Nike had sales of $25.3 billion in 2012. Suppose you expect its sales t gro w at a at f10%in 2013, but then slov .per r to the long-run growth rate that is characteristic of the apparel industry -5% - 2018. Based on Nike's past profitability and investment needs, you expect E I t h o% f sales, increases in net working capital requirements to be 10% of any increase in sales, an a a ex en tures to equal depreciation expo n es 1 Nike has$3 3 billion in cash, $1.2 billion in debt, 893.6 million shares outstanding, a tax rate of24% and a weighted average cost ofcapital of 10%, 3B 3B 2. What is your estimate of the value of Nike's stock in early 9018? (5 points) (Answer: 50.34) a. Suppose you believe Nike's initial revenue growth rate will be between 7% and 11% with growth always slowing linearly to 5% by year 2018). What range of prices for Nike stock is consistent with these forecasts? (5 points) (Answer: 46.89 to 51.58) b. O c. Suppose you believe Nike's initial revenue EBIT margin will be between 9% and 11% or sales. what nge of prices for Nike stock is consistent with these forecasts? (5 points) (Answer: +5.18 to 55.5) Suppose you believe Nike's weighted average cost ofcapital is between 95% and 12% what range of prices for Nike stock is consistent with these forecasts? (5 points) (Answer: 36.4+ to 55.75) d e. What range of stock prices is consistent if you vary the estimates as in parts (b), (e), and (d) simultaneously? (5 points) (Answer: s0.69 to 62.98) Nike had sales of $25.3 billion in 2012. Suppose you expect its sales t gro w at a at f10%in 2013, but then slov .per r to the long-run growth rate that is characteristic of the apparel industry -5% - 2018. Based on Nike's past profitability and investment needs, you expect E I t h o% f sales, increases in net working capital requirements to be 10% of any increase in sales, an a a ex en tures to equal depreciation expo n es 1 Nike has$3 3 billion in cash, $1.2 billion in debt, 893.6 million shares outstanding, a tax rate of24% and a weighted average cost ofcapital of 10%, 3B 3B 2. What is your estimate of the value of Nike's stock in early 9018? (5 points) (Answer: 50.34) a. Suppose you believe Nike's initial revenue growth rate will be between 7% and 11% with growth always slowing linearly to 5% by year 2018). What range of prices for Nike stock is consistent with these forecasts? (5 points) (Answer: 46.89 to 51.58) b. O c. Suppose you believe Nike's initial revenue EBIT margin will be between 9% and 11% or sales. what nge of prices for Nike stock is consistent with these forecasts? (5 points) (Answer: +5.18 to 55.5) Suppose you believe Nike's weighted average cost ofcapital is between 95% and 12% what range of prices for Nike stock is consistent with these forecasts? (5 points) (Answer: 36.4+ to 55.75) d e. What range of stock prices is consistent if you vary the estimates as in parts (b), (e), and (d) simultaneously? (5 points) (Answer: s0.69 to 62.98)
