Quiz 1.

You were to review and work through the Nike CoC case. Now that you have worked out the
case issues, answer the following questions in paragraph form. Provide all your calculations; if
you did it in excel, clearly label the question and attach your excel file as well as the word
document answering these questions.
You must work on your own. The penalty for sharing work will be a zero on the quiz for all
parties. Furthermore, similar questions may appear on the test, so it is best for each student to
work alone.
Save your file as yourname_Quiz1Fin 6806fall 2019. Failure to clearly label your file will result
in a penalty of 5 points.

Nike Cost of Capital Questions.

1. Do you believe that Nike should have multiple discount rates/CoC? Why or why not? (4
pts)
2. Do you agree with Kimi Ford’s weights for debt and equity? Show numerically why or
why not. (5 pts)
3. Do you agree with her calculation for the cost of debt? Show numerically why or why
not. (5 pts)
4. Do you agree with her assumptions for the CAPM? Why or why not? What is the cost
of equity using the CAPM? (8 pts)
5. What other ways should she calculate the cost of equity? What are your results for the
cost of equity via these alternative methods? Which method gives you the best estimate
for the cost of equity and why? (hint – think about the Dividend Discount Model and the
Earnings Multiplier approach and which of the three methods is the best) (17 pts)
6. What is the WACC for Nike? (5 pts)
7. Why is important to accurately calculate the WACC for a firm? How would using an
inaccurate WACC impact the various stakeholders of the firm? (6 pts)