Practice · graded on a filing

WACC build-up — AMZN

Build it from AMZN’s latest annual filing. Every line you enter is checked by code against the filing.

What this drill asks

Derive an effective tax rate from the filed tax figures, cost the filed debt and tax-affect it, cost the equity by CAPM from a stated risk-free rate, beta and premium, weight the two by the filed debt and a stated equity market value, and blend them into a weighted average cost of capital. Every cell is a percentage; the model stops at the rate and is never applied to a company's cash flows here. Every figure you are given comes from AMZN’s latest annual filing and is cited below; the assumptions are handed to you and are never graded. Nothing here is a view on the company.

Match the AI

You–/6

AI model6/6

An AI model worked this exact drill and got 6 of 6 lines right. Match it.

Claude Sonnet 5, given the same filed figures and stated assumptions you see, scored by the same grader. One run, on 2026-09-28, not retried. It does arithmetic on this filing only and never forms a view on the company.

Reconcile AMZN's model from the filed figures below (as of 2025-12-31). Derive each linked line in the unit its label names — the model must reconcile end to end.

Given (filed figures)

Interest expense (FY2025, filed; includes finance-lease interest, so finance leases are in total debt below): $2,274,000,000
Income tax expense (FY2025, filed): $19,087,000,000
Pre-tax income (FY2025, filed): $97,311,000,000
Long-term debt, noncurrent (filed, 2025-12-31): $65,648,000,000
Current portion of long-term debt (filed, 2025-12-31): $2,748,000,000
Finance lease liabilities (filed, 2025-12-31): $12,286,000,000
Total debt — the two filed debt lines plus finance leases (not a filed line item): $80,682,000,000
Book equity (filed, 2025-12-31) — the carrying amount, not the weighting basis: $411,065,000,000

Stated assumptions — given to you, not filed

Risk-free rate (stated assumption — not a filed figure; the US treasury rate Damodaran Online (NYU Stern) quotes beside the implied premium below, as of 2026-08-01): 4.74%
Equity risk premium (stated assumption — not a filed figure; Damodaran Online (NYU Stern) implied ERP, trailing 12 month with adjusted payout, as of 2026-08-01): 4.28%
Levered beta (stated assumption, a teaching input — the same 1.2 for every company in this drill, not AMZN's measured beta; not a filed figure): 1.2×
Equity market value (stated assumption, a teaching input — the same $1 trillion for every company in this drill, not AMZN's own equity value; not a filed figure and not a price. It is what the weights use, which is why the filed book equity above is not): $1,000,000,000,000

Derive the linked lines

Effective tax rate — filed income tax expense ÷ filed pre-tax income, in percentAfter-tax cost of debt — filed interest expense ÷ total debt, then multiplied by (1 − the effective tax rate), in percentCost of equity (CAPM) — the stated risk-free rate + the stated levered beta × the stated equity risk premium, in percentDebt weight — total debt ÷ (total debt + the stated equity market value), in percentEquity weight — the stated equity market value ÷ (total debt + that value), in percentWeighted average cost of capital — the debt weight × the after-tax cost of debt, plus the equity weight × the cost of equity, in percent. A practice WACC on the filed debt side and the stated inputs, not AMZN's market WACC

AMAZON COM INC 10-K (FY2025, period ended 2025-12-31), accession 0001018724-26-000004, via SEC EDGAR

Educational use only — not investment advice.

In the interview

“How do you calculate WACC?”

The 30-second answer

Weight the after-tax cost of debt and the cost of equity by their shares of total capital at market value. Cost of debt is interest over debt, times one minus the tax rate, because interest is deductible. Cost of equity comes from CAPM: the risk-free rate plus beta times the equity risk premium.

Why it works: WACC is the return the business has to earn to satisfy everyone who funded it. Debt costs less, both because lenders are paid first and because interest saves tax, so adding debt lowers WACC until the extra risk pushes both costs up.
The common trap: Forgetting to tax-affect the cost of debt, or weighting by book equity instead of market value. The tax shield is the whole reason debt costs less, and investors price the equity at its market value, not the figure on the balance sheet.

The full mechanics · 5 steps

01Effective tax rate = income tax expense ÷ pre-tax income.
02Pre-tax cost of debt = interest expense ÷ total debt; after-tax = that × (1 − tax rate).
03Cost of equity = risk-free rate + beta × equity risk premium.
04Debt weight = debt ÷ (debt + equity market value); equity weight is the rest.
05WACC = debt weight × after-tax cost of debt + equity weight × cost of equity.

Comes up inIB first-round technicalsCorporate finance interviewEquity research case

How this is graded

Interest expense, income tax expense, pre-tax income, both filed debt lines and book equity, as filed in the latest annual report. The equity market value is a stated figure, not a filed one — a market value needs a price, and this page displays none. Each cell is checked against the value the same pipeline derives from that filing, inside a small tolerance band, and the model has to reconcile end to end. There is no language model in the grade — it is arithmetic over filed figures, so it returns the same verdict every time. The correct values are not in this page: they are recomputed on the server when you submit, and your entries are read as a submission, never as the answer.

Every attempt ends in a review. Each line is marked Best, Inaccuracy, Mistake or Blunder by how far it is off, and the first line that went wrong is flagged, so an error carried through the rest of the model is fixed once, where it started.

Signed out, nothing is recorded: work it as many times as you like. Signed in, each graded attempt is saved to your account so your dashboard can track it.

The same model, other filers

Each one is built from that company's own annual filing and graded the same way.

MSFT · wacc build-up NVDA · wacc build-up

Other models on AMZN

AMZN · accretion / dilution AMZN · comps (fundamentals)AMZN · dcf sensitivity grid AMZN · single-stage dcf AMZN · ebitda bridge AMZN · basic lbo

Educational use only — not investment advice. Figures come from public SEC filings; Echelon teaches you to analyze data, it never recommends buying or selling any security.

“How do you calculate WACC?”

The 30-second answer

Why it works

WACC is the return the business has to earn to satisfy everyone who funded it. Debt costs less, both because lenders are paid first and because interest saves tax, so adding debt lowers WACC until the extra risk pushes both costs up.

The common trap

Forgetting to tax-affect the cost of debt, or weighting by book equity instead of market value. The tax shield is the whole reason debt costs less, and investors price the equity at its market value, not the figure on the balance sheet.

The full mechanics · 5 steps

01Effective tax rate = income tax expense ÷ pre-tax income.
02Pre-tax cost of debt = interest expense ÷ total debt; after-tax = that × (1 − tax rate).
03Cost of equity = risk-free rate + beta × equity risk premium.
04Debt weight = debt ÷ (debt + equity market value); equity weight is the rest.
05WACC = debt weight × after-tax cost of debt + equity weight × cost of equity.

Comes up inIB first-round technicalsCorporate finance interviewEquity research case

How this is graded

Signed out, nothing is recorded: work it as many times as you like. Signed in, each graded attempt is saved to your account so your dashboard can track it.