1. Financial Analysis Kaytlynn Clemons Evan Whittaker

2. BACKGROUND Founded in 1994 Started as an Internet bookstore
Now the largest Internet- based retailer in the U.S.
KC:

3. PRODUCTS & SERVICES PRODUCTS SERVICES Amazon Dash Button Amazon Echo
Kindle
FireTV
Delivery of goods
Prime Air
Prime Now
Amazon Prime
Streaming Video
Cloud Storage
Services via Other Companies
i.e. Twitch KC

4. MARKETS & CUSTOMERS Domestic & International Markets
Germany
Japan
United Kingdom
Expanding in India and China
All sales and services require Internet
Higher-Income customers are a key demographic
Primary consumer age groups are and
Customers typically know what they want KC

5. COMPETITORS Only partial competition Brick & Mortar stores
Walmart, Target, BestBuy, etc.
All have websites in an attempt to compete
Online retailers
Overstock.com, Jet.com, eBay, etc. EW

6. SOURCES
All historic financial data for Amazon was collected using Bloomberg (except where noted)
Historic risk-free rate uses 10-year note rate from Treasury.gov
Historic market return rate uses S&P 500 return rate from MoneyChimp.com KC

7. HISTORIC EBIT (MILLIONS, USD) PROJECTED EBIT (MILLIONS, USD)
FORECASTS - EBIT
YEAR
HISTORIC EBIT (MILLIONS, USD)
2006
389
2007
655
2008
842
2009
1180
2010
1406
2011
862
2012
751
2013
757
2014
348
2015
2233
YEAR
PROJECTED EBIT (MILLIONS, USD)
2016
1,318.28
2017
1,438.23
2018
1,558.18
2019
1,678.13
2020
1,798.08
2021
1,918.03
2022
2,037.98
2023
2,157.93
2024
2,277.88
2025
2,397.83
*Projections utilized double exponential smoothing method*
*Projections from Crystal Ball

8. FORECASTS – TAX RATE
Projected tax rate is the average of tax rates from the previous 11 years:
YEAR
HISTORIC TAX RATE
2006
49.6%
2007
27.88%
2008
27.69%
2009
21.79%
2010
23.51%
2011
31.16%
2012
78.86%%
2013
31.82%
2014 0%
2015
60.59%
34.1%
KC:
Note how tax rate was calculated

9. FORECASTS – CAPITAL EXPENDITURES
YEAR
HISTORIC CAPEX (MILLIONS, USD)
2006
216
2007
224
2008
333
2009
373
2010
979
2011
1,811
2012
3,785
2013
3,444
2014
4,893
2015
4,589
YEAR
PROJECTED CAPEX (MILLIONS, USD)
2016
5,419.24
2017
5,971.43
2018
6,523.62
2019
7,075.81
2020
7,628.01
2021
8,180.20
2022
8,732.39
2023
9,284.58
2024
9,836.77
2025
10,388.96 EW
*Projections from Crystal Ball

10. FORECASTS - DEPRECIATION
YEAR
HISTORIC DEP (MILLIONS, USD)
2006
200
2007
246
2008
287
2009
384
2010
552
2011
1,000
2012
1,700
2013
2,500
2014
3,600
2015
4,900
YEAR
PROJECTED DEP (MILLIONS, USD)
2016
2,740
2017
3,088
2018
3,365.6
2019
3,538.72
2020
3,526.46
2021
3,251.76
2022
3,354.11
2023
3,407.33
2024
3,415.68
2025
3,391.07 KC
*Projections are moving average of last 5 years

11. FORECASTS - △ WORKING CAPITAL
YEAR
HISTORIC △WC (MILLIONS, USD)
2006
284
2007
832
2008
714
2009
1,612
2010
1,581
2011
1,464
2012
1,523
2013
767
2014
974
2015
2,557
YEAR
PROJECTED △WC (MILLIONS, USD)
2016
2,009.21
2017
2,111.39
2018
2,213.58
2019
2,315.77
2020
2,417.96
2021
2,520.15
2022
2,622.33
2023
2,724.52
2024
2,826.71
2025
2,928.90 EV
*Projections from Crystal Ball

12. FORECASTS – REINVESTMENT RATE
YEAR
CAPEX-DEP+△WC
EBIT(1-T)
REINV. RATE
2006
300
336.1
0.73
2007
810
472.39
1.71
2008
760
608.85
1.25
2009
1601
922.88
1.73
2010
1,075.45
1.87
2011
2275
593.4
3.83
2012
3608
158.76
22.73
2013
1711
516.12
3.32
2014
2267
348
6.51
2015
2246
880.03
2.55
YEAR
CAPEX-DEP+△WC
EBIT(1-T)
REINV. RATE
2016
4,688.45
868.75
5.40
2017
4,994.83
947.79
5.27
2018
5,371.6
1,026.84
5.23
2019
5,852.86
1,105.89
5.29
2020
6,519.5
1,184.93
5.5
2021
7,448.59
1,263.98
5.89
2022
8,000.61
1,343.03
5.96
2023
8,601.77
1,422.08
6.05
2024
9,247.81
1,501.12
6.16
2025
9,926.79
1,580.17
6.28 KC
*Reinvestment Rate = (CapEx-Dep+△WC) ÷ EBIT(1-T)

