1 / 11

Mod 7 VALUATION USING RESIDUAL ENTERPRISE INCOME

Mod 7 VALUATION USING RESIDUAL ENTERPRISE INCOME. SPECIALTY RETAIL - AMAZON Sophie Yu Section 2. Beta. OTHER beta ESTIMATES. 1.86 0.71 0.91 0.79 0.9 0.71 0.9 0.63 0.9 0.91 0.52 1. http://www.nasdaq.com http://investing.money.msn.com http://www.reuters.com

kelli
Download Presentation

Mod 7 VALUATION USING RESIDUAL ENTERPRISE INCOME

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Mod 7VALUATIONUSINGRESIDUALENTERPRISEINCOME SPECIALTY RETAIL - AMAZON Sophie Yu Section 2

  2. Beta

  3. OTHER beta ESTIMATES • 1.86 • 0.71 • 0.91 • 0.79 • 0.9 • 0.71 • 0.9 • 0.63 • 0.9 • 0.91 • 0.52 • 1 • http://www.nasdaq.com • http://investing.money.msn.com • http://www.reuters.com • http://finance.yahoo.com • http://research.scottrade.com • http://www.google.com • http://research.tdameritrade.com • http://www.firstrade.com • http://www.etrade.wallst.com • http://finance.comcast.net • http://www.zacks.com • http://www3.valueline.com

  4. Beta regression Conclusion: β=0.903

  5. Cost of equity capital using capm • Estimated β=0.903 • Treasury Long-term rate=3.42% • Market return ratePremium=11.75% • For Amazon: • Cost of Equity = 3.42%+0.903*(11.75%-3.42%)=10.94%

  6. Cost of debt capital • Interest Expense= $141 million • Average amount of interest-bearing debt=(3191+3084)/2=$3137.5million • Cost of Debt=(141/3137.5)*(1-0.37)=2.8% • On the Financial Statements: • “…hadaweightedaverageinterestrateof5.5%and6.4%asofDecember31,2013and2012…” • Astheweightedaverageinterestrateisdeclining,Iassumeinthefutureinterestwillalsodecreasegradually. • Conclusion:Costofdebt=4.5%

  7. Cost of enterprise capital • Market value of equity $164,252.66 million • Net financial obligations $(3,778.14) million • Market value of net operating assets $160,474.52 million • CostofEnterpriseCapital= • (164,252.66/160,474.52)*10.94%+(-3,778.14/160,474.52)*4.5% • =11.09%

  8. ASSUMPTIONS • Currently,Amazonhasa20%growthrate • However,itisnotgoingtogrowat20%forever • Accordingtoanalyst’sreport,Amazonisfacingproblemssuchasheavyinvestmentsinwarehouses,R&Dindeliverydrone,andincreasingcostintransportation • Nevertheless,mostoftheanalystsarestilloptimisticaboutAmazon’sfuture • Thus,Iassumethatinthenext20years,thesalesgrowthwillgraduallydropto10%andstayat10%foralongtime

  9. Valuing amazon-DCF Market Value = $357.35*454 = $162, 236.9

  10. Valuing amazon–Residualenterpriseincome Same Enterprise Value!

  11. Questions?

More Related