Estimate your firm cost of equity

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Question - Please estimate what percentage of Amazon's capital comes from debt, preferred stock, and common equity. This information can be found on the firm's latest annual balance sheet. Total debt includes all interest-bearing debt and is the sum of short-term debt and long-term debt. Find an estimate for Amazon's cost of debt. One approach is to take the company's interest expense and divide it by total debt. Or you can go to Morningstar.com to find yield to maturity information on the firm's various bond issues. A longer-term issue's YTM could provide an estimate of the firm's current cost of debt to be used in the WACC calculation. Use CAPM to estimate your firm's cost of equity. Assume risk free rate is 2% and market risk premium is 5% and use the beta estimate from Yahoo to find your firm's cost of equity.

Reference no: EM132177131

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