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Forecasting with the Parsimonious Method and Estimating Share Value Using the ROPI Model Following are income statements and balance sheets for Nike Inc. NIKE INC. Consolidated Income Statements For Year Ended ($ millions) Revenues May 31, May 31, 2019 2018 $39,117 $36,397 21,643 20,441 17,474 15,956 3,753 3,577 8,949 7,934 Cost of sales Gross profit Demand creation expense Operating overhead expense Total selling and administrative ex Interest expense (income), net Other (income) expense, net Income before income taxes nse 12,702 11,511 49 54 (78) 66 4,801 4,325 Income tax expense 772 2,392 $1,933 Net income $4,029 NIKE INC. Consolidated Balance Sheets May 31, May 31, 2019 2018 $ millions Current assets Cash and equivalents $4,466 $4,249 996 Short-term investments 197 Accounts receivable, net 4,272 3,498 Inventories 5,261 5,622 1,968 Prepaid expenses and other current assets 1,130 Total current assets 15,134 16,525 4,744 4,454 Property, plant and equipment, net Identifiable gible assets, net Goodwill 283 285 Deferred income taxes and other assets 154 154 2,011 2,509 $23,717 $22,536 Total assets Current liabilities $6 $6 9 336 2,279 2,612 5,010 3,269 150 229 7,866 3,464 6,040 3,468 3,216 3,347 Current portion of long-term debt Notes payable Accounts payable Accrued liabilities Income taxes payable Total current liabilities Long-term debt Deferred income taxes and other liabilities Commitments and contingencies (Note 18) Shareholders' equity Common stock at stated value: Class A convertible315 and 329 shares outstanding Class B1,253 and 1,272 shares outstanding Capital in excess of stated value Accumulated other comprehensive income (loss) Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 3 3 7,163 6,384 231 (92) 1,643 3,517 9,040 9,812 $23,717 $22,536 c. Use the parsimonious forecast method, as shown in the Analysis Insight box on page 14-5, to forecast sales, NOPAT, and NOA for 2020 through 2023 using the following assumptions. Sales growth 8% Net operating profit margin (NOPM) 2019 ratios rounded to three decimal places Net operating asset turnover (NOAT), year-end 2019 ratios rounded to three decimal places Forecast the terminal period value assuming a 2% terminal period growth and using the NOPM and NOAT assumptions above. Note: Round your final answers to the nearest whole dollar. Nike (NKE) Forecast Horizon Reported 2019 Terminal Period 2020 2021 2022 2023 ($ millions) Sales $ * $ X $ * $ * $ * $ X NOPAT X X X X X X X NOA X X X X X Forecasting with the Parsimonious Method and Estimating Share Value Using the ROPI Model Following are income statements and balance sheets for Nike Inc. NIKE INC. Consolidated Income Statements For Year Ended ($ millions) Revenues May 31, May 31, 2019 2018 $39,117 $36,397 21,643 20,441 17,474 15,956 3,753 3,577 8,949 7,934 Cost of sales Gross profit Demand creation expense Operating overhead expense Total selling and administrative ex Interest expense (income), net Other (income) expense, net Income before income taxes nse 12,702 11,511 49 54 (78) 66 4,801 4,325 Income tax expense 772 2,392 $1,933 Net income $4,029 NIKE INC. Consolidated Balance Sheets May 31, May 31, 2019 2018 $ millions Current assets Cash and equivalents $4,466 $4,249 996 Short-term investments 197 Accounts receivable, net 4,272 3,498 Inventories 5,261 5,622 1,968 Prepaid expenses and other current assets 1,130 Total current assets 15,134 16,525 4,744 4,454 Property, plant and equipment, net Identifiable gible assets, net Goodwill 283 285 Deferred income taxes and other assets 154 154 2,011 2,509 $23,717 $22,536 Total assets Current liabilities $6 $6 9 336 2,279 2,612 5,010 3,269 150 229 7,866 3,464 6,040 3,468 3,216 3,347 Current portion of long-term debt Notes payable Accounts payable Accrued liabilities Income taxes payable Total current liabilities Long-term debt Deferred income taxes and other liabilities Commitments and contingencies (Note 18) Shareholders' equity Common stock at stated value: Class A convertible315 and 329 shares outstanding Class B1,253 and 1,272 shares outstanding Capital in excess of stated value Accumulated other comprehensive income (loss) Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 3 3 7,163 6,384 231 (92) 1,643 3,517 9,040 9,812 $23,717 $22,536 c. Use the parsimonious forecast method, as shown in the Analysis Insight box on page 14-5, to forecast sales, NOPAT, and NOA for 2020 through 2023 using the following assumptions. Sales growth 8% Net operating profit margin (NOPM) 2019 ratios rounded to three decimal places Net operating asset turnover (NOAT), year-end 2019 ratios rounded to three decimal places Forecast the terminal period value assuming a 2% terminal period growth and using the NOPM and NOAT assumptions above. Note: Round your final answers to the nearest whole dollar. Nike (NKE) Forecast Horizon Reported 2019 Terminal Period 2020 2021 2022 2023 ($ millions) Sales $ * $ X $ * $ * $ * $ X NOPAT X X X X X X X NOA X X X X X
