Nike

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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 | | 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…show more content…
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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