Home / Questions / 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 |
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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% |
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