Suppose Amazon.com Inc pays no dividends but spent $3. 16 billion on share repur

Question

Suppose Amazon.com Inc pays no dividends but spent $3. 16 billion on share repurchases last year. balon on share repurchases last year Amazon's equity cost of captal is 7 7% and Ithe amount spent on repurchases is expected to grow by 6 1% per year, esinat Amazon's market capitalization If Amazon has 442 million shares outstanding. what stock price does this correspond to? Estimate Amazons market capitalization Amazon's market capitalization isbilion Round to two decimal places) If Amazon has 442 million shares outstanding, what stock price does this cormespond to? The stock price per share is Round to the nearest cent

Explanation / Answer

Answer :-

Formula used :- price of share purchased in last year (1+g)/ cost of equity

Here, price of shares purchased in last year = $3.16 billion, g = growth rate = 6.1% per year, cost of equity = 7.7%

Market capitalization this year of Amazon will be

= $3.16 billion (1+0.061)/0.077

= $43.54 billion

If Amazon 442 million shares outstanding then stock price per share is

= $43.54 billion / 0.442 billion shares

=$ 98.51 per share

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