NIKE‚ INC.: COST OF CAPITAL On July 5‚ 2001‚ Kimi Ford‚ a portfolio manager at NorthPoint Group‚ a mutual-fund management firm‚ pored over analysts ’ write-ups of Nike‚ Inc.‚ the athletic-shoe manufacturer. Nike ’s share price had declined significantly from the beginning of the year. Ford was considering buying some shares for the fund she managed‚ the NorthPoint Large-Cap Fund‚ which invested mostly in Fortune 500 companies‚ with an emphasis on value investing. Its top holdings
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20 Expected Return Vs. Required Return 21 Portfolio Planning 21 Dividend growth model 24 Corporate Valuation Model 24 Constant & non-constant growth of dividend 27 Actual prices Vs. Expected Prices 27 Weighted average cost of capital (WACC) 28 Trend of financial statements in last five years 30 Acknowledgement First of all we all are thankful to one and only the Almighty Allah for always guiding us in the thick and thin and giving us strengths and courage
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Interco | | | | | | | | Formerly a footwear manufacturing company‚ Interco developed into a diversified company that comprised subsidiary corporations in four major business areas: apparel manufacturing‚ general retail merchandising‚ footwear manufacturing and retailing‚ and furniture and home furnishings. Due to the fact that Interco ’s subsidiaries operated as autonomous units and lacked integration between its operating divisions‚ the company is particularly vulnerable
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Investment Banks? As of 2010‚ stand alone Investment banks are numerous. 2. We compute the profitability index of a capital-budgeting proposal by Initial outlay = $1‚748.80 dividing the present value of the annual after-tax cash flows by the cost of the project. Explanation: The profitability index is calculated as Net Present Value / Initial Outlay. 3. Project Sigma requires an investment of $1 million and has a NPV of $10. Project Delta requires an investment of $500‚000 and has a
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Part I – Perfect capital markets‚ capital structure and cost of capital (15 points) GP Corp. has common stock with a market value of $200 million and riskless debt with a value of $100 million. Investors expect a 15% return on the stock and a 6% return on the debt. Assume perfect capital markets without any taxes. a) Suppose GP issues $100 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? (4 points) b) Suppose instead GP issues $50 million
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expense or depreciation cost is fixed cost or variable cost in nature? Fixed costs: Fixed costs are such costs that do not change with the change in activity level within the relevant range. Where relevant range can be defined in terms of time or activity level. Variable costs: Variable costs are such costs that change with the change in activity level . Coming to the question‚ depreciation expense or depreciation cost can either be fixed or variable and this depends on the method adopted to measure
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market sales and prices of stocks‚ management presented its plans to improve and perform better. • Third party sources also gave their opinions on whether the stock was a sound investment. WACC CALCULATION: Cost of Capital Calculations: Nike Inc Cohen calculated a weighted average cost of capital (WACC) of 8.3 percent by using the capital asset pricing model (CAPM) for Nike Inc. I do not agree with her figure‚ and the reasons to that are as follows: Value of equity The problem with Cohen’s
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Rwacc =4.52*10.19% + 8.89*89.81% = 8.44% C7: average dividend growth rate: g = [0+12.5++ 20+12+8]/4 %=8% (Assumption: In this calculation‚ the growth rates significantly higher than 20% and negative figure have been ignored.) C8: Using CAPM: KE’=3.2%+0.91*5.5%=8.21% C9: Using DGM formula: P’=D1/ (KE’-g) =1.06*(1+8%)/(8.21%-8%)=$545 In Nike’s case‚ when Joanna Cohen calculated the WACC of Nike‚ she made several mistakes and led to a wrong estimate of the cost of capital. The first mistake comes to the
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technology to be brought into the commercial aerospace market at this time. Boeing has two models for the “Dreamliner‚” the 7E7 Baseline and the 7E7 Stretch‚ a slightly bigger version of the 7E7 Baseline. Both models are said to produce significant cost savings for companies by decreasing the jets fuel consumption by 20% and decreasing the operating expenses by 10%. Based on the seat configurations the Baseline model can seat between 200-300+ passengers and the Stretch can seat between 250-350+ passengers
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Molson Coors Alcoholic Beverages Industry‚ Team 1 Leah Black Professor Shaked‚ FE449 12:30PM Section Industry Information -Make sure to add info about craft beer -Shift away from beer and towards liquor Key Industry Drivers For beer‚ wine and liquor‚ demand from wholesalers is very important. Companies in this industry must work closely with wholesalers to properly promote their product and ensure shelf space at liquor stores. An issue that arises with wholesaling is state restrictions
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