In Recent Years, Amazon Has Lowered Its Profits by Offering

question 135

Multiple Choice

In recent years, Amazon has lowered its profits by offering some of its customers free shipping on books and building more warehouses to hold its book inventories.Which of the following explains Amazons actions?

• A)Amazon feared government regulation if its profits were too high.
• B)Amazon took these actions to deter entry into its market by new online booksellers.
• C)Amazon took these actions to compete more effectively with existing online booksellers.
• D)Amazon was forced to take these actions because of the bargaining power of its suppliers.

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Definitions:

DCF Approach

The Discounted Cash Flow approach, a valuation method used to estimate the value of an investment based on its future cash flows.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often calculated using the Capital Asset Pricing Model (CAPM).

WACC Calculation

The process of determining a company's Weighted Average Cost of Capital, incorporating the costs of equity, debt, and any other forms of financing.

Semiannually

Occurring twice a year, generally used in the context of payments, interest accruals, or reports.