Please show work for rating... Based on last year’s results and various projecti
ID: 2763158 • Letter: P
Question
Please show work for rating...
Based on last year’s results and various projections of its future operations, you have determined that Amazon Corporation's free cash flows this year will be $3,452 million with future free cash flows growing at 3% per year. The company has net nonoperating obligations of ${nno] million (i.e., nonoperating liabilities exceed nonoperating assets by $-368 million). The weighted average cost of capital is 13% and there are 695 million shares of common stock outstanding. What should be the value of the company's common stock? Present your answer to two decimal places (e.g., $20.00).
Explanation / Answer
Discount rate =13% , growth rate = 3% , Net Non operating obligations= $-368 Million , Free Cash Flow= $3,452 million
Present value of the firm = Net Non operating obligations+ (Free Cash Flow)/(Discount rate-growth rate)
= $-368 million + ($3,452)/(13%-3%)
= $ 34152 Million
Outstanding Shares = 695 million
Per Share Stock Price = Present value of the firm/Outstanding Shares
= $ 34152 Million/ 695 million
= $ 49.14