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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
| 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 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 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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Credit Derivatives Handbook Global Perspectives Innovations And Market Drivers
Authors: Greg Gregoriou, Paul Ali
1st Edition
0071549528, 978-0071549523
