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 nethervalued; up to now the calculations were totally different.
WACC is the total cost of financing the company. It is expressed as the weighted cost of debt plus the weighted cost of equity. My prototypical step was to decide if the weights were done correctly. With Nike and its publicly lendable study I felt that apply their market capitalisation would be a truer estimate than the book value utilize by Joanna. I found that multiplying the number of shares outstanding, 275.1 million, times the stock price of 42.09. Total equity 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 divide 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 evaluate it would be to estimate what it would cost for Nike to expel more debt from this point in time forward.



I did not have information as to whether or not they could bemuse more Japanese debt so cheaply, and the fact that their cost of debt under Joanna is less than the risk 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 to issue new debt for Nike based on current 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 rate and 5.9 as the risk of premium was a good choice. When it came to beta however I disagreed, Nike has been on a downward cut and the Betas from a few...If you want to get a full essay, order it on our website: Orderessay



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