Question#01Amazon 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 constant7% rate. Amazon’s cost of capital is WACC = 13%.Time123Free 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 securities, $100 million in debt, and 10 millionshares of stock. What is the price per share?

Answered: Question#01 Amazon Inc. is a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

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 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 securities, $100 million in debt, and 10 millionshares of stock. What is the price per share?

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