Joanna Cohen’s WACC calculation because she mistakenly used historical data to estimate the future cost of debt. Joanna calculated the cost of debt by taking the interest expense for 2001 and dividing it by the average debt balance. The cost of debt for Nike is the effective rate that it pays on its current debt‚ meaning the yield to maturity of bonds should be used to make an estimate instead of the average debt balance. Through the use of past data‚ the average balance of debt‚ the 4.3% before-tax cost
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Nike‚ Inc.: Cost of Capital EXECUTIVE SUMMARY Kimi Ford‚ a portfolio manager of North Point Group a large mutual fund management firm‚ is looking into the viability of investing in the stocks of Nike for the fund that she manages. Ford should base her decision on data on the company which were disclosed in the 2001 fiscal reports. While Nike management addressed several issues that are causing the decrease in market sales and prices of stocks‚ management presented its plans to improve and
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world? In 2005‚ Nike released reports of multiple audits it conducted in its supply chain. Said report brought to light serious unethical violations. In half of the shops visited‚ workers were being poorly treated. The victims have little or no access to water and restrooms during work hours; they work more than 60 hours a week for wages below the legal minimum. Moreover‚ workers are literally being forced to work overtime and those who still refuse are severely punished. Nike is trying to change
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Nike Case Study By Mark Colasurdo‚ Andrew McMullen‚ Jonathan Burd‚ Gaoxing Feng‚ and Jie Leng Background: Kimi Ford‚ a portfolio manager at North Point Group‚ is looking into the profitability of investing in the stocks of Nike for her fund that she manages. She is supposed to base her decision the company’s data which was disclosed in the 2001 fiscal reports. While Nike management had addressed several issues that are causing the decrease in market sales and stock price‚ management presented
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Executive Summary Wanting to add Nike’s share to her portfolio‚ Kimi Ford asked her new assistant‚ Joanna Cohen‚ to estimate Nike’s cost of capital. Cohen‚ later‚ came up with the cost of capital of 8.4% that was contradicted to Ford’s cost of capital of 12%. This report points out flaws of Cohen’s assumption and recalculates the WACC to obtain the most accurate cost of capital. In the cost of equity calculation‚ we will use CAPM‚ the dividend discount model (DDM)‚ and the earnings capitalization
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Nike has been accused of using child labor in the production of its soccer balls and shoes for Nike in Pakistan. While Pakistan has laws against child labor‚ the government has taken very little action to terminate it. It is said that only a boycott by the United States and other nations will have any impact on child-based industries. In addition‚ the U.S constitution states that child labor is an illegal and inhumane practice and any U.S. company found guilty practicing and encouraging it will
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594 Total current assets 11‚531 11‚297 b. What method does the company use to value inventory? The Notes indicate that NIKE uses “last in first out‚” or LIFO‚ for domestic inventories and “first in first out‚” or FIFO‚ for international inventories c. What depreciation method does the company use? The Notes indicate that NIKE uses the straight line method for buildings and leasehold improvements and the declining balance method for machinery and equipment. As with the
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------------------------------------------------- Product management From Wikipedia‚ the free encyclopedia Marketing | Key concepts | Product • Pricing Distribution • Service • Retail Brand management Account-based marketing Marketing ethics Marketing effectiveness Market research Market segmentation Marketing strategy Marketing management Market dominance | Promotional content | Advertising • Branding • Underwriting Direct marketing • Personal Sales Product placement • Publicity Sales promotion • Sex
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Do you think the criticism of Nike is fair‚ considering that the host countries are in dire needs of creating jobs?Yes and no. In a pure capitalist economic system employers will seek to pay workers as little in cash and benefits as possible and will locate his plant in the location that incurs the least cost. That being said there is a certain moral consideration to pay a wage that allows the worker to reasonably support themselves and their dependents. Lastly you should consider Henry Ford’s Famous
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to Kimi about Nike’s WACC‚ she calculated it to be 8.3%. She also provided some assumptions she made while developing this WACC. First‚ she noted that she decided to use a single cost of capital because she did not believe that other segments with Nike were large enough to make a considerable difference on the weights. She determined that Nike’s segments also did not have a significant difference in risk to justify using a multiple cost of capital. We agreed with Joanna and also used a single segment
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