FIRM VALUATION OF NIKE INC. (SPORTSWEAR)

1. This part requires you to estimate firm value of your main company, and to provide stock recommendations. You are required to use one of the valuation methods discussed in the class (e.g., DDM, DCF, or ROPI models).

2. You should state and justify the major assumptions used for your calculation. Discuss how the changes in the assumptions may affect firm value. A sensitivity analysis may be performed to provide further insights into firm valuation and stock recommendation.

3. When you make stock recommendations, one important factor to be considered is the difference between the estimated equity values and the observed stock prices. If the estimated equity value is higher (lower) than the current stock price, this suggests that the market undervalues (overvalues) your firm and analysts should provide a buy (sell) recommendation. To enhance the credibility of your recommendation, you may summarize the main points from the previous analyses (i.e. company overview; ratio analysis).

Please use Excel spreadsheets to show your estimations.

	Nike (amounts in Millions)	Under Armour (amounts in Thousands)
Return On Assets	15.49%	7.19%
Return on Net Operating Assets	27.14%	14.44%
Accounts Receivable Turnover	10.23	10.37
Inventory Turnover	3.30	3.31
Accounts Payable Turnover	8.15	4.75
PPE Turnover	9.75	9.36
Times Interest Earned	33.44	9.82
Operating Cashflow to debt	0.21	0.24
Free Cashflow to Debt	0.18	0.21
Current Ratio	2.63	2.3
Quick Ratio	1.65	1.54
Liabilities-to-Equity Ratio	1.64	1.39
Total Debt-to-Equity Ratio	1.64	1.39