CASE 14 NIKE‚ INC.: COST OF CAPITAL Cost of capital denotes the opportunity cost of using capital for a particular investment as oppose to the alternative investment which has similar systematic risk. It is extremely important since it is used in evaluating whether a project is feasible or not in the net present value (NPV) analysis‚ or in assessing the value of an asset. WACC (weighted average cost of capital) is the proportional average of each category of capital inside a firm (common
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Nike Nike was founded in 1964 by Philip Knight and Bill Bowerman. They started to design shoes that were lighter‚ better padded‚ and featured waffle like patterns in their rubber sole. At first not much commercial success. After that they started importing low cost‚ high quality running shoes out of Asian countries. A deal was made with Onitsuka to import these hoes to the US‚ there were sold under the brand name ‘Blue Ribbon Shoes’ (BRS). Their initial shipment were only 200 shoes. By 1964 BRS
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the business‚ his inability to maintain a positive cash flow‚ inadequate financing‚ poor management and planning. While Hill had a lot of passion for street hockey‚ he was not able to translate that drive and energy into profitable results. The most important reasons are his inadequate financial funding and his lack of forward vision and planning. As described in the reading‚ Hill did not
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The role of the government also plays a major role in these challenges that are faced by Nike. As we know that government laws and regulations differ from country to country and this makes manufacturing of products very difficult challenge for the international companies like Nike. The host governments have laws concerns against consumer protection‚ information and labeling‚ employment‚ wages and salaries and safety of the workers who work in those firms. The international organizations must keep
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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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United Way Case Study Judson University United Way Case Study The United Way is a long established company that is known for helping build stronger communities. Many people may have first been introduced to this organization through their successful commercials featured during professional football games. The ads made many viewers aware of the needs experienced through different areas‚ and how football players were volunteering to make a difference. This was a great introduction to the United
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s Case Study: Marks and Spencer Where now for an icon of British retailing? History and background Early history Marks and Spencer (M&S) was founded by Michael Marks and Thomas Spencer in 1884 - he called his business ’penny bazaars’ with signs reading "Don’t ask the price‚ it’s a penny" (the forerunner of stores like Poundland today?) The company went public in the 1920’s and by the 1970’s M&S had established itself as a British institution with locations in every major town and
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Nike Inc. Case 1. What is the WACC and why is it important to estimate a firm’s cost of capital? WACC is weighted average cost of capital‚ which is the expected rate of return on average from all the company’s existing debts and securities. It takes into account all different types of financing in the company’s capital structure. The reason it is important to estimate WACC is because it measures what it costs the firm to take on a project based on its current Debt and Equity mix. When the
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MINIICASE AS an investment advisor‚ you have been approached by a client called Ramesh‚ who wants some help in investment related matters. Ramesh is currently 45 years old and has Rs. 600000 in the bank. He plans to work for 15 more years and retire at the age of 60. Ramesh’s present salary is Rs. 400‚000 per year. He expects his salary to increase at the rate of 12 % per year until his retirement. Ramesh has decided to invest his bank balance and future savings in a portfolio in which stocks
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Case Report - Nike Introduction Many of us know Nike for the clever maketing campaigns‚ celebrity athelets‚ "swoosh" logo‚ and "Just Do It!" slogan. In 1963 the world’s largest athletic shoe company was founded by Philip Kight and Bill Bowerman for $500 apiece and a handshake‚ and today has over $9 billion in revenues. After several years of record breaking performance Nike’s global labor practices were brought to the attention of the public as early as the 1990s. Which included publishings
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