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Calculating the WACC for Amazon

Describe how the Weighted Average Cost of Capital (WACC) is calculated in amazon.com. Evaluate the effectiveness of this approach.

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Amazon.com is amazing online super mart selling numerous items including book for which it is famous for. Now it is one of the world's leading online retailers with over 17 million customer accounts in over 150 countries. The company sells books, music, DVDs, videos, toys, electronics software, video games, home improvement products amongst others. Through its marketplace services- amazon.com auctions, zshops etc. the company has created web-based marketplaces where buyers and sellers enter into transactions involving a wide range of products.

As the company states in its 199 10-k:

"We offer our customers a superior shopping experience by providing high value through selection, convenience, ease of use, low prices, product information and an intense focus on customer service. We are a proven technology leader, having developed electronic commerce innovations such as 1-click technology, personalized shopping services, easy to use search and browse features, secure payment protections, and wireless access to our stores."

Calclating WACC
The WACC is the required rate of return that a firm must achieve in order to cover the cost of generating funds in the marketplace. Another way to think of the cost of ...

Solution Summary

The solution calculates the WACC for Amazon.

$2.19