Calculation of cost of debt by using IRR method : Formula : B0=I*t=1n11+rd t +M*11+2dn=I*PVIFA r d,n+M*PVIFrd,n B0=Value of the bond at time zero I= annual interest paid in dollars n=number of years to maturity m=par value in dollars rd=required return on bond B0=$956 Coupon Rate =13.5% I= coupon payment=13.5%*1000 = 135 Year to maturity =n=25 years Par value =1000 A trial –and – error technique: At the first consider rd=7.58%equal to method one and B0=$956 I= coupon payment=$135
Words: 333 - Pages: 2
Assignment # C3 Nike, INC.: Cost of Capital Jul 31st, 2014 Case Approach As required in the instructions, the group will answer each of the questions regarding the case, along with its justifications. In addition, a spreadsheet will be attached with all the calculations regarding this case. Q1. What is the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not? WACC is defined as the weighted average cost of capital
Words: 1114 - Pages: 5
Group, Kimi Ford, pored over analysts’ write-ups of Nike, Inc. NorthPoint Large Cap fund was deciding on whether it would be wise to purchase stock from Nike. The issue was that Nike has experienced sales growth decline, where not only was there a decline in profits, but a decrease in their market share as well. In attempt to recuperate from this situation, Nike then suppressed their concern for their company by creating more merchandise. Here, Nike would enhance their exposure in mid-price footwear
Words: 562 - Pages: 3
NIKE INC. Cost of capital estimation | GROUP FINN- 400 | NIKE INC. Cost of capital estimation | GROUP FINN- 400 | Background: The case is built around the stock buy decision of Nike Incorporation by the North-Point Large Cap fund. The mutual fund manager, Kimi Ford is evaluating Nike’s financial performance. Nike’s revenues had stabilized at $9 Billion since 1997 and Net Income had fallen from $800 Million to about $580 Million. In sum, Nike was experiencing
Words: 1027 - Pages: 5
NIKE, INC.: COST OF CAPITAL Book value vs. Market value While calculating the Nike’s cost of capital using both the book value (Exhibit 1.1) and the market value (Exhibit 1.2), I could notice the mistake Cohen made finding the equity value. Cohen used the book value to reflect equity value. Although the book value is an accepted measure to estimate the debt value, the equity’s book value is an inaccurate measure of the value perceived by the shareholders. Since Nike is a publicly traded company
Words: 1183 - Pages: 5
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
Words: 1190 - Pages: 5
13/3/2013 Nike, Inc. Cost of Capital 1 Discussion Questions • What is the WACC and why is it important to estimate a firm’s cost of capital? What does it represent? Is the WACC set by investors or by managers? • Do you agree with Joanna Cohen’s WACC calculation? Why or why not? If you do not agree with Cohen’s analysis, calculate your own WACC for Nike and be prepared to justify your assumptions. What mistakes did Joanna Cohen make in her analysis? Which method is best for calculating
Words: 1203 - Pages: 5
Nike Wacc: September 2013 Find the Values of the Components in the Capital Structure E = 890.35M shares $65.40 = $58,228.89 million P = N/A L= 1447.358M B = 826.041M V = 58,228.89M + 826.041M + 0 + 1447.358M= $60,502.289M Find the Weights of the Components in the Capital Structure E/V = 58,228.89/60,502.289= 0.962 B/V = 826.041/60,502.289 = 0.0137 L/V = 1447.358/60,502.289 = 0.0239 Find the Component Marginal Costs of Capital kd = 0.0769 {see table} ke = rf + β(km - rf) = 0.0389 +
Words: 1239 - Pages: 5
Topic: Nike Inc.: Cost of Capital Course: International Finance Table of Contents 1 Background Information on the Case: 3 1.1 Nike’s Performance: 3 1.2 Nike Analysts Meeting June 28, 2001: 3 2 Kimi Ford’s Evaluation of Nike: 3 3 Joanna Cohen’s Calculation of Nike’s Cost of Capital: 3 3.1 Assumptions & Calculations: 3 4 Our Calculation: 4 4.1 Cost of common equity 4 4.2 Cost of debt 4 4.3 Weights of Debt and Equity 4 4.4 WACC 5 4.5 Equity Value of Share
Words: 1266 - Pages: 6
Nike Inc. Case Summary. Kimi Ford, a portfolio manager of NorthPoint Large Cap fund is considering purchasing Nike’s stock. Nike’s report revealed a decline in sales growth, profits and market share. However, Nike had a strategy to revitalize the company. The strategy would address both top-line and operating performances by pushing its apparel lines and cutting down expenses. Analyst responded with mix signal to Nike new plan. Ford has done the discounted cash flow forecast, and Joanna Cohen estimated
Words: 1054 - Pages: 5
