Please show work for rating... Based on last year’s results and various projecti
ID: 2763161 • 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 $4,039 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 $-428 million). The weighted average cost of capital is 10% and there are 719 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 =10% , growth rate = 3% , Net Non operating obligations= -428 Million , Free Cash Flow= $4,039 million
Present value of the firm = Net Non operating obligations+ (Free Cash Flow)/(Discount rate-growth rate)
= $-428 million + ($4039 million)/(10%-3%)
= $-428 million + $ 57700 million
= $ 57272 Million
Outstanding Shares = 719 Millions
Per Share Stock Price = Present value of the firm/Outstanding Shares
= $ 57272 Million/719 Millions
= $ 79.66