Finance Instrument and Markets - Desklib

Running head: FINANCE INSTRUMENT AND MARKETS
Finance instrument and markets
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1FINANCE INSTRUMENT AND MARKETS
Table of Contents
Question 4..................................................................................................................................2
Answer (a)..............................................................................................................................2
Answer (b)..............................................................................................................................2
Answer (c)..............................................................................................................................5
Answer (d)..............................................................................................................................6
Reference....................................................................................................................................7

2FINANCE INSTRUMENT AND MARKETS
Part A
Question 4
Answer (a)
Industry and company analysis
E-commerce is regarded as selling and buying of services or products exclusively
using the electronic channels. E-commerce market in US has evolving constantly for over the
last decades. Retail e-commerce in US is expected to grow at fast space in future years and it
is expected that the sales will grow from 360 billion in 2016 to 638 billion in 2022. However,
Amazon is the most accepted in US. Amazon also ranked ahead of pack with regard to US e-
commerce sales in 2017 (Scarborough 2016). It generated dollars amounting to more than 54
billion through e-commerce sales. On the other hand, e-Bay is another successful online
retailer that is ranked among most popular e-commerce organization in US. Emerging in
1990, both Amazon as well as e-Bay assisted in expansion of global electronic sector.
Though both the companies are multinational corporations for e-commerce, e-Bay is
exclusively the market place for conducting the business whereas the Amazon is retailer as
well marketplace (eBay 2018). Initially, Amazon was formed as online bookstore however; it
expanded to superstore through selling the digital media and physical products. On the
contrary, e-Bay is transformed as online marketplace from just the collectibles.
However, Jet.com is new entrant in US e-commerce market and is providing
competitive prices that can become strong threat for Amazon. However, as brand loyalty for
Amazon is significantly strong with high engagement of consumer for 93% that means
consumers have strong trust for the brand and are likely to go for the repeat purchase from
Amazon. This can act as the barrier to new entrants in market (Turban et al. 2017). Further,
electronic products those are the major products for Amazon are comparatively costly in
Jet.com. Hence, in such situation Amazon has strong supply chain with low cost and threat
from new entrants may be reduced in this way (Ritala, Golnam and Wegmann 2014).
Answer (b)
Theoretical price for share can be computed through various ways. One of the ways is
computing through using the dividend discount model that uses the current dividend of the
stock and the expected dividend growth rate for determining theoretical current price of the