4. Calculate the costs of equity using CAPM and the dividend discount model. Estimate Nikes cost of debt. The information needed is given in the spreadsheet Cost of Capital in the Excel file.

Historical betas of Nike 1996 1997 1998 1999 2000 0.98 0.84 0.84 0.63 0.83 0.69 up to 2001 June Hostorical markket risk premium Arithmetic mean Geometric mean 7.50% 5.90% Dividend growth rate forecasted by Value line 5.50% Dividend history 1997 1998 1999 2000 2001 31-Mar 0.1 0.12 0.12 0.12 0.12 30-Jun 0.1 0.12 0.12 0.12 0.12 30-Sep 0.1 0.12 0.12 0.12 31-Dec 0.1 0.12 0.12 0.12 Annual 0.4 0.48 0.48 0.48 Consensus EPS estimates FY 2002 FY 2003 $2.32 $2.67 Current yields on U.S. Treasuries 3-month 6-month 1-year 5-year 10-year 3.59% 3.59% 3.59% 4.88% 5.39% 5.74% 20-year Current Nike Debt ISSUER NIKE NIKE NIKE NIKE NIKE NIKE COUPON 2.25 3.625 3.875 2.375 3.375 2.4 MATURITY 5/1/2023 5/1/2043 11/1/2045 11/1/2026 11/1/2046 3/27/2025 Book value millions) MARKET PRICE 212.56 104.536 187.61 117.139 241.33 124.383 155.66 109.125 210.58 114.297 288.86 107.417 YTM 0.3 2.6 2.536 0.773 2.606 0.689 Historical betas of Nike 1996 1997 1998 1999 2000 0.98 0.84 0.84 0.63 0.83 0.69 up to 2001 June Hostorical markket risk premium Arithmetic mean Geometric mean 7.50% 5.90% Dividend growth rate forecasted by Value line 5.50% Dividend history 1997 1998 1999 2000 2001 31-Mar 0.1 0.12 0.12 0.12 0.12 30-Jun 0.1 0.12 0.12 0.12 0.12 30-Sep 0.1 0.12 0.12 0.12 31-Dec 0.1 0.12 0.12 0.12 Annual 0.4 0.48 0.48 0.48 Consensus EPS estimates FY 2002 FY 2003 $2.32 $2.67 Current yields on U.S. Treasuries 3-month 6-month 1-year 5-year 10-year 3.59% 3.59% 3.59% 4.88% 5.39% 5.74% 20-year Current Nike Debt ISSUER NIKE NIKE NIKE NIKE NIKE NIKE COUPON 2.25 3.625 3.875 2.375 3.375 2.4 MATURITY 5/1/2023 5/1/2043 11/1/2045 11/1/2026 11/1/2046 3/27/2025 Book value millions) MARKET PRICE 212.56 104.536 187.61 117.139 241.33 124.383 155.66 109.125 210.58 114.297 288.86 107.417 YTM 0.3 2.6 2.536 0.773 2.606 0.689