Jim Cramer of CNBC recently commented that Amazon (AMZN) will start paying dividends in the mediumterm future
Question:
Jim Cramer of CNBC recently commented that Amazon (AMZN) will start paying dividends in the mediumterm
future because of all of the cash flow that it generates (coupled with a cash balance in excess of $20 billion).
When pressed on the issue, Jim made a bold forecast that Amazon will start paying its first dividend 6 years from now
in the amount of $91.50 per share. Jim also projected that the dividends would grow, over the following 4 years, by
15.00% per year, after which the growth rate would be a constant rate of 6.00%/year, forever. If the appropriate
required return (also called discount rate, because we use it for discounting!) for AMZN's stock is 10.0%, what should
today’s stock price be based on discounted valuation of the future dividends that Cramer has projected?
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1285190907
8th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw