The case notes that in early 2001, despite growth in accounts and assets, the online brokerage industry suffers from the stock market decline. Snapshots of financial situation of Merrill Lynch, Charles Schwab, and E*Trade are compared to give students a clear picture of the situation at that time

These cost-of-capital exercises stress the weighted-average cost of capital, beginning with a simple capital structure and extending to a company with a complete balance sheet, including four separate debt issues. The problems demand that several different estimates of cost of equity be computed...