Page No.

Date

Name Rahu Sonaulane

Req.No 1149
SeC A
SubJect Haanctol Manaq enent

Ca.se ssiqn.men-
Nike laC Cos+ of Capital

.. Do ou
Do Ou agree oitoJoonna Cobens WACC
ColCulaHon h y O1 hy Not 2
Ans
No T_don gree wito Cohen5
ue iqhted ANerugeCoSt CaLpa to
hese r a9on S

She CalCuladed the weiaht'S of_debts

Ond eqult USing bookValue atne
han Marke Nolue
Baok Ualue is the price pald tor on BSSe-
thod oill eue Chanaq aS
aSSeS
Long
\oaq a5 Nou

hence, She dis a miStake

his toiCa doda
in eSonatng e Tost
of olebt aS S a mustTar ne
USethe market Value baSe OA Cuore et
doade.
 Page No.
Date

uSinq histoiCa dadadoesatre flect NikeS

Current oX tutun cost of delot thereFare
CohensCoSt ot delot
CalCulaHon ulhich
daS done
lo alcinqth total
espensetor 200 and diuidiag
teest
iL b
the CampanyS aveoqee de balanclAg
Cona
3 Anothe emor thau0aS done usaS USing
the auemag beta trom
996-2001) ,uKc
is o H's Aumbe doesn tpe@e
tne turu SystemaHC dSK So i
iS beter to Use doe moSt CRnt
be O6

9. M a k e Value
ofeaul
42. 09 24 3 5million
1 2+.q4 oilion

uwejght O 11u27
WS2.4Y +129

.1/
 Poge No.
Dsto

eightOf deb+ loo-81:1

o o9

Value of Bond 56
-to
45( YI22TJ*CH

So the CoS+ o t debt

C-38 .)
.u3
RE CKon-REXB
5.44 5.g-1.)*6.9

WACC
D[C0+E
wACC
2y.
 Page No.
Date

ASSumpHon S -

ACC O0 morie Ualue

.3
CoStof equity RE

RE D1/PogD1 Do (9
Do 0 .u 5.5 /
DL O: u < + 0 055)
O50 6

Po = y2 09
RE
5 o 6 45 - 5 -
y2.o9

6 0 .
Aduan e ot s model

Thene is a lesibility in toreCatag

Hae hutu oiuidendS.

2T aSsistS in the ppotm oton

No madie he impac ofhe lapue
 Page No.
Date

3Helps in Sesi4iuity Onalysis Onnalyg

ot 0arke-E UamLOHOnnS to Chonging
SituaHon S
meHnod s e Si.mple-

DiSaddand0ge model
1.hemadeL is n o t Switable to uSe i n
monyCaSes S0 dLl ceSult In naa
L0aCU
anSueTS

HiQh Sen Siduit to miao antiaHon 10

he npudtS ot the model and aShump

b.SLg Eamniaq Capitolizahon Mode-

ECco 2.16 5. 13/
Po y.09

EL=Fore Co.Sted eorcniOg5

P a - Sto ck prriCe to do

*Aduantage of wS molel
T elps o poredi Cing h e lorcing
 Page No
Date

2 T ConrieTS ConSideoHon tó e
ForeCcagHnq eaninqand the Cucre0t
pcice 6f ne Stsc

4Disaduon-LageS of HS mode l1

ignore S the 9outa

s model iS no ppece appnopslak
TO the firms wit Nogfo
h e eSlcmode S mayAot oe aCCucode

The CoJcudaded uACC S g.24. ond

the present VoJue p e Share S 5g.13

Tis Shows that thepme.seot Ualue S

Lighe by I:38Hmer han Nike 5
iane
Cuxrent market_ pmice t u209

( R (umeot qrout matethads

ConSldered malo unde Soteal
based on these reCome S e eCommerd
t o t h No lo0t Lam -Cap
 Paga No.
Dato

to buy Nike5ShaeS beCousethe

( u r e n t l y Unde Valuej
Stoce iS
t ha S a mao q o u H potental
thot will be benefHcial to fund

he p aS t p e t o Y M O n e S h o w S
Nike Can Ou preform t h e uTent
Market recuco and AoW thar
ht
haS gonedoula i S S left
t o l o p e TO an. aCeoed