What is amazon weighted average cost of capital

Reference no: EM132759231

Problem 1: The dividend growth model is used to calculate

A. the cost of debt by using the equation for a growing perpetuity, plugging in the current price of the bond, the coupon, and the expected growth rate and solving for R(D).

B. the weighted average cost of capital by using the equation for a growing perpetuity, plugging in the current price of the stock, the dividend paid, and the expected growth rate. Then we solve for R(E).

C. the cost of equity by comparing the dividend growth to similar firms.

D. the cost of equity by using the equation for a growing perpetuity, plugging in the current price of the stock, the dividend paid, and the expected growth rate. Then we solve for R(E).

Problem 2: Amazon Inc. (AMZN) has 55 percent equity-to-asset ratio. The average yield to maturity on AMZN's bonds is 3.2 percent; assume a tax rate of 30 percent. The firm's estimated required rate of return on equity is estimated at about 10.8 percent. What's Amazon's weighted average cost of capital (WACC)? (Round to the nearest tenth of a percent.)

A. 6.1 percent

B. 7.3 percent

C. 6.6 percent

D. 6.9 percent

Reference no: EM132759231

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