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NIKE Inc Cost of Capital _ Financial Management

NIKE Inc Cost of Capital _ Financial Management

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Published by Anung Triningrum

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Published by: Anung Triningrum on Nov 24, 2012
Copyright:Attribution Non-commercial

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02/28/2014

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NikeInc.
Cost of Capital
FINANCIAL MANAGEMENTGROUP 2
 Anung Triningrum | Risyanto Krisna S | Muhtad Fadly|Hasnan Ridwan |Diaz
 
Nike Inc.
Case Background :
NorthPoint Large Cap Fund weightingwhether to buy
Nike’s
stock
Nike has experienced sales growthdecline, declines in profits and marketshare
Nike has reveal that it would increaseexposure in mid-price footwear andapparel lines. It also commits to cutdown expenses
The market responded mixed signalsto Nike
s changes. Kimi Ford has donea cash flow estimation, and ask herassistant, Joanna Cohen to estimatecost of capital
 
 
What is WACC?
The cost of capital is the rate of return requiredby a capital provider in exchange for foregoing aninvestment in another project or business withsimilar risk. Thus, it is also known as anopportunity cost
WACC is calculated taking into account therelative weights of each component of the capitalstructure- debt and equity, and is used to see ifthe investment is worthwhile to undertake
The WACC is set by the investors (or markets),not by managers. Therefore, we cannot
observe 
 the true WACC, we can only
estimate 
it.
The minimum return that a company must earnon existing asset base to satisfy its creditors,owners, and other providers of capital

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