Short and simple financial findings
sumeetmadh
Amazon.docx
The Estimated is 0.1408 but the actual Beta of Amazon is 1.71 and thus estimated Beta is very low
The risk-free rate represented by 30-year yield of US treasuries is 2.86% and equity premium is 5.54% so the expected return = Rf + beta*(Rm-Rf)
= 2.86%+0.1408*(5.54%) =3.62%
Cost of Debt = Interest Expense/Total debt
= 1417000/119099000
= 11.90%
Tax Rate = Taxes/Earning before taxes
= 1197000/11261000
= 10.63%
Debt/ (Deb+ Equity) = 119099000/162648000 = 73.23%
Equity/ (Deb+ Equity) = 26.77%
WACC = 0.2677*0.0362+0.7323*0.1190*(1-0.1063) = 8.76%
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Year |
Cash Flow |
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0 |
-10 |
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1 |
15 |
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2 |
15 |
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3 |
15 |
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4 |
15 |
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5 |
15 |
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6 |
15 |
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7 |
15 |
|
8 |
15 |
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9 |
15 |
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10 |
15 |
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NPV = |
$87.29 |
NPV =
Since NPV is Greater than 0, the Investment is Viable
https://finance.yahoo.com/quote/AMZN/
https://www.nasdaq.com/symbol/amzn
https://fred.stlouisfed.org/series/DTB3
https://www.federalreserve.gov/data download/Choose.aspx?rel=H15
Amazon Vs S&P 500
y = 0.1408x + 0.0764 R² = 0.0971
0.70268270129220201 0.42822749402359617 0.18431130365467846 9.4480399167237647E-2 0.19825856899459088 0.38684112736591053 0.56382481047898148 0.4023710974029025 0.69313184135106143 0.1583904236609017 0.35962001319787834 0.14908700064560498 2.5153855851238829E-2 0.14282744035300349 0.17925975993541879 0.10698801148778496 -9.6906564356409024E-3 0.15440850938555326 0.11066609488408628 8.2755214948733821E-2
S&P 500
Amazon
