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Consider the following data for Nike Inc.: In 2018, it had $36,397.00 million in sales with a 15% growth rate in 2019, but then slows
Consider the following data for Nike Inc.: In 2018, it had $36,397.00 million in sales with a 15% growth rate in 2019, but then slows by 2% to the long-run growth rate of 5% by 2024. Nike expects EBIT to be 13% of sales, increases in net working capital requirements to be 5% of any increases in sales, and capital expenditures to equal depreciation expenses. Nike also has $525 million in cash, $38 million in debt, 1,626 million shares outstanding, a tax rate of 25%, and a weighted average cost of capital of 9%. a. Suppose you believe Nike's initial revenue growth rate will be between 10% and 20% (with growth slowing linearly to 5% by year 2024). 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 12% and 14% 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 8.5% and 11%. 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? a. Suppose you believe Nike's initial revenue growth rate will be between 10% and 20% (with growth slowing linearly to 5% by year 2024). What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price share: $ (Round to the nearest cent.) Lowest price share: $ (Round to the nearest cent.) b. Suppose you believe Nike's initial revenue EBIT margin will be between 12% and 14% of sales. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $ . (Round to the nearest cent.) Lowest price per share: $ (Round to the nearest cent.) c. Suppose you believe Nike's weighted average cost of capital is between 8.5% and 11%. What range of prices for Nike stock is consistent with these forecasts
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