As used in this report, the terms we, us, nike and the company refer to nike, inc. This is an approximation for the true cost of the debt, but is too inaccurate. Failure to respond timely could have adverse effects on sales and productivity just do it. If you do not agree with cohens analysis, calculate your own wacc for nike and be prepared to justify your assumptions. Provides a wacc calculation, although it has been intentionally designed to mislead students. Must respond to shifts in consumer preferences by adjusting existing product offerings, styles and categories. Acceptance or rejection of an investment project depends on the cost that the company has to pay for financing it. Nike, inc cost of capital group, a mutua fund 5, ford, a portfolio manager at the athletic man management firm, pored over analysts of inc.
Nike inc cost of capital case solution term paper warehouse. Introduction miss ford is a portfolio manager for northpoint group, a mutualfund management firm. Financial analysis and decisions darryl yasinowski university of regina due november 23rd 2016 2. The capital asset pricing model capm approach for calculating the cost of equity in the case of nike inc uses a beta of 0. Nikes share price had declined significantly from the start of the year.
The environmental disaster was hurricane katrina which was caused the huge destruction across the southeastern united states. Case analysis of nike, inc cost of capital find mba. Nike, inc cost of capital case study cost of capital beta. Cost of capital on july 5, 2001, kimi ford, a portfolio manager of. Cost of capital case summary in this case, kimi ford, a portfolio manager at northpoint group, a mutual fund company, manages the northpoint largecap fund. The market responded mixed signals to nikes changes. Cohen calculated a weighted average cost of capital wacc of 8. Ford was considering buying some shares for the fund. Cost of capital on july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutual fund management firm, pored over analysts writeups of nike, inc. The american manufacturer, through its marketing strategy which rests on a favorable brand image, has evolved into a large. Nike, inc cost of capital case analysis importance of cost of capital the concept of cost of capital is used in finance decisions. Nike has experienced sales growth decline, declines in profits and market share. As of today 20200505, nikes weighted average cost of capital is 5.
As of today 20200504, nike s weighted average cost of capital is 5. Cost of capital excel file, subjects covered finance by kenneth eades, david thornhill source. Introduces the weighted average cost of capital wacc. To calculate the cost of debt, cohen simply divides the interest expense by the average balance of the interestbearing debt. This fund invests mostly in fortune 500 companies with an emphasis on value investing. Nike s share price had declined significantly from the start of the year. Conclusion after discounting cash flows provided in exhibit 2 with the calculated wacc of 9. Cost of capital on july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutual fund.
The capital structure of the company shows that it is focusing more onequity financing as compared to debt financing. Nike became a publicly traded company since december 2, 1980, the share price has changed significantly during 20years time. Each group will turn in one report sounds obvious, but might as well make it explicit. Nike swot 2020 swot analysis of nike business strategy hub. The company specializes in athletic wear, providing footwear, apparel, athletic equipment, and accessories.
Nike over view nike is the ancient greek goddess of victory it is one of the most recognized symbols in the world the swoosh. Northpoint large cap fund weighing whether or not to buy nikes stock. The first mistake comes to the book value of equity used in calculating w d. Nike, inc cost of capital case 15 financial administration finc 57180 team 1 fall 20. What is the wacc and why is it important to estimate a firms cost of capital. November23,2016 nike, inc cost of capital prepared by justin nychuk bus 495. Nike is a public company, and its market capitalization is a more relevant metric for equity than the book value of equity. Nikes share price had declined significantly from the beginning of the year. Project evaluation solved by using beta regressions and weighted average cost of capital wacc comparisons. Nike inc cost of capital case solution and analysis, hbr. Decline in sales, growth, and market share plans to increase exposure in midprice footwear and apparel lines and commits to cut down expenses. Nike inc cost of capital by maria canchola on prezi. It was found by bill bowerman and phil knight in the year 1964. Each report should have a cover page that contains the following the names of.
Social media and advertising cookies of third parties are used to offer you social media functionalities and personalized ads. To get more information or amend your preferences, press the more information button or visit cookie settings at the bottom. This case is about the impact of an environmental factor external issue on dividend policy of the firm internal issue. Nike asks you to accept cookies for performance, social media and advertising purposes. Nike s share price had declined significantly from the beginning of the year. Cost of equity capm model capital asset pricing model 9. Cost of capital on july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutualfund management. Our analysis will include how wacc is calculated using the capital asset pricing model capm to. Ford was considering buying some shares for the fund she managed, the northpoint largecap. Nikes primary goal is to supply athletes with exceptional products.
