nike cost of capital

This document is authorized for use only by Ruijuan He (heruijuann@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies.

Fall 2009 This case was prepared by Itir Karaesmen and Inbal Yahav of Robert H. Smith School of Business at University of Maryland, College Park. The names, locations, and other information included

What is your estimate of Ace’s cost of new common stock, ke? What are some potential weaknesses in the procedures used to obtain this estimate?

© Copyright 2009 by Cambridge Business Publishers, LLC. All rights reserved. No part of this publication may be reproduced in any form for any purpose without the written permission of the publisher.

firm Tower Brook Capital Partners. Some strengths of the company are its great pricing and excellent

This document is authorized for use only by Martha O'Neill (gville02@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org

As of 2005, Value Trust had outperformed its benchmark index, the S&P 500, for 14 years consecutively. Given that the next longest period of sustained performance was only half as long, 14 consecutive years of excellent performance set a record as the longest streak of success for any manager in the mutual-fund industry. The average annual total return for the past 15 years was 14.6%, which was higher than the S&P’s 500 by 3.67%. Value Trust had 36 holdings, 10 of which accounted for nearly 50% of the fund’s assets. Morningstar gave Value Trust a five-star rating.

The Case Study is provided by the Harvard Business School and is considered necessary reading prior to the understanding the responses contained herein. This paper is

Recently, however, competition has become stiffer and such large biotechnology firms as Genentech, Amgen, and even Bristol-Myers Squibb have begun to recognize the opportunities in SIVMED’s research lines. Because of this increasing competition, SIVMED’s founders and board of directors have concluded that the firm must apply state-of-the-art techniques in its managerial processes as well as in its technological processes. As a first step, the board directed the financial vice president, Gary Hayes, to develop an estimate for firm’s cost of capital and to use this number in capital budgeting decisions. Haves, in turn, directed SIVMED’s treasurer, Julie Owens, to have cost of capital estimate on his desk in one week. Owens has an accounting background, and her primary task since taking over as treasurer has been to deal with the banks. Thus, she is somewhat apprehensive about this new assignment, especially since one of the board members is a well-known Northwestern University finance professor.

© Copyright 2012 by Cambridge Business Publishers, LLC. All rights reserved. No part of this

3) What is the weighted average cost of capital and why is it important to estimate it? Is the

Investing in a company has certainly changed over the years. Financial information is literally at one's fingertips via the internet. In today's fast paced corporate environment companies are under tremendous scrutiny to maintain their edge. The company I am evaluating is NIKE. This Financial analysis will consist of the following: Ratios from the Income Statement, Statement of Owner's Equity, and Balance Sheet. This information is designed to assist a potential investor.

1. Cohen calculated Nike’s weighted average cost of capital (WACC) to be 8.3%. I find error in this calculation as a result of the following points of disagreement:

Similarities & Differences: Within the financial statement of Nike, Inc. there are tremendous similarities due to the consistency as well efficiency of the conduction of business. However, with these similarities is a fair deal of differences due to economic stability as well as the adoption product ideas and innovative methods that aid Nike to continue for the better of the company: by reaching new levels of sustainability as they enhance product performance, by developing, more meaningful connections with consumers, and by presenting their products in compelling experiences at retail. The annual reports of 2010 to 2014 clearly distinguish the letter to shareholders in the same placement but the content with each year are not similar by any means; within 2010, they created six new strategic geographies to focus their effort where passion and culture of sport are strongest. Nike pushed forward an aggressive retail agenda in store and online. Revenue at $19 billion the previous year went down 1 percent under EPS and future orders. Their income from other operation contributed more than $2.5 billion in revenue and generated $2.8 billion in free cash flow from operations and had $5 billion in cash and short-term investments on their balance sheet. Revenue from direct to consumer increased 12% to near $2.5 billion. Gross margins came in at 46.3 percent for the year. That was the year of the World cup, whereby they showed tremendous acceleration they generated in the back of

Ford has done a significant amount of research through analysts’ reports, which had mixed reviews. She found no clear guidance from the analysts and decided to develop her own discounted cash flow forecast to come to a conclusion. Her forecast showed that Nike was overvalued at its current share price causing a