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Nike Case

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NIKE, INC.: COST OF CAPITAL

On July 5, 2001, Kimi Ford, a portfolio manager at NorthPoint Group, a mutual-fund management firm, pored over analysts ' write-ups of Nike, Inc., the athletic-shoe manufacturer. Nike 's share price had declined significantly from the beginning of the year. Ford was considering buying some shares for the fund she managed, the NorthPoint Large-Cap Fund, which invested mostly in Fortune 500 companies, with an emphasis on value investing. Its top holdings included ExxonMobil, General Motors, McDonald 's, 3M, and other large-cap, generally old-economy stocks. While the stock market had declined over the last 18 months, the NorthPoint Large-Cap Fund had performed extremely well. In 2000, the …show more content…

statutory tax rate was 35%. The state tax varied yearly from 2.5% to 3.5%.
Sources of data: Company filing with the Securities and Exchange Commission (SEC), UBS Warburg.

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Exhibit 2
NIKE, INC.: COST OF CAPITAL
Discounted Cash Flow Analysis

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Assumptions:
Revenue growth (%) 7.0 6.5 6.5 6.5 6.0 6.0 6.0 6.0 6.0 6.0
COGS/sales (%) 60.0 60.0 59.5 59.5 59.0 59.0 58.5 58.5 58.0

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