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Based on the WACC and OCS information below should Amazon.com, Inc. take on more debt, rep

Based on the WACC and OCS information below should Amazon.com, Inc. take on more debt, rep

Based on the WACC and OCS information below should Amazon.com, Inc. take on more debt, repurchase stock, have a seasoned equity offering? Justify your answers

Input Data (Millions Except Per Share Data)    
Tax rate     30.79%
Debt (D)     $3,457.00
Number of shares (n)     290
Stock price per share (P)   $71.91
       
       
       
       
Capital Structure (Millions Except Per Share Data)  
Market value of equity (S = P A?´ n)   $20,846.71
Total value (V = D + S)     $24,303.71
Percent financed with debt (wd = D/V) k   14.2%
Percent financed with stock (ws = S/V)   85.8%
       
Cost of Capital      
Cost of debt (rd)     3.33%
Beta (b)     1.15
Risk-free rate (rRF)     2.20%
Market risk premium (RPM)   10.30%
Cost of equity (rs = rRF + b A?´ RPM )   14.05%
       
Cost of Equity from Dividend Growth Model    
Future Dividend Growth Rate   19.05%
Last Dividend $     0.9000
Share Price $ (4/5/13)     $71.91
       
Cost of Equity from Dividend Growth Model   20.54%
       
Cost of Equity from Bond Plus Markup    
Cost of debt     3.33%
Risk Markup     9.80%
Cost of Equity from Bond Plus Markup   13.13%
Average rs     15.9%
       
WACC     13.97%
Abhinav 03-Dec-2019

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