What is the forecast for average annual earnings growth

Reference no: EM13691099

Nike has significant sales in emerging markets. Assume that Nike announces that its earnings (reported in dollars) would be impacted by the depreciation of many of the emerging market currencies in relation to the dollar.

Assume before this announcement that Nike is trading at $75 a share. The P/E for Nike equals 25 and the PEG (based on a 5 year forecast) equals 2.0.

a) Based on the above information, what is the value of E for Nike?

b) Based on the above information, what is the forecast for average annual earnings growth for the next 5 years?

c) Assume due to the exchange rate outlook, Nike’s earnings change by 20%. You need to analyze if the currency effect helps or hurts Nike’s earnings (that are reported in dollars). Holding Nike’s price at $75, what is the new P/E for Nike?

d) Following your answer for part c) and assuming no change in Nike’s long term growth outlook. What is a new market price for Nike to bring its 5 year PEG back to a value of 2.0?

Reference no: EM13691099

Questions Cloud

Making decisions to increase or decrease production : Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 ..

Street lighting fixtures and their sodium vapor bulbs : Street lighting fixtures and their sodium vapor bulbs for a two block area of a large city need to be installed at a first cost of 118,337. Annual maintenance expenses are expected to be 6,134 for the first 20 years and 8,498 for each year thereafter..

Drill geothermal well to provide a district heating steam : A town in Wyoming wants to drill geothermal well to provide a district heating steam and hot water for its businesses and residences.

What is the forecast for average annual earnings growth : Nike has significant sales in emerging markets. Assume that Nike announces that its earnings (reported in dollars) would be impacted by the depreciation of many of the emerging market currencies in relation to the dollar.

Rate of return on a lie subscription purchased for an infant : A popular magazine offers a lifetime subscription for $1000. Such a subscription may be a given as a gift to an infant at birth (the parents can read it in those early years), or taken out by an individual for himself.

Expected to generate annual revenue : An investment of $18,000 is expected to generate annual revenue of $8,000 throughout life of the investment. The risk is based the life of the investment. The estimate of probabilities for the duration of the investment is given in the table below.

International financial markets : How is the forward value date calculated on a 90-day forward contract? Empirical tests suggest that UIP does not hold. How would you exploit the failure of UIP? Describe in detail the investment strategy that you would use?

User Account

All Pages