Nike, Inc.: Cost Of Capital Case Study

Joanna Cohen has been asked to adjudicate Nikes hail of capital for her boss, Kimi cover. Ford is a portfolio manager at a mutual-fund management firm and is sputter to forge if she should purchase Nike sh ares for the successful fund she manages. On calendar week prior, Nike held an analysts exact together to communicate a strategy for better the lodge and increase market share. At this meeting, management revealed plans to breed both top- groove growth and operating performance. To increase revenue, Nike will initiate more athletic-shoe products geared towards the midpriced segment, a segment Nike has overlooked in youthful years. The company in like manner plans to repulse its apparel line which has performed exceedingly well under recent management. To minimize addresss, 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 guida nce. Some viewed Nikes financial targets as too aggressive, while others saw world-shattering growth opportunities. Because of this, Ford demonstrable her get price reductioned cash draw forecast which showed that at a discount rate of 12%, Nike was overvalued at its genuine share price of $42.09. Ford also conducted a contiguous sensitivity analysis which revealed Nike was undervalued at discount rates on a lower floor 11.17%.

Due to time constraints, Ford asked her assistant, Joanna Cohen, to estimate Nikes cost of capital and help Ford determine if Nikes banal is under or overvalued. The following is my own analysis of Cohens findings and whether or not I check up on with them. I. Single or Multiple! Costs of Capital I change course with Cohen on her decision to compute precisely 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 congeries revenues, all business segments are sports related businesses. Therefore I think it is a give out assumption to avow the risks will not differ...If you want to get a broad essay, order it on our website: OrderEssay.net

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