Suppose amazon inc. pays no dividends but spent $ 2.95 billion on share repurchases last year. if amazon's equity cost of capital is 7.6 %, and if the amount spent on repurchases is expected to grow by 6.4 % per year, estimate amazon's market capitalization. if amazon has 428 million shares outstanding, what stock price does this correspond to?

Market Capitalization =  $261.567 Billion

Stock Price per share = $611.137 per share

Explanation:

given data

spent = $2.95 billion

equity cost of capital ke = 7.6 % = 0.076

grow =  6.4 % per year  = 0.064

shares outstanding = 428 million = 0.428 Billion

to find out

Amazon’s Market Capitalization  and stock price

solution

first we get here Amazon's market capitalization that is express as

Market Capitalization = Cash Flow (1 + g) ÷  (Ke - g)    ..............1

here g is grow rate and ke is equity cost of capital

Market Capitalization =

Market Capitalization =  $261.567 Billion

and

Stock Price per share  will be as

Stock Price per share =   ..................2

Stock Price per share =

Stock Price per share = $611.137 per share

false! basically!

i hope i'm correct.