AMAZON.com: Weighted Average Cost of Capital (WACC)
Not what you're looking for?
Please show work and calculations.
Estimate the components of the cost of capital for AMAZON using MARKET data:
(a) For the cost of common stock, analyze using the dividend growth model and beta estimate using the dividend growth model and CAPM. To determine Beta, first use published sources. Next calculate your own beta estimate using regression analysis with 52 weeks of daily data. See the textbook's website to DOWNLOAD the regression tool kit from Chapter 6 (Financial Management Theory and Practice, 14th Edition, Brigham & Ehrhardt), If the published estimated and the results of your regression analysis differ, justify your final choice of Beta for the WACC determinations.
(b) Calculate the cost of preferred stock.
(c) Calculate the cost of DEBT. Recall that you do NOT use the coupon rate, but instead use the YTM for each bond issue.
(d) Determine the appropriate weights for each of the categories using MARKET values.
(e) Calculate the company's WACC.
(f) In your opinion, has the company minimized its WACC? What could it have done differently? Recall that more debt increases the risk of BANKRUPTCY and more equity means the flotation costs of issuing stock.
(g) Provide reasons why or why not the current WACC is appropriate for future use by the company. If not, explain which WACC should be used for future business decisions.
Purchase this Solution
Solution Summary
Compute Amazon's weighted average cost of capital
Solution Preview
Please see attached files
Addendum:
Question G
The firm ...
Purchase this Solution
Free BrainMass Quizzes
Motivation
This tests some key elements of major motivation theories.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.