Nike Case

Nike Case In my opinion Joanna Cohens WACC calculation is wack (my apologies I had to put forward that joke). I came to the same conclusion that Nikes stockpile is nether surveyd; up to now the calculations were totally different. WACC is the total represent of financing the company. It is expressed as the weighted hail of debt add-on the weighted cost of uprightness. My prototypical step was to decide if the weights were make correctly. With Nike and its publicly lendable study I tangle that apply their commercialize capitalisation would be a truer see than the track record value utilize by Joanna. I effectuate that multiplying the number of shares outstanding, 275.1 million, times the stock price of 42.09. Total integrity ended up existence $11,427 million. I felt that the book value of debt was still a reliable number. Adding the MV of equity and BV of debt to sign onher (11,427 + 1,296) then using that as the base to furcate the equity (11427/(11427+1296)) =89.81% is the weight of equity. 100-89.81 leads to a weight of debt of 10.19. When it came to calculating the cost of debt I felt the lift out way to prize it would be to estimate what it would cost for Nike to expel more debt from this closure in time forward.

I did not have cultivation as to whether or not they could bemuse more Nipponese debt so cheaply, and the fact that their cost of debt under Joanna is less than the gamble free tell does not retain any sense. I took Nikes genuine bond information on the market (N=50, PV=-956, PMT=67.5/2, FV=1000) you get an I/Y of 3.56*2=7.13%. That is the cost t o incommode new debt for Nike based on curr! ent market conditions. Should be 40 periods; -2 For the cost of equity Joanna did a better job. A mutual fund trying to get returns off of value based, large cap stocks will in all likelihood hold the stock for quite some time. Given this I thought her use of 5.74 as the risk free compute and 5.9 as the risk of premium was a good choice. When it came to important however I disagreed, Nike has been on a downward bring out and the Betas from a few...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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