13. FORECASTS – FREE CASH FLOWS
YEAR
HISTORIC FCFF (MILLIONS, USD)
2006
486
2007
1,181
2008
1,364
2009
2,920
2010
2,516
2011
2,092
2012
395
2013
2,031
2014
1,949
2015
7,331
YEAR
PROJECTED FCFF (MILLIONS, USD)
2016
3,770.33
2017
4,350.11
2018
5,150.48
2019
2020
4,641.41
2021
4,738.51
2022
4,601.19
2023
4,660.37
2024
4,666.69
2025
4,642.75 EV
*Projections are moving average of last 3 years

14. HISTORIC LTD (MILLIONS, USD) HISTORIC INT EXP (MILLIONS, USD)
WACC - DEBT
YEAR
HISTORIC LTD (MILLIONS, USD)
HISTORIC INT EXP (MILLIONS, USD)
HISTORIC COST OF DEBT
2006
1,247 78
6.26%
2007
1,282 77
6.01%
2008
533 71
13.32%
2009
240 34
14.17%
2010
641 39
6.08%
2011
1,415 65
4.59%
2012
3,830 92
2.40%
2013
5,181
141
2.72%
2014
19,489
210
1.08%
2015
14,183
459
3.24%
INT EXP/LTD
Projected cost of debt is the average of the last 11 years: KC
5.99%

15. WACC – EQUITY YEAR HISTORIC # OF SHARES (MILLIONS)
HISTORIC STOCK PRICE (USD)
HISTORIC EQUITY (MILLIONS, USD)
2006
414
39.46
16,336.44
2007
431
92.64
39,927.84
2008
428
51.28
21,947.84
2009
444
134.52
59,726.88
2010
451
180
81,180
2011
455
173.1
78,760.5
2012
454
250.87
113,894.98
2013
459
398.79
183,044.61
2014
465
310.35
144,312.75
2015
471
675.89
318,344.19 EW

16. WACC – EQUITY (Continued)
YEAR
HISTORIC BETA
HISTORIC RISK-FREE RATE
HISTORIC MARKET RETURN RATE
2006
1.453
4.71%
15.74%
2007
0.893
4.04%
5.46%
2008
1.013
2.25%
-37.22%
2009
0.861
3.85%
27.11%
2010
1.149
3.3%
14.87%
2011
1.197
1.89%
2.07%
2012
1.235
1.78%
15.88%
2013
1.379
3.04%
32.43%
2014
0.881
2.17%
13.81%
2015
1.07
2.27%
1.3% EW

17. WACC – EQUITY (Continued)
YEAR
HISTORIC EQUITY (MILLIONS, USD)
HISTORIC COST OF EQUITY
2006
16,336.44
20.74%
2007
39,927.84
5.31%
2008
21,947.84
-37.73%
2009
59,726.88
23.88%
2010
81,180
16.59%
2011
78,760.5
2.11%
2012
113,894.98
19.19%
2013
183,044.61
43.57%
2014
144,312.75
12.42%
2015
318,344.19
1.23%
CAPM
Projected cost of equity is the average of the last 11 years: EW
10.19%

18. WEIGHT-ADJUSTED COST OF CAPITAL
YEAR
HISTORIC WACC (FORMULA)
HISTORIC WACC (BLOOMBERG)
2006
19.49%
10.20%
2007
5.28%
11%
2008
-36.16%
11.7%
2009
23.83%
10.4%
2010
16.5%
11.2%
2011
2.12%
12%
2012
18.59%
11.9%
2013
42.42%
11.3%
2014
11.07%
9.1%
2015
1.23%
8.7%
Projected WACC is the average of the last 11 years (using Bloomberg WACC): KC
11%

19. VALUATION – GROWTH RATE
YEAR
CASH (MILLIONS, USD)
2014
14,557
2015
15,890
(15,890/14,557)-1 =
Projected growth rate = 9.16%
(All other growth rate calculations yield g > WACC) EW

20. VALUATION – TERMINAL VALUE & TV+FCFF10
TV = FCFF11 ÷ (WACC – g)
TV = ÷ (11% %)
TV = (Millions)
TV = $282,792,010,000
FCFF10 =
TV =
TV+FCFF10 = (Millions)
TV+FCFF10= $287,434,760,000 EW

21. VALUATION – PRESENT VALUE OF FIRM
FCFF1 – 9 & FCFF10+TV
NPV (FCFF1-FCFF10+TV)
WACC = 11% (Bloomberg)
NPV = (Millions)
NPV + Cash = (Millions) EW
PV = $142,538,800,000

22. VALUATION – EQUITY & STOCK PRICE
Value of Equity = Value of Firm – Value of Debt
Value of Equity = – = (Millions)
Value of Equity = $128,355,800,000
Stock Price = Value of Equity ÷ # of Shares KC
Stock Price = ÷ 471 (Millions) =
Stock Price = $272.52

23. COMPARISON
Current market price of stock is much higher than calculated intrinsic price
$ (April 27, 2016) vs $272.52
Enterprise value via Bloomberg is much higher than PV calculation
$318 Billion Enterprise Value vs $142.5 Billion PV Calculation
Likely due to limitations of formulas and computations in this project
Other difficult factors – i.e. growth rate EW

24. LIMITATIONS
Some formulas used for this project are simplistic in nature
Access to information is somewhat limited
Evaluation of a company with such extreme fluctuation in growth is challenging KC

25. CONCLUSION
Though Amazon.com’s net income is not relatively high, it is still a valuable company
Profit from sales of goods and services is not necessarily where the value comes from
Amazon.com will likely continue to do well in the market for the foreseeable future
Incredible growth rate in recent years
Lack of direct competition
Brand recognition KC

26. THANK YOU