Nike, Inc.: Cost Of Capital Case Study

Joanna Cohen has been asked to adjudicate Nikes hail of capital for her boss, Kimi crossway. Ford is a portfolio manager at a mutual-fund management firm and is clamber to forge if she should purchase Nike sh ares for the successful fund she manages. On hebdomad prior, Nike held an analysts exact together to communicate a strategy for recuperative the lodge and increase market share. At this meeting, management revealed plans to divvy up both top- blood line growth and operating performance. To increase revenue, Nike will set about more athletic-shoe products geared towards the midpriced segment, a segment Nike has overlooked in youthful years. The company in like manner plans to motor its apparel line which has performed exceedingly well under sweet management. To minimize tolls, Nike will commission on expense control. Kimi Ford pored through the analysts reports discussing the recent analysts meeting Nike had but walked away with no clear guidance. Some viewed Nikes financial targets as too aggressive, while others saw world-shattering growth opportunities. Because of this, Ford veritable her get price reductioned cash draw forecast which showed that at a discount rate of 12%, Nike was overvalued at its real share price of $42.09. Ford also conducted a energetic sensitivity analysis which revealed Nike was undervalued at discount rates at a lower place 11.17%.

Due to time constraints, Ford asked her assistant, Joanna Cohen, to estimate Nikes cost of capital and help Ford determine if Nikes var. is under or overvalued. The following is my own analysis of Cohens findings and whether or not I check u p on with them. I. Single or Multiple C! osts of Capital I change course with Cohen on her decision to compute just now one cost of capital for Nike, given the companys various telephone circuit segments. With the exception of one line which makes up only a tiny fraction of summate revenues, all business segments are sports related businesses. Therefore I think it is a give out assumption to dictate the risks will not differ...If you want to get a salutary essay, order it on our website: OrderEssay.net

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