Solution
Priyanka answered on
Jul 29 2021
Sheet1
Year FCFF Terminal Value Present Value
1 ($99,185.53) ($87,073.59)
2 ($122,578.50) ($94,469.28)
3 ($89,485.95) ($60,543.75)
4 ($47,177.38) ($28,021.18)
5 ($35,445.83) ($18,482.29)
6 $29,288.26 $13,502.86
7 $124,343.44 $51,053.14
8 $164,173.80 $60,467.09
9 $284,321.75 $94,626.40
10 $307,314.08 $6,195,142.08 $1,969,978.32
$1,901,037.72
$36,031.80
Option Valuation
Valuing Options or Wa
ants when there is dilution Source: people.stern.nyu.edu/adamoda
pc/valns/amazon.xls
Enter the cu
ent stock price = 1972
Enter the strike price on the option = 18.71
Enter the expiration of the option = 8
Enter the standard deviation in stock prices = 50.00% (volatility)
Enter the annualized dividend yield on stock = 0.00%
Enter the treasury bond rate = 5.00%
Enter the number of wa
ants (options) outstanding = 6.01
Enter the number of shares outstanding = 52.76
VALUING WARRANTS WHEN THERE IS DILUTION
Stock Price= 1972 # Wa
ants issued= 6.01
Strike Price= 18.71 # Shares outstanding= 53
Adjusted S (DO NOT ENTER)= 1970.5722243985 T.Bond rate= 5.00%
Adjusted K (DO NOT ENTER)= 18.71 Variance= 0.2500
Expiration (in years) = 8 Annualized dividend yield= 0.00%
Div. Adj. interest rate= 5.00%
d1 = 4.2829606996
N (d1) = 0.9999907789
d2 = 2.8687471372
N (d2) = 0.9979394944
Value of the call = $1,958.04
Number of Options = 6.01
Value of Options = $11,767.81
The Valuation of Amazon
A Valuation of Amazon Source: people.stern.nyu.edu/adamoda
pc/valns/amazon.xls
Those cells in which amount are entered are marked in blue and amount in millions except share data)
This model is designed to value a firm, with two stages of growth, an initial
period of higher growth and a subsequent period of stable growth.
Assumptions
1. The firm is expected to grow at a higher growth rate in the first period.
2. The growth rate will drop at the end of the first period to the stable growth rate.
3. The free cashflow to equity is the co
ect measure of expected cashflows to stockholders.
The user has to define the following inputs:
1. Length of high growth period
2. Expected growth rate in earnings during the high growth period.
3. Capital Spending, Depreciation and Working Capital needs during the high growth period.
4. Expected growth rate in earnings during the stable growth period.
5. Inputs for the cost of capital. (Cost of equity, Cost of debt, Weights on debt and equity)
Inputs to the model
Cu
ent EBIT = $12,421.00 (in cu
ency)
Cu
ent Net Income = $10,073.00 (in cu
ency)
Cu
ent Dividends = $0.00 ( in cu
ency)
Cu
ent Interest Expense = $0.00 (in cu
ency)
Cu
ent Capital Spending $13,427.00 (in cu
ency)
Cu
ent Depreciation = $15,341.00 (in cu
ency)
Tax Rate on Income = 36.00% (in percent)
Cu
ent Revenues = $232,887.00 ( in cu
ency)
Cu
ent Working Capital = $72,043.00 (in cu
ency)
Chg. Working Capital = $0.00 (in cu
ency)
Book Value of Debt = $0.00 ( in cu
ency)
Book Value of Equity = $213,356.00 (in cu
ency)
Weights on Debt and Equity
Is the firm publicly traded ? Yes ( Yes or No)
If yes, enter the market price per share = $1,973.82 (in cu
ency)
& Number of shares outstanding = 491.20 (in #)
& Market Value of Debt = $0.00 ( in cu
ency)
If no, do you want to use the book value debt ratio ? (Yes or No)
If no, enter the debt to capital ratio to be used = (in percent)
Enter length of extraordinary growth period = 10 (in years)
Costs of Components
Do you want to enter cost of equity directly? No (Yes or No)
If yes, enter the cost...