fund for NorthPoint Group. Her company is trying to decide whether or not to invest in Nike’s stock‚ which has been declining in price in the past year. Kimi has asked her assistant‚ Joanna Cohen‚ to estimate Nike’s weight average cost of capital (WACC) to help make this decision (Case 13‚ pg. 58). We looked at Joanna’s estimates and discovered a few problems that she made when estimating her cost of capital. We found Joanna’s estimates to be wrong because of a few reasons. The first mistake she
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NIKE‚ INC.: COST OF CAPITAL Book value vs. Market value While calculating the Nike’s cost of capital using both the book value (Exhibit 1.1) and the market value (Exhibit 1.2)‚ I could notice the mistake Cohen made finding the equity value. Cohen used the book value to reflect equity value. Although the book value is an accepted measure to estimate the debt value‚ the equity’s book value is an inaccurate measure of the value perceived by the shareholders. Since Nike is a publicly traded company
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Royal Asset Package Valuation DCF Valuation EBITDA - Depreciation EBIT - Taxes on EBIT + Depreciation - Capex - WK FCF Wacc Enterprise Value + Terminal Value + working capital Total EV (31/12/1983) EV/EBITDA 1984 EV/EBITDA 1985 EV/EBITDA avg. Terminal Value Growth Capex = Depreciation Monticello Mill financials Revenues Annual Capacity Utilization rate Tons Price per ton EBITDA margin Box Plants financials Revenues EBTIDA margin Combined Package financials Revenues EBITDA margin Depreciation EBIT
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levels between the years 2008-2012. Owing to the uneven capital structures between 2008 and 2012‚ it will be prudent not to deploy WACC to value the target but value the target using APV. Additionally‚ WACC computation might be difficult to use since an adjustment discount rate each year the capital structures change. Assuming that the project will de-lever after 2012‚ WACC valuation will be applied to determine the terminal value. factors the interest tax shields in its calculation and in the case
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Abstract This paper is an analysis of Road King Trucks’ new project which is introducing a new product into its product line. I will decide whether run the project or not. Six issues will be discussed as follows 1) importance of energy cost; 2) project’s cash flows; 3) cost of capital; 4) choose an engine 5) evaluation 6) accept or reject. We should accept the project because of the positive NPV and high IRR. We will gain $532 million in wealth which is a big money on the scale like this. The
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Q.1: Joint Venture organization 1. From the bottler’s perspective A)Corporate governance • I would require the concentrate producer to purchase a minority share in the company that would ideally be 49% . This is because the more shares the producer buys‚ the more growth and profit margins I expect to have. This was seen with the Gallardo-PepsiCo joint venture expectations. Plus‚ I would like to name more directors than the producer. • As we have seen in the text‚ concentrate producers and bottlers
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1. This is a measure summarizing the overall past performance of an investment. Average Return 2. This includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment. Dollar Return 3. Which of these statements is true? When people purchase a stock‚ the do not know their return‚ neither the short term nor the long-term. 4. This is the volatility of the investment‚ which includes firm-specific risk as well as market risk. Total risk 5. This
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on an estimate of Teletech’s WACC. Currently‚ the hurdle rate for Teletech is 10.407%‚ using data in Figure 1. The case rounds this number to 10.41% 2. What are the segment WACCs for Teletech? What assumptions do you have to make to do these calculations? Using the data in Figure 1‚ we can calculate the WACC for the Telecom Services division and the Products and Systems division of Teletech. Telecom Services WACC is 10.404% while Products and Services WACC is 10.417%. Assumptions need
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rape -- explained‚ with case examples.. Retrieved from http://www.nolo.com/legal-encyclopedia/rape-statutory-rape-32638.html LII. (2013). 18 usc § 1201 - kidnapping. Retrieved from http://www.law.cornell.edu/uscode/text/18/1201 Galletly‚ C.‚ & Pinkerton‚ S. (2008). Preventing hiv transmission via hiv exposure laws: Applying logic and mathematical modeling to compare statutory approaches to penalizing undisclosed exposure to hiv. Retrieved from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2603033/
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aims to help Kimi Ford make a decision on her investment of Nike. We choose WACC as our method to estimate the cost of capital‚ which can be used as a discount rate to verify whether Nike is correctly valued in current market. We have mainly four steps to calculate WACC: I. Identify the type of cost of capital; II. Figure out the weights of debt and equity; III. Calculate the cost of debt and equity respectively; IV. Get WACC. After our analysis‚ we conclude that Nike is undervalued at its current
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