Nike inc case essay

Therefore is the empirical validity of CAPM. On the other hand, dividend discount model requires an enormous amount of speculation in trying to forecast future dividends. Need to establish that the beta is able to measure the risk of a security and that there is a significant correlation between beta and the expected return.

During the case years studiedthe net income in for Nike, Inc. What mistake Joana Cohen make in her analysis? So, for long life valuation, we can find stable valuation.

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Cost of capital includes the cost of debt and the cost of equity. Executive Summary Nike, Inc.

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Is Nike a Good Investment for the time being? Except the non-Nike-branded products such as Cole Hann have some differences, but they only contributed a tiny part of Nikes revenue.

Since Nike Inc.

Nike inc. cost of capital course hero

So, for long life valuation, we can find stable valuation. Nike has various products which include footwear as well as other apparel that compliment the former. Ford was considering buying some shares for the fund she managed, the NorthPoint Large-Cap Fund, which invested mostly in Fortune companies, with an emphasis on value investing. For the Krf risk free rate , we used the current yield on 10yr bond 5. One major problem is that many times the risk of an asset is not captured by beta alone. Is the WACC set by investors or by managers? So, the market value of equity should be used instead of book value. Comparing the already discussed methods, we found that the main advantage of CAPM approach is that it takes into consideration a company's market risk as the most relevant risk to stockholders, hence to determine the effect of the new activities and projects of the company on stock price. The reasoning of using market weights to estimate WACC is that it is how much it will cause the firm to raise capital today. Beside that, CAPM also have advantages and disadvantages. If company must decide the individual project, company will choose the project which give satisfactory return on investment. Therefore we chose to reject this calculation. Ask for an average over the past three to five years, and you will mitigate the effect of unusual spikes in any given year. It helps managers give out better react and balancing sources of finance when faced with requires additonal finance, which helps mimimize the cost of capital.
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Final Case 2 Nike Inc Essays