Consider the valuation of Nike given in Example 10.1. a. Suppose you believe Nikes initial revenue growth

Question:

Consider the valuation of Nike given in Example 10.1.

a. Suppose you believe Nike’s initial revenue growth rate will be between 7% and 11% (with growth always slowing linearly to 5% by year 2015). What range of prices for Nike stock is consistent with these forecasts?

b. Suppose you believe Nike’s initial revenue EBIT margin will be between 9% and 11% of sales. What range of prices for Nike stock is consistent with these forecasts?

c. Suppose you believe Nike’s weighted average cost of capital is between 9.5% and 12%. What range of prices for Nike stock is consistent with these forecasts?

d. What range of stock prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...