On july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutual fund management firm, pored over analysts writeups of nike, inc. In corporate finance, it is the hurdle rate on investments, an optimizing. Well, in the manner of you are truly dying of pdf, just choose 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. Wacc weighted average cost of capital explained with example. Nikes share price had declined significantly from the start of the year. This fund invests mostly in fortune 500 companies with an emphasis on value investing.
Nike is a public company, and its market capitalization is a more relevant metric for equity than the book value of equity. The capital asset pricing model capm approach for calculating the cost of equity in the case of nike inc uses a beta of 0. Nike, inc cost of capital case study free download as powerpoint presentation. Northpoint large cap fund weighing whether to buy nikes stock. As such, the cost of capital is a critical factor in decisionmaking and in estimating the weighted average cost of capital wacc. Case the weighted average cost of capital wacc free essay and over 89,000 other research documents. Nike inc cost of capital by maria canchola on prezi. 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. Each group will turn in one report sounds obvious, but might as well make it explicit. In corporate finance, it is the hurdle rate on investments, an optimizing tool for capital structure and a divining rod for dividends. The cost of capital is determined by computing the costs of various. The market responded mixed signals to nikes changes. Cost of capital case 15 financial administration finc 57180 team 1 fall 20.
November23,2016 nike, inc cost of capital prepared by justin nychuk bus 495. 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. Nike inc cost of capital case solution term paper warehouse. The environmental disaster was hurricane katrina which was caused the huge destruction across the southeastern united states.
Conclusion after discounting cash flows provided in exhibit 2 with the calculated wacc of 9. Nike inc cost of capital hult international business school march 2, 2014 1. The cost of capital is the cost of a firms debt and equity funds, or the required rate of return on a portfolio of the companys existing securities. What is the wacc and why is it important to estimate a firms cost of capital. Nike inc cost of capital case study essay example graduateway. 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. Introduction miss ford is a portfolio manager for northpoint group, a mutualfund management firm.
Nike inc cost of capital case study essay 917 words. Download ebook nike cost of capital case solution give the favorite nike cost of capital case solution baby book as the other today. Nike, inc cost of capital case analysis importance of cost of capital the concept of cost of capital is used in finance decisions. To calculate the cost of debt, cohen simply divides the interest expense by the average balance of the interestbearing debt. Nike s share price had declined significantly from the start of the year.
Case analysis of nike, inc cost of capital find mba. Cost of capital on july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutual fund. Each report should have a cover page that contains the following the names of. Nike has experienced sales growth decline, declines in profits and market share. Cost of capital case study solution case study analysis.
Since june 30, 2001, nike did not pay any dividend for shareholders, so this model ddm cant be used for calculating ke in this case because it does not reflect the true cost of capital. View essay nike, inc from fina 402 at concordia university. 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. Nike, inc cost of capital case 15 financial administration finc 57180 team 1 fall 20. Nike, inc cost of capital case study cost of capital. Project evaluation solved by using beta regressions and weighted average cost of capital wacc comparisons. Cost of capital case study solution contains an 1,100 word answer to the four questions below, a financial analysis in excel that compares joannas financials to the correct financials, and a powerpoint presentation that summarizes the case and walks the audience thru the financial analysis.
Cost of capital articles, research and case studies. A comparative analysis of strategies and business models of nike, inc. This case is about the impact of an environmental factor external issue on dividend policy of the firm internal issue. The capital structure of the company shows that it is focusing more onequity financing as compared to debt financing. In depth view into nke capital expenditure explanation, calculation, historical data and more. Nike cost of capital case study 1193 words 5 pages. Nike, inc nike inc cost of capital nike inc case background. Financial analysis and decisions darryl yasinowski university of regina due november 23rd 2016 2. 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. This is an approximation for the true cost of the debt, but is too inaccurate.
The cost of equity can be determined using the capital asset pricing model capm. A comparative analysis of strategies and business models of. 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. Nike this case is a group project that is due on march 28 just before class begins at 10. Because she was about to go into a meeting, she asked her new assistant, joanna cohen, to estimate nikes cost of capital. On july 5, 2001, kimi ford, a portfolio manager at northpoint group, a mutualfund management firm, pored over analyst writeups of nike, inc. Nike inc cost of capital case solution and analysis, hbr case. 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. It is used to evaluate and decide new projects, as well as the minimum return investors expect from the invested capital. Acceptance or rejection of an investment project depends on the cost that the company has to pay for financing it. Pdf cost of capital at ameritrade marco fazio academia. This is a baby book that will do its stuff you even new to archaic thing.
Case number 2 nike incorporateds cost of capital is a vital element when addressing opportunities regarding topline growth and operating performance. Introduces the weighted average cost of capital wacc. Essay on nike cost of capital case 1615 words bartleby. 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. Cohen immediately gathered all the data she thought she might need exhibits 1 through 4 and began to work on her analysis. Download free pdf study materials in financial management. Provides a wacc calculation, although it has been intentionally designed to mislead students.
Return on invested capital calculation is included in the quarterly earnings section of our. Since overall cost of capital is the minimum rate of return required by the investors, this rate is used as the discount rate or the cutoff rate for evaluating the capital budgeting proposals. Case analysis of nike, inc cost of capital apparently, the issue of nikes case is to control and check the calculation cost of capital done by joanna cohen who is the assistant of a portfolio manager at northpoint group. Nike has reveal that it would increase exposure in midprice footwear and apparel lines. The swiss army knife of finance aswath damodaran april 2016 abstract there is no number in finance that is used in more places or in more contexts than the cost of capital.
Ali mahdi1, mohammed abbas2, taher ilyas mazar3 1,2,3mba student, university of bahrain, kingdom of bahrain dr. Nike, inc cost of capital by jessica chan, robert f. The optimal capital structure occurs at a point where the overall cost of capital is minimum. Including marginal cost of capital case 6 talking head. Case study on wacc with additional finance youtube. Total capital, fair value 0 current fair value of nike inc. Nikes share price had declined significantly from the beginning of the year. Cost of equity capm model capital asset pricing model 9.
928 1195 1275 739 729 704 721 676 979 1497 828 1432 462 1211 263 752 712 1005 1382 542 1382 731 1579 1168 841 166 934 1458 1095 603 625 1066 1473 199 1284 1149 1184 1254 1419