Question#01 Amazon Inc. is a fast-growing company. Analysts project the followingfree cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Amazon’s cost of capital is WACC = 13%. Time 1 2 3 Free cash flow ($ millions) -$20 $30 $40 What is Amazon’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyondYear 3 discounted back to Year 3.) What is the current value of operations for Amazon? Suppose Amazon has $10 million in marketable
Question#01 Amazon Inc. is a fast-growing company. Analysts project the followingfree cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Amazon’s cost of capital is WACC = 13%. Time 1 2 3 Free cash flow ($ millions) -$20 $30 $40 What is Amazon’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyondYear 3 discounted back to Year 3.) What is the current value of operations for Amazon? Suppose Amazon has $10 million in marketable
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question#01
Amazon Inc. is a fast-growing company. Analysts project the followingfree
7% rate. Amazon’s cost of capital is WACC = 13%.
Time |
1 |
2 |
3 |
|
-$20 |
$30 |
$40 |
- What is Amazon’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyondYear 3 discounted back to Year 3.)
- What is the current value of operations for Amazon?
- Suppose Amazon has $10 million in marketable securities, $100 million in debt, and 10 millionshares of stock. What is the price per share?
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