Nike Inc Cost of Capital

sale of Nike’s high-margin products to high-end customers. Regardless of the low cost of the World Shoes, they

The report focuses on the Economic Value Added of Nike Inc. The analysis is conducted through a detailed assessment of the financial statements including income statement, balance sheet, and cash flow. Such financial statements are then applied to derive common-size statements for income statement and balance. The trends and predictions obtained from the common-size statements predict the future economic value. Similarly, the Pro-forma financial statements derived provide vital future economic performances of Nike Inc. According to the regression analysis and the assessment of the common-size and Pro-forma financial statements; Nike Inc. has a growth in revenue and earnings per share. The EVA computed using WACC, Net Operating Profit after Taxes (NOPAT), and Invested Capital is positive (+$391.24); this shows that Nike Inc. is financially stable and will grow in the next three years.

* Stock Beta: Exhibit 5 shows a detailed measurement of the company’s stock returns in relation to the rest of the market through 5-year historical price and index data. The analysis includes monthly returns of both the NYSE and the S&P 500 index in order to capture a comprehensive view of the market return. In each comparison, the monthly returns of the Target stock and market are plotted on Y-axis and X-axis respectively to get the regression line’s slope or beta. The analysis arrives at an average beta of 0.988 which indicates a similar movement of Target stock’s returns in comparison to the whole market over time.

can use for forecasting future directions in the stock market and in the economy as a whole. Major techniques/tools that the financial managers of Nike Inc. can use for forecasting future directions in the stock market and in the economy as a whole are fundamental analysis and market indicators. Market indicators are technical indicators that can be used to predict the direction of major financial indexes. (Investopedia) Advance/Decline Index, Absolute Breadth Index, and Arms Index are just some examples of market indicators. Advance/Decline Index is a tool that analysis use that represents the difference of advancing and decline security prices. The financial managers of Nike Inc. will be able to use the Advance/Decline Index to confirm if an upward trend will continue by identifying rising values of the advance/decline. The Absolute Breadth Index will indicate to the financial managers the volatility levels in the market without factoring in price direction. The Arms Index will indicate to the financial managers by comparing the advancing and decline stock issues and trading volume as an indicator of overall market sentiment. (Investopedia) Fundamental analysis has several strengths that will increase its popularity to the financial managers of Nike Inc. Strengths of fundamental analysis are long-term trends, value spotting, and business acumen. Fundamental analysis allows the financial managers of Nike Inc. to have the ability to identify and predict long-term economic, demographic, technological or consumer trends can benefit patient investors who pick the right industry groups or companies. (Stock

Apparently, the issue of Nike’s case is to control and check the calculation cost of capital done by Joanna Cohen who is the assistant of a portfolio manager at NorthPoint Group. But I am willing to tell you that it can be a complex case in which we can doubt about sensitivity analysis done by Kimi Ford (portfolio manager) too. Because her assumptions such as Revenue Growth Rate, COGS / Sales,

In utilizing the fundamental data provided by the 2010 Richard Ivey School of Business Foundation article titled Valuing Wal-Mart - 2010, I have made the following conclusions regarding the value of Wal-Mart (WMT) stock as of February 2012.

We use the equation ri=(Pt-Pt-1+Dt)/Pt-1 to calculate the monthly return of stock of Charles Schwab Corp, Quick & Reilly Group and Waterhouse Investor Srvcs. Then we have two methods to calculate the Beta of Equity for each company.

The risk-free rate recommended under the CAPM model is the yield on long-term (i.e. 10+ years) T-bills.  When choosing the T-bill term, it is important for it to closely represent the time frame used for Heinz’ required rate of return.

Investing in a company has certainly changed over the years. Financial information is literally at one's fingertips via the internet. In today's fast paced corporate environment companies are under tremendous scrutiny to maintain their edge. The company I am evaluating is NIKE. This Financial analysis will consist of the following: Ratios from the Income Statement, Statement of Owner's Equity, and Balance Sheet. This information is designed to assist a potential investor.

William Sharpe presented several assumptions without which a valid CAPM cannot be obtained . These assumption are discussed below –

clear assessment of the financial health of the company: NIKE International. Just knowing that this company chose a symbol that references the winged goddess of victory seems to have been a premonition for the designer of the ‘swoosh’ as well as the founder, Phil Knight, of NIKE. (Hinker,)

Using the tax rate of 35% plus state taxes of 3%, cost of debt becomes 4.3%*(1-0.38) = 0.266 = 2.7%

Similarities & Differences: Within the financial statement of Nike, Inc. there are tremendous similarities due to the consistency as well efficiency of the conduction of business. However, with these similarities is a fair deal of differences due to economic stability as well as the adoption product ideas and innovative methods that aid Nike to continue for the better of the company: by reaching new levels of sustainability as they enhance product performance, by developing, more meaningful connections with consumers, and by presenting their products in compelling experiences at retail. The annual reports of 2010 to 2014 clearly distinguish the letter to shareholders in the same placement but the content with each year are not similar by any means; within 2010, they created six new strategic geographies to focus their effort where passion and culture of sport are strongest. Nike pushed forward an aggressive retail agenda in store and online. Revenue at $19 billion the previous year went down 1 percent under EPS and future orders. Their income from other operation contributed more than $2.5 billion in revenue and generated $2.8 billion in free cash flow from operations and had $5 billion in cash and short-term investments on their balance sheet. Revenue from direct to consumer increased 12% to near $2.5 billion. Gross margins came in at 46.3 percent for the year. That was the year of the World cup, whereby they showed tremendous acceleration they generated in the back of

Kimi Ford read all the analysts' reports that she could find about the June 28 meeting, but the reports gave her no clear guidance: a Lehman Brothers report recommended a strong buy, while UBS Warburg and CSFB analysts expressed misgivings about the company and recommended a hold. Ford decided instead to develop her own discounted cash flow forecast to come to a clearer conclusion.

3. Calculate the cost of equity capital using the CAPM, assuming a market risk premium of 5%.