Definition of WACC The Weighted Average Cost of Capital (WACC) is the rate at which the firm is expected to pay for capital raised by issuing debt and equity to finance its assets. It is the minimum return that the company should earn to satisfy the needs of the debt holders and shareholders of the company. It is calculated by proportionally weighing each category of capital such as common stock, preferred stock, long term and short term debts, bonds etc. It is the discount rate used to calculate
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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
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Nike Inc. Common Size Consolidated Income Statement 2014 Revenues 100.00 Cost of Sales -55.23 Gross Profit 44.77% Demand Creation Expense -10.90 Operating overhead expense -20.63 Selling & Administrative Expense -31.53% Restructing charges Goodwill impairment Intangible & other asset impairment Operating income 13.24% Interest income 0.02 Interest expense -0.14 Interest (expense) net -0.12% Other income (expense) net -0.37 Income before
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Executive Summary: Nike, Inc. Cost of Capital Mid-year 2001, Nike, Inc. revealed their strategy to rejuvenate the company image, increase stagnant earnings, and to take back market share. By July, the share price for Nike had declined significantly to $42.09. During Nike’s analysts’ meeting, management stated their goals of 8% to 10% in revenue-growth and over 15% in earnings-growth. Analysts’ reviews were mixed on the new targets and the actual growth potential for Nike, so Kimi Ford and her
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Nike, Inc.: COST OF CAPITAL CASE ANALYSIS Importance of Cost of Capital The concept of cost of capital is used in finance decisions. Acceptance or rejection of an investment project depends on the cost that the company has to pay for financing it. Good financial management calls for selection of such projects, which are expected to earn returns, which are higher than the cost of capital. It is therefore, important for the finance manager to calculate the cost of capital, which
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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
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Nike, Inc: Cost of Capital CASE SUMMARY In this case, Kimi Ford, a portfolio manager at NorthPoint Group, a mutual fund company, manages the NorthPoint Large-Cap Fund. This fund invests mostly in Fortune 500 companies with an emphasis on value investing. Some of the top holdings of the NorthPoint Large-Cap Fund include; ExxonMobil, McDonalds and GM, these stocks are generally old-economy stocks. Over 2000 and the first half of 2001, the NorthPoint Large-Cap Fund performed very well, earning
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Section 1: Tests of Profitability Return on Equity | 2012 | Under Armour | 15.8% | Nike, Inc. | 21.4% | The return on assets ratio measures how effectively a company can earn a return on its investment in assets. In other words, ROA shows how efficiently a company can covert the money used to purchase assets into net income or profits. Based on Nike, Inc.’s ROE of 21.4%, it can be concluded that Nike, Inc. could be more efficient in utilizing its equity base and may have a better return to
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Inventory Turnover 3 Capital Asset Turnover 3 Total Asset Turnover 3 Liquidity Ratios 4 Current Ratio 4 Quick Ratio 4 Debt Utilization Ratios 4 Debt to Total Assets 4 Times Interest Earned 4 Conclusion and Recommendations 5 Appendix I: Ratios Analysis Results 6 Executive Summary The purpose of the report is to provide Wand Inc. a recommendation from the following choices: - 1. Grant short-term credit to Lululemon Athletica Inc. 2. Grant long-term credit
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Nike Analysis Financial Management Spring 2016 Introduction Nike Inc. is one of the world’s largest marketer of athletic footwear and apparel, holding more than 37 percent of the market share. Nike is a multinational company having factories and retail stores in over 160 countries. However, Nike was not an overnight success as it took years to build the brand and create profitability. The idea of Nike came about in 1962 by Phillip Knight, a Stanford University business graduate. Traveling
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