Question#01 Amazon Inc. is a fast-growing company. Analysts project the followingfree cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Amazon’s...

Question#01

Amazon Inc. is a fast-growing company. Analysts project the followingfree cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant

7% rate. Amazon’s cost of capital is WACC = 13%.

1. What is Amazon’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyondYear 3 discounted back to Year 3.)


2. What is the current value of operations for Amazon?

• Suppose Amazon has $10 million in marketable securities, $100 million in debt, and 10 millionshares of stock. What is the price per share?