Question
Consider the following data for NikeInc.: In 2009 it had $19,150 million in sales with a 10% growth rate in2010, but then slows by 1%
Consider the following data for NikeInc.: In 2009 it had $19,150 million in sales with a 10% growth rate in2010, but then slows by 1% to thelong-run growth rate of 5% by 2015. Nike expects EBIT to be 10% ofsales, increases in net working capital requirements to be10% of any increases insales, and capital expenditures to equal depreciation expenses. Nike also has $2,300 million incash, $32 million indebt, 486 million sharesoutstanding, a tax rate of 24%, and a weighted average cost of capital of 10%.
a. Suppose you believeNike's initial revenue growth rate will be between 7% and 11% (with growth slowing linearly to 5% by year2015). What range of prices for Nike stock is consistent with theseforecasts?
b. Suppose you believeNike's initial revenue EBIT margin will be between 9% and 11% of sales. What range of prices for Nike stock is consistent with theseforecasts?
c. Suppose you believeNike's weighted average cost of capital is between 9.5% and 12%. What range of prices for Nike stock is consistent with theseforecasts?
d. What range of stock prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously?
Please slove all the parts thanks
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