Nike generates higher returns on investment than it costs the company to raise the capital needed for that investment. I case background kimi ford the manager of the northpoint largecap fund, which invested mostly in fortune 500 companies, weighing whether to buy nikes stock. Nikes share price had declined significantly from the beginning of. Nike cost of capital case study 1193 words 5 pages. Nike inc cost of capital case solution, nike inc cost of capital case analysis, nike inc cost of capital case study solution, nike inc cost of capital case solution, a4. Nikes share price had declined significantly from the. Nike, inc cost of capital on july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutual fund management firm, pored over analyst writeups of nike, inc. Nike over view nike is the ancient greek goddess of victory it is one of the most recognized symbols in the world. Introduction kimi ford a portfolio manager at northpoint group which is a mutualfund management firm, is considering to buy some shares from nike, inc even if its share price had declined from the beginning of the year, for the northpoint largecap. As such, the cost of capital is a critical factor in decisionmaking and in estimating the weighted average cost of capital wacc. Nike, inc cost of capital case study free download as powerpoint presentation. On july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutualfund management firm, pored over analyst writeups of nike, inc. Nike, was founded in the year 1957 by knight and the company since the very beginning manufacturing higher quality sports shoes for several sports inclusive of athletics, football, volleyball etc.
Nike case analysis wacc nike inc case study please enjoy. A firms weighted average cost of capital wacc represents its blended cost of capital across all sources, including common shares, preferred shares, and debt. Nike, inc cost of capital by jessica chan, robert f. This is arrived at as the most relevant to be used since it accounts for the variations seen in the past in the corporations betas. Weighted average costs of capital wacc is an essential estimation that is needed in order to determine the amount of interest that will be paid for each additional dollar financed. Northpoint large cap fund weighing whether to buy nikes stock. In nikes case, when joanna cohen calculated the wacc of nike, she made several mistakes and led to a wrong estimate of the cost of capital. This new dimensions in hrd pdf case is a group project that is due on march 28 just before class begins at 10.
Nike, inc cost of capital on july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutualfund management. Case number 2 nike incorporateds cost of capital is a vital element when addressing opportunities regarding topline growth and operating performance. Thus, their task is to identify and explain the mistakes in the analysis, which are intended to highlight conceptual issues regarding wacc and its components. View essay 1316907casestudynikeinccostofcapital from finance 300 at university of louisiana, lafayette. Thus, their task is to identify and explain the mistakes in the analysis, which.
The concept of cost of capital is also important in many others areas of decision making, such as dividend decisions, working capital policy etc. Cost of capital case study analysis, subjects covered finance by kenneth eades, david thornhill source. Total capital, fair value 0 current fair value of nike inc. Nike, share price had declined from the emphasis ford was considering buying some shares for the fund with an largecap fund, which invested mostly in fortune 500 companies. Introduction kimi ford a portfolio manager at northpoint group which is a mutualfund management firm, is considering to buy some shares from nike, inc even if its share price had declined from the beginning of the year, for the northpoint largecap fund she managed which. Using market value, we came up with a cost of capital of 9. Nike inc cost of capital hult international business school march 2, 2014 1.
Additionally, the company also has been involved in manufacturing equipments for fitness and related sports apparels such as caps amoakogympah 2010. Cost of capital on july 5, 2001, kimi ford, a portfolio manager of northpoint group, a mutualfund management firm, pored over analysts writeups of nike, inc. Nike inc cost of capital case study essay 917 words. On july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutual fund management firm, pored over analysts writeups of nike, inc. Nike case study analysis by ahmed samir haitham salah magdy essmat magdy mohamed sherif 2. Essay on nike cost of capital case 1615 words bartleby. Case study nike, inc cost of capital essay 718 words. Using this computed wacc and a growth rate of 3%, an equity value.
Nike, inc cost of capital case study cost of capital. Cost of capital case 15 financial administration finc 57180 team 1 fall 20. Nike inc cost of capital nike struggles with demand of changing design trends. Case the weighted average cost of capital wacc free essay and over 89,000 other research documents. Pdf cost of capital at ameritrade marco fazio academia. Nike this case is a group project that is due on march 28 just before class begins at 10. Introduction kimi ford a portfolio manager at northpoint group which is a mutualfund management firm, is considering to buy some shares from nike, inc even if its share price had declined from the beginning of the year, for the northpoint largecap fund she. Nike inc cost of capital case study essay graduateway. The cost of equity can be determined using the capital asset pricing model capm. Nike has reveal that it would increase exposure in midprice footwear and apparel lines. In depth view into nke capital expenditure explanation, calculation, historical data and more.
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