741 32.375 - 0
31-Mar-93 37,741 36.500 - 0
30-Apr-93 37,741 32.750 0.075
28-May-93 37,741 35.250 - 0
30-Jun-93 56,612 28.500 - 0 3 for 2
30-Jul-93 56,612 29.000 0.050
31-Aug-93 56,612 32.875 - 0
30-Sep-93 57,625 34.500 - 0
29-Oct-93 57,625 34.625 0.050
30-Nov-93 57,815 31.875 - 0
31-Dec-93 57,815 32.375 - 0
31-Jan-94 57,815 29.500 0.070
28-Feb-94 57,815 27.500 - 0
31-Mar-94 57,815 26.875 - 0
29-Apr-94 57,815 28.375 0.070
31-May-94 57,815 30.250 - 0
30-Jun-94 57,114 24.750 - 0
29-Jul-94 57,114 26.750 0.070
31-Aug-94 57,114 30.750 - 0
30-Sep-94 56,829 29.625 - 0
31-Oct-94 56,829 35.375 0.070
30-Nov-94 57,325 31.875 - 0
30-Dec-94 57,325 34.875 - 0
31-Jan-95 57,325 40.000 0.090
28-Feb-95 57,325 44.375 - 0
31-Mar-95 85,988 32.250 - 0 3 for 2
28-Apr-95 85,988 34.250 0.060
31-May-95 85,988 35.000 - 0
30-Jun-95 85,896 43.875 - 0
31-Jul-95 85,896 46.125 0.080
31-Aug-95 87,061 46.625 - 0
29-Sep-95 174,122 29.000 - 0 2 for 1
31-Oct-95 174,122 22.875 0.040
30-Nov-95 174,678 24.250 - 0
29-Dec-95 174,678 20.125 - 0
31-Jan-96 174,678 25.125 0.040
29-Feb-96 174,678 25.500 - 0
29-Mar-96 174,678 25.875 - 0
30-Apr-96 174,032 24.500 0.040
31-May-96 174,032 24.250 - 0
28-Jun-96 174,989 24.500 - 0
31-Jul-96 174,989 24.125 0.050
30-Aug-96 174,989 25.000 - 0
30-Sep-96 175,166 23.000 - 0
31-Oct-96 175,166 25.000 0.050
29-Nov-96 175,166 30.250 - 0
31-Dec-96 175,173 32.000 - 0
31-Jan-97 175,173 37.500 - 0
28-Feb-97 175,173 37.500 0.050
31-Mar-97 175,173 32.000 - 0
30-Apr-97 175,068 36.625 - 0
30-May-97 175,068 40.625 0.050
30-Jun-97 175,813 40.500 - 0
31-Jul-97 176,422 47.000 - 0
29-Aug-97 176,422 42.750 0.050
E*Trade
Date Shares Price Dividend Stock Split
30-Aug-96 29,393 10.500 - 0
30-Sep-96 29,539 13.188 - 0
31-Oct-96 29,539 11.125 - 0
29-Nov-96 29,539 10.938 - 0
31-Dec-96 29,545 11.500 - 0
31-Jan-97 29,545 17.625 - 0
28-Feb-97 29,545 24.000 - 0
31-Mar-97 30,440 18.000 - 0
30-Apr-97 30,440 15.000 - 0
30-May-97 30,440 17.625 - 0
30-Jun-97 30,958 19.625 - 0
31-Jul-97 30,958 30.500 - 0
29-Aug-97 30,958 32.125 - 0
Quick & Reilly
Date Shares Price Dividend Stock Split
31-Jan-84 6,318 17.625 - 0
29-Feb-84 6,318 15.000 0.050
30-Mar-84 6,318 14.875 - 0
30-Apr-84 6,318 17.125 - 0
31-May-84 6,318 17.375 - 0
29-Jun-84 6,318 18.000 0.050
31-Jul-84 6,318 14.750 - 0
31-Aug-84 6,318 18.000 0.050
28-Sep-84 6,318 17.000 - 0
31-Oct-84 6,318 17.875 - 0
30-Nov-84 6,318 15.250 0.050
31-Dec-84 6,318 15.500 - 0
31-Jan-85 6,318 23.375 -...