Question
I use a ti 84 plus c calculator. If you post an excel solution please explain the steps. Thank you. Consider the following data for
I use a ti 84 plus c calculator. If you post an excel solution please explain the steps. Thank you.
Consider the following data for Nike Inc.: In 2009 it had $19,300 million in sales with a 10% growth rate in 2010, but then slows by 1% to the long-run growth rate of 5% by 2015. Nike expects EBIT to be 10% of sales, increases in net working capital requirements to be 10% of any increases in sales, and capital expenditures to equal depreciation expenses. Nike also has $2,300 million in cash, $32 million in debt, 486million shares outstanding, a tax rate of 24%, and a weighted average cost of capital of 10%.
a. Suppose you believe Nike's initial revenue growth rate will be between 7% and 11% (with growth slowing linearly to 55%
by year 2015). 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 9% and 11%
of sales. What range of prices for Nike stock is consistent with these forecasts?
Highest price share: $ (Round to the nearest cent.) Lowest price share: $ (Round to the nearest cent.)
c. Suppose you believe Nike's weighted average cost of capital is between 9.5% and 12%.
What range of prices for Nike stock is consistent with these forecasts?
Highest price share: $ (Round to the nearest cent.) Lowest price share: $ (Round to the nearest cent.)
d. What range of stock prices is consistent if you vary the estimates as in parts (a),(b),and(c) simultaneously? Compute the stock prices when the initial revenue growth begins at 7 %, the EBIT is 9 % of sales, and the WACC is 12%. Then compute the stock price when the initial revenue growth begins at 11 %, the EBIT is 11 % of sales, and the company's WACC is 9.5%. What is the range of prices under these scenarios? The range of prices will be:
Highest price per share: $
Lowest price per share: $
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