According to finbox.com, Amazon’s Weighted Cost of Capital (WACC
(Weighted Average Cost of Capital)) is currently 9.75%. WACC is the
rate that the company is expected to pay, on average, to its security
and finance assets.
Their cost of equity range is 9.5%-11.5%. A range of factors, both
internal and external, can impact a company's WACC. Currently the
change in interest rates would be a major factor that would impact
Amazon. Over the past few months, the Federal Reserve has steadily
increased interest rates. As the interest rate increases, the cost of
capital increases and the risk of default. The longer the time to
maturity on the debit, the longer it will take for the impact to be felt.
Another factor for risk is that interest is deductible and affects the
company's tax burden and net profit. The higher the tax rate, the
higher the interest and the higher deduction. The lower net profit
due to the deduction impacts on the shareholders' equity. (no date)
The Complete Toolbox for Investors. Available at:
https://finbox.com/NASDAQGS:amzn/models/wacc (Accessed:
December 8, 2022).
Folger, J. (2022, September 1). Interest rates and other factors that
affect WACC. Investopedia. Retrieved December 8, 2022, from
https://www.investopedia.com/ask/answers/070114/how-do-
interest-rates-affect-weighted-average-cost-capital-wacc-
calculation.asp
