Nike

Case Study: Nike: make up of Capital 20 September, 2010 1. Do you agree with Joanna Cohens WACC delibe stepness? Why or why not? Our group did not agree with Joannas WACC calculation. We ring that many of the assumptions that she made were senseless and nighwhat altered the rouse of the WACC calculation. The first piece that we disagreed with was with Joannas estimation of the impartiality of the company. Joanna simply utilise the Total Shareholders loveliness figure off the proportionality sheet of Exhibit #2. We notion that she under apprizes the truth of the company by using this figure. In our calculation, we calculate the shares outstanding by the upstart market price of the stock. Our equity figure came out to (271.5 x $42.09) $11,427.4. This is importantly more than Joannas book value pick up of $3,494.5. We debate that Joanna mistakenly use the book value of equity rather than the market value of equity in her WACC calculations. This significantly impacts the equity to debt ratio utilise in the WACC calculation. It raises the equity role of total capital from 73% to 90%. We agreed with Joannas debt figure of $1,296.6.

Due to the change over in equity, the debit plowshare of total capital was cut back from 27% to 10%. Joanna use the current yield on the 20-year exchequer bond as her risk of exposure- discontinue set out. According to process #4, this was at 5.74%. We felt that this was in addition aggressive and believe that a more blimpish auspicate was in order. We did some searching on the profits and found that a 90- sidereal day Treasury mensuration is most a capacious deal used. riskless damages: The riskless consecrate is a theoretical invade rate at which an investment may earn come to without incur any risk. In practice, the risk-free rate is often a short-term Treasury rate (i.e., 90 Day Treasury Bill). We selected the 90-day Treasury bond rate of 3.59% as our risk free rate. This figure was obtained from exhibit #4. This tonic risk-free...If you want to stick a full essay, order it on our website: Ordercustompaper.com

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