Ma3. Assume that Nike decides to build a new warehouse complex at significant cost, financed with additional project-specific long-term debt. Describe how this project and financing will impact Nike’s financial statements. In your response, focus on the impact on the ratios gross margin, profit margin, ROA, current ratio, and debt-to-equity   Second, assume that management is wondering whether to capitalize the interest associated with the warehouse project’s financing. Describe how the financial statements will be impacted by the choice to capitalize interest or not. Also describe managements’ incentives to capitalize interest (or not to capitalize).

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter12: Corporate Valuation And Financial Planning
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Ma3.

Assume that Nike decides to build a new warehouse complex at significant cost, financed with additional project-specific long-term debt. Describe how this project and financing will impact Nike’s financial statements. In your response, focus on the impact on the ratios gross margin, profit margin, ROA, current ratio, and debt-to-equity

 

Second, assume that management is wondering whether to capitalize the interest associated with the warehouse project’s financing. Describe how the financial statements will be impacted by the choice to capitalize interest or not. Also describe managements’ incentives to capitalize interest (or not to capitalize).

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