(20 points) Using the Excel Template provided on the course Web site (newsecurityanalysis.com/value2025) and Capital IQ as a source of information, calculate and tabulate the following for Amazon.com, Inc. and Netflix, Inc.:

Total Book Value of Common Equity for the last 10 fiscal years. (Column B on the Template)

Total amount of dividends paid for same years. Use the amount actaully paid, not just declared. (Column C on the Template)

Book value of common equity per share (Column F on the Template)

The dividend per share for each year. (Calculated column K on the Template)

(20 points) Now perform the following calculations:

Calculate the annual rate of growth in Total Book Value, and the annual compounded rate of growth for the last 9 fiscal years. This is the growth in undistributed business value. (Template calculates this for you in column D, where annual compounded rate is in row 14)

Calculate the annual rate of growth in book value per share, and the annual compounded rate of growth for the last 9 fiscal years. (Column G)

What do we learn?

Calculate the annual rate of growth for the sum of total undistributed and distributed value (business and common dividends), and the annual compounded (the geometric average) rate for the last 9 fiscal years. (Column E)

Calculate the annual rate of growth of the sum of total undistributed and distributed value (business and common dividends) per share, and the annual compounded rate for the last 9 fiscal years. (Column H)

(10 points) Have these companies grown undistributed business values at reasonable rates over the last 9 fiscal year period? Let us define a reasonable rate something greater than 20% on average.

(10 points) Have these companies grown total wealth (business values and distributed values) at reasonable rates over the last 9 fiscal year period?

(10 points) Has the growth in undistributed business value being accompanied by the same growth in business value on a per share basis? Explain.

(20 points) Find the market price per share for each company at the end of each calendar year, and tabulate it for both companies on the same spreadsheet you built for the other numbers. Calculate the annual growth in share prices and the compounded annual rate of capital gains from owning the shares for the last 9 fiscal years. Is there any relationship between this and the growth in the book value of the shares? To find the answer to this last question, you may calculate the correlation coefficient (CORREL function in Excel) between Columns G and J.

(20 points) Now, using the dividends per share, calculate the "total return" obtained by shareholders (per share) on an annual basis AND as a compounded annual total return for the last fiscal 9 year period. Does the annual compounded rate of return on the shares have any relationship to the annual rate of total wealth generation per share by all companies? Total return means capital appreciation plus dividends. (Hint: calculate the correlation between annual rates of growth in Columns H and L)

(25 points) The results in question 7 contain lessons that you must learn about business wealth creation and how this dynamic is reflected in stock market prices. In your own words, what can you conclude?

(10 points) Recall the following graph: and tell me what two data points in your analysis for the two companies are equivalent to those on the graph. This is the profound insight about stock investing that ties stock performance to business performance. Think about it.

(20 points) Using the per share information calculate the "Price to Book" ratio or P/B ratio for each year and each company. What two observations can you make about these ratios over time?

(10 points) Companies generate wealth by being engaged in pure going concern activities and resource conversion activities. We want to find out how Netflix, Inc., Amazon.com, Inc. generate wealth, i.e. what proportion of the wealth they have generated is attributable to going concern activities and how much is attributable to resource conversion activities. The value attributable to resource conversion activities will be that undistributed business value after we account for going concern value not distributed. For the 9 year period calculate the total amount of Resource Conversion Value created for all companies.

(10 points) Calculate the proportion of all value created that can be attributed to Going Concern activities and Resource Conversion activities for all companies. How much of the total wealth generated by each company was retained in the business? Will that have any effect on going concern operations going forward?

(50 points) For each company "build" the Equity Reconciliation sheet and point out the two major sources of wealth creation.