Read 8 answers by scientists with 1 recommendation from their colleagues to the question asked by gholamreza soleimani on jul 6, 2011. When calculating cost of capital, the market value of debt and equity must be used the market value of equity is found by multiplying the stock price of nike inc by the number of shares outstanding. Nike cost of capital case 1 november23,2016 nike, inc: cost of capital prepared by justin nychuk bus 495: financial analysis and decisions darryl yasinowski university of regina due november 23rd 2016.
The weighted average cost of capital and its importance for nike inc the weighted average cost of capital (wacc) is the average of the costs of a company’s sources of financing-debt and equity, each of which is weighted by its respective use in the given situation. Get 1 month access to nike inc for $1799, or get full access to whole website for at least 3 months from $4999. The wacc calculation uses the higher of nike's wacc or the risk free rate, because no investment can have a cost of capital that is better than risk free this situation may occur if the beta is negative and nike uses a significant proportion of equity capital. Cost of capital and its financial importance for the company and future investors the management of nike inc addresses issues both on top-line growth and operating performance the company's cost of capital is a critical element in such decisions and it is important to estimate precisely the weighted average cost of capital (wacc).
On the cost side, nike would exert more effort on expense control finally, company executives reiterated their long-term revenue-growth targets of 8% to 10% and earnings-growth targets of above 15% keywords: cost of capital, investment analysis, valuation. Because i submitted some new methods in the field of capital budgeting (case analysis of euroland food) in finance while i had not any background in finance only i studied finance for 1 month what is the concept of this matter. Custom nike inc cost of capital essay the cost of capital is a term in finance used in reference to the total of a firms fund the funds include both equity and debt capital.
Case 1 nike, inc: cost of capital overview of case: in the beginning of 2001, nike, inc faced a significant decline in share price this was an unpleasant, yet not too. The weighted average cost of capital and its importance for nike inc the weighted average cost of capital (wacc) is the average of the costs of a company's sources of financing-debt and equity, each of which is weighted by its respective use in the given situation. Nike cost of capital analysis october 22, 2010 1 i introduction in this case analysis kimi ford, a portfolio manager for a large cap value mutual fund, northpointgroup is considering adding shares of nike, inc, an athletic shoe manufacturer as a new position in her fund. The cost of capital can be thought of as the minimum return required by providers of finance for investing in an asset, whether that is a project, a business unit or an entire company. This is a darden case studyintroduces the weighted average cost of capital (wacc) provides a wacc calculation, although it has been intentionally designed to mislead students.
The cost of capital is the rate of return required by a capital provider in exchange for foregoing an investment in another project or business with similar risk. The cost of nike's capital will have a significant impact on the ability of nike to achieve these growth estimates profitably during kimi ford's discounted-cash-flow analysis of nike share values, she utilizes a cost of capital of 10%with her current analysis, kimi estimates that using a discount rate below 94% shows an undervaluation of . Essay about cost of capital nike 974 words | 4 pages case analysis of nike, inc: cost of capital 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. I the weighted average cost of capital and its importance for nike inc the weighted average cost of capital (wacc) is the average of the costs of a company's sources of financing-debt and equity, each of which is weighted by its respective use in the given situation.
Nike, inc: cost of capital on july 5, 2001, kimi ford, a portfolio manager of northpoint group, a mutual-fund management firm, pored over analysts' write-ups of nike, inc, the athletic-shoe manufacturer. The nike inc cost of capital case study solution contains an 1,100 word answer to the four questions below, a financial analysis in excel that. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads you can change your ad preferences anytime.
In order to diminish the opportunity cost to investors by investing in capital, the company must earn in excess of its cost of capital a standard means of expressing a company’s cost of capital is the weighted average of the cost of individual sources of capital employed. This paper will present the financial importance of the cost of capital for nike and its future investors nike inc tries a new strategy to revitalize the company by focusing on top-line growth and operating performance. As of april 2016, the company had a trailing 12-month revenue of $319 billion and a market cap of $100 billion nike's capital structure has high equity capital relative to debt, with a debt-to-total-capital ratio of 014, though this figure rose slightly over the 12 months ended february 2016, following a $1 billion bond issuance the company's enterprise value grew rapidly over the three years leading up to april 2016, driven almost entirely by the appreciating market value of its equity.