Section 1 (3 credits): Analyze company's financial performance based on provided financial statements Read the case and financial statements carefully and answer the following questions: 1. what business is Ameritrade in? 2. what is Ameritrade's competitive advantage compared to other companies in the industry? 3. what are the revenue sources? 4. Based on the Income Statements and Balance Sheet, calculate 3 financial ratios of your choice and explain the implications of your results. Section 2 (3 credits): Evaluate investment projects Read the "Planned investments of cost of capital" part of case carefully and answer the following questions: 1. what is Ameritrade's strategic goal? 2. what are some of strategies that Ameritrade is going to implement 3. what investment projects do the company plan to evaluate and potentially take on? 4. what kind of rate of returns are expected? 5. what discount rates have been used in evaluating Ameritrade? Section 3 (4 credits): Estimate cost of capital Based on the case information and information from Exhibit 1-5 (view Exhibit 5 HERE), come up with your estimate of the WACC of the company and justify your estimates: 1. estimate the cost of debt based on data from Exhibit 3 and historical data of corporate bonds . Assuming the company issued 20-year bonds, which annualized yield to maturity is appropriate as an estimate of cost of debt? briefly justify your choice. 2. estimate the cost of equity using either SML: a. explain why you cannot use dividend growth model in this case. b. what is your choice of risk-free rate? c. what is your choice of market rate of return? d. pick the company's beta from this website e. briefly justify your choices. 3. estimate the capital structure weights based on Exhibit 4 (debt/value: market value of debt / total market value of the firm). 4. assume the company has 30% tax rate, what is the estimated weighted average cost of capital for the company? 5. how is your estimated cost of capital compared to the discount rates that have been used in evaluating Ameritrade?