Question
Following are income statements and balance sheets for Nike Inc. NIKE INC. Consolidated Income Statements May 31, May 31, For Year Ended ($ millions) 2019
Following are income statements and balance sheets for Nike Inc.
NIKE INC. | ||
---|---|---|
Consolidated Income Statements | ||
May 31, | May 31, | |
For Year Ended ($ millions) | 2019 | 2018 |
Revenues | $39,117 | $36,397 |
Cost of sales | 21,643 | 20,441 |
Gross profit | 17,474 | 15,956 |
Demand creation expense | 3,753 | 3,577 |
Operating overhead expense | 8,949 | 7,934 |
Total selling and administrative expense | 12,702 | 11,511 |
Interest expense (income), net | 49 | 54 |
Other (income) expense, net | (78) | 66 |
Income before income taxes | 4,801 | 4,325 |
Income tax expense | 772 | 2,392 |
Net income | $4,029 | $1,933 |
NIKE INC. | ||
---|---|---|
Consolidated Balance Sheets | ||
May 31, | May 31, | |
$ millions | 2019 | 2018 |
Current assets | ||
Cash and equivalents | $4,466 | $4,249 |
Short-term investments | 197 | 996 |
Accounts receivable, net | 4,272 | 3,498 |
Inventories | 5,622 | 5,261 |
Prepaid expenses and other current assets | 1,968 | 1,130 |
Total current assets | 16,525 | 15,134 |
Property, plant and equipment, net | 4,744 | 4,454 |
Identifiable intangible assets, net | 283 | 285 |
Goodwill | 154 | 154 |
Deferred income taxes and other assets | 2,011 | 2,509 |
Total assets | $23,717 | $22,536 |
Current liabilities | ||
Current portion of long-term debt | $6 | $6 |
Notes payable | 9 | 336 |
Accounts payable | 2,612 | 2,279 |
Accrued liabilities | 5,010 | 3,269 |
Income taxes payable | 229 | 150 |
Total current liabilities | 7,866 | 6,040 |
Long-term debt | 3,464 | 3,468 |
Deferred income taxes and other liabilities | 3,347 | 3,216 |
Commitments and contingencies (Note 18) | ||
Shareholders’ equity | ||
Common stock at stated value: | ||
Class A convertible—315 and 329 shares outstanding | - | - |
Class B—1,253 and 1,272 shares outstanding | 3 | 3 |
Capital in excess of stated value | 7,163 | 6,384 |
Accumulated other comprehensive income (loss) | 231 | (92) |
Retained earnings | 1,643 | 3,517 |
Total shareholders’ equity | 9,040 | 9,812 |
Total liabilities and shareholders’ equity | $23,717 | $22,536 |
Required
c. Use the parsimonious forecast method, as shown in the Analysis Insight box on page 13-4, to forecast sales, NOPAT, and NOA for 2020 through 2023 using the following assumptions.
Sales growth | 8% |
Net operating profit margin (NOPM) | 2019 ratios rounded to three decimal places |
Net operating asset turnover (NOAT), year-end | 2019 ratios rounded to three decimal places |
Forecast the terminal period value assuming a 2% terminal period growth and using the NOPM and NOAT assumptions above.
Note: Round your answers to the nearest whole dollar.
Nike (NKE) | ||||||
---|---|---|---|---|---|---|
Forecast Horizon | ||||||
Reported | Terminal | |||||
($ millions) | 2019 | 2020 | 2021 | 2022 | 2023 | Period |
Sales | Answer 39,117 | Answer 42,246 | Answer 45,626 | Answer 49,276 | Answer 53,218 | Answer 54,283 |
NOPAT | Answer 4,006 | Answer | Answer | Answer | Answer | Answer |
NOA | Answer 7,856 | Answer | Answer | Answer | Answer | Answer |
d. Estimate the value of a share of Nike’s common stock using the discounted cash flow (DCF) model as of May 31, 2019; assume a discount rate (WACC) of 6.8% and common shares outstanding of 1,682 million.
Note: Round your final answer to two decimal places (for example, round $15.555 to $15.56).
Stock price per share: Insert Answer
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