2. Given the following information:

Cost of acquiring customer: $5

Monthly profit margin from customer: $1.5

Annual retention rate: 70 percent

Costs and revenues grow at 2.5 percent annually

Discount profits at 10 percent per year

Tax rate: 38 percent

Assume the profit during the month is based on the ending number of customers and the market value of

January 2021 is $8 billion. In the file AmazonData.xlsx, t = 1 is March 1997 and so on. For example,

through the end of September 1997, there are 6.34 million people had tried Amazon.com.

For each month you might have the following columns:

Month

N(t) = Total number of customers who have tried Amazon.com by end of month t

Quits = Number of customers leaving Amazon.com during each month

Ending customers

New customers

Profit margin

Acquisition costs

After-tax profits

Use this information to get a value of Amazon.com as of January 2021. Run 420 total months (35 years)

and determine whether you believe that at the beginning of January 2021 Amazon.com was fairly valued.

Show all the steps and your analysis.

The data is as follow:

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