Nike had sales of ($36.397) billion in 2018. Suppose you expected its sales to grow at a
Question:
Nike had sales of \($36.397\) billion in 2018. Suppose you expected its sales to grow at a rate of 10% in 2023, but then slow by 1% per year to the long-run growth rate that is characteristic of the apparel industry—5%—by 2028. Based on Nike’s past profitability and investment needs, you expected EBIT to be 16% of sales, increases in net working capital requirements to be 5% of any increase in sales, and capital expenditures to equal depreciation expenses. If Nike had \($12.997\) billion in cash, \($12.627\) billion in debt, 1,574 million shares outstanding, a tax rate of 25%, and a weighted average cost of capital of 9%, what would have been your estimate of the value of Nike stock in early 2023?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780137852581
6th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford