Nike

1200 Words Apr 18th, 2015 5 Pages
JOHN MOLSON SCHOOL OF BUSINESS | CASE ANALYSIS: NIKE INC. – COST OF CAPITAL | FOR PROF. EDWARD WONG | | ARUN KUMAR DURAIRAJ – 27416008 NIDISH PC – 27254423 VIPUL PARTI – 27246307 | 12/3/2015 |

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Evaluation of Cohen’s Report and Calculation of WACC
We do not agree with Cohen’s report about the cost of capital because of the following reasons. * Capital Structure (% equity vs % debt):
In calculating the capital structure of Nike Inc., Johanna
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is given below with the terminal value as above.
The present value for the cash flows is found as per the WACC (9.26%) to arrive at the enterprise value. Free Cash Flow For Nike Inc. for 2002 - 2011 | | | | | | | | | | | | (All figures in millions) | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Operating Income | 1218.4 | 1351.6 | 1554.6 | 1717 | 1950 | 2135.9 | 2410.2 | 2554.8 | 2790.1 | 2957.5 | Taxes | 463 | 513.6 | 590.8 | 652.5 | 741 | 811.7 | 915.9 | 970.8 | 1060.2 | 1123.9 | NOPAT | 755.4 | 838 | 563.9 | 1064.5 | 1209 | 1324.3 | 1494.3 | 1584 | 1729.9 | 1833.7 | Capex, Net Depreciation | - | - | - | - | - | - | - | - | - | - | Change in NWC | 8.8 | -174.9 | -186.3 | -198.4 | -195 | -206.7 | -219.1 | -232.3 | -246.2 | -261 | Free Cash Flow | 764.1 | 663.1 | 777.6 | 866.2 | 1014 | 1117.6 | 1275.2 | 1351.7 | 1483.7 | 1572.7 | Terminal Value | - | - | - | - | - | - | - | - | - | 25876.69 | Total Flow | 764.1 | 663.1 | 777.6 | 866.2 | 1014 | 1117.6 | 1275.2 | 1351.7 | 1483.7 | 27449.4 | | | | | | | | | | | | Present Value of Cash Flows@ WACC | 699.34 | 555.46 | 596.17 | 607.82 | 651.23 | 656.93 | 686.04 | 665.57 | 668.64 | 8072.58 |

Enterprise Value = $17109.36 million
Total Equity Value = Enterprise Value – Total Debt = 17109.36-1296.6
Total Equity Value = $15812.76 million
Current Outstanding shares = 271.5 million
Equity Value per

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