Question: Question 3: Use below information (in thousands) to answer the questions. Forecasted numbers are the numbers that are based on analysts forecasts. That is, Alibabas

Question 3: Use below information (in thousands) to answer the questions. Forecasted numbers are the numbers that are based on analysts forecasts. That is, Alibabas forecasted revenue of $650,000 is the revenue analysts forecasted in 2019 Alibaba will have in 2020.

Question 3: Use below information (in thousands) to answer the questions. Forecasted 5. What should be the stock price of Alibaba using Amazon and NET profitability? Given this answer alone, what should we do with Alibaba?

6. What should be the stock price of Amazon using Alibaba and NET profitability? Given this answer alone, what should we do with Amazon?

7. Assume you are a hedge fund manager and want to use profitability to value firm as you believe in the value of cash and cash comes from profit. You also believe operating profit defined as sales subtracted by CGS and SG&A is the best profitability measure as it best predicts stock returns.

- With that belief, what is the stock price of Alibaba using Amazon as a matching firm?

- With that belief, what should be the stock price of Amazon using Alibaba as a matching firm?

- If the Alibaba stock price that is derived is lower than the trading price, what should you do next?

- If it is above, what should you do?

Sales revenue Sales growth Cost of goods sold Gross profit Research and development expense R&D growth Selling, general and administrative expense Interest expense Net profits before taxes Net profits after taxes Stock price per share Number of employees in thousands 2019 425,131 25% 349,535 75,596 121,099 135% 127,147 20,000 -192,650 -134,855 $166 3 Alibaba forecasted number 650,000 50% 677,500 -27,500 228,000 150% 148,750 20,000 -424,250 -296,975 2019 2,558,776 125% 2,138,155 420,621 1,024,464 250% 1,524,325 26,372 -2,154,540 -1,508,178 $1,608 16 Amazon forecasted number 3,387,761 150% 2,512,505 875,256 1,537,984 200% 1,509,787 26,372 -2,198,887 -1,539,221 5 20 Sales revenue Sales growth Cost of goods sold Gross profit Research and development expense R&D growth Selling, general and administrative expense Interest expense Net profits before taxes Net profits after taxes Stock price per share Number of employees in thousands 2019 425,131 25% 349,535 75,596 121,099 135% 127,147 20,000 -192,650 -134,855 $166 3 Alibaba forecasted number 650,000 50% 677,500 -27,500 228,000 150% 148,750 20,000 -424,250 -296,975 2019 2,558,776 125% 2,138,155 420,621 1,024,464 250% 1,524,325 26,372 -2,154,540 -1,508,178 $1,608 16 Amazon forecasted number 3,387,761 150% 2,512,505 875,256 1,537,984 200% 1,509,787 26,372 -2,198,887 -1,539,221 5 20

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