Reference no: EM132007390
Nike had sales of $25.3 billion in 2012. Suppose you expect its sales to grow at a rate of 10% in 2013, but then slow by 1% per year to the long-run growth rate that is characteristic of the apparel industry — 5% — by 2018. Based on Nike’s past profitability and investment needs, you expect EBIT to be 10% of sales, increases in net working capital requirements to be 10% of any increase in sales, and capital expenditures to equal depreciation expenses. If Nike has $3.3 billion in cash, $1.2 billion in debt, 893.6 million shares outstanding, a tax rate of 24%, and a weighted average cost of capital of 10%,
What is your estimate of the value of Nike’s stock in early 2013?
Suppose you believe Nike’s initial revenue growth rate will be between 7% and 11% (with growth always slowing linearly to 5% by year 2018). What range of prices for Nike stock is consistent with these forecasts?
Suppose you believe Nike’s initial revenue EBIT margin will be between 9% and 11% of sales. What range of prices for Nike stock is consistent with these forecasts?
Suppose you believe Nike’s weighted average cost of capital is between 9.5% and 12%. What range of prices for Nike stock is consistent with these forecasts?
What range of stock prices is consistent if you vary the estimates as in parts (b), (c), and (d) simultaneously?
Use Data Table Functionality to examine the sensitivity of your valuation to both the WACC and the EBIT Margin. Examine WACC ranging from 9.5% to 12% in increments of 0.25% and EBIT margin ranging from 9% to 11% in increments of 0.25%. Use the same input figures as provided in the original question.
|
How large will your retirement account
: How large will your retirement account be in 32 years?
|
|
Correlation of stock with market portfolio
: If the correlation of stock (i) with the market portfolio is negative one, then this implies that if the market portfolio return increases by 10 percent,
|
|
What are the additions to retained earnings
: Lemon Co. has net income of $760,000 and 84,000 shares of stock. what are the additions to retained earnings?
|
|
What was the operating cash flow per share
: Weston Corporation had earnings per share of $1.56, depreciation expense of $691,200, and 270,000 shares outstanding. What was the operating cash flow per share
|
|
Prices for nike stock is consistent with these forecasts
: What range of prices for Nike stock is consistent with these forecasts?
|
|
The client using the weighted average approach
: What is the value that you should report to the client using the weighted average approach?
|
|
Unfunded pension liability
: Imprudential, Inc., has an unfunded pension liability of $751 million that must be paid in 30 years.
|
|
Value of diaz stock with required rate of return
: What is the value of Diaz stock with a required rate of return of 14 percent?
|
|
What was the annual change in average selling price
: In October 2005, the average price was $288,600. What was the annual change in the average selling price?
|