What is amazon weighted average cost of capital

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Suppose, Amazon has free cash flow to firm (FCFF) of $700 million and free cash flow to equity (FCFE) of $620 million. Amazon's before-tax cost of debt is 5.7 percent and its required rate of return for equity is 11.8 percent. The company expects a target capital structure consisting of 20 percent debt financing and 80 percent equity financing. The tax rate is 33.33 percent, and FCFF is expected to grow forever at 5.0 percent. Amazon has debt outstanding with a market value of $2.2 billion and has 200 million outstanding common shares.

i) What is Amazon's weighted average cost of capital?

ii) What is the total value of Amazon's equity using the FCFF valuation approach?

iii) What is the value per share using this approach?

Reference no: EM132691159

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