P14-29. Forecasting with the Parsimonious Method and Estimating Share Value Using the ROPI Model does your for the difference? What investment decision Following are the income statement and balance sheet for Nike Inc. NIKE INC. Consolidated Income Statement May 31, 2016 May 31, For Year Ended ($ millions) 2015 Revenues. Cost of sales. $30,601 16,534 $32,376 17,405 14,971 3,278 7,191 14,067 3,213 6,679 9,892 Gross profit. .. Demand creation expense. Operating overhead expense.. Total selling and administrative expense Interest expense (income), net. Other (income) expense, net Income before income taxes Income tax expense. Net income.. 10,469 19 (140) 4,623 863 28 (58) 4,205 932 $ 3,760 $ 3,273 Module 14 Operating income-Based Valuation NIKE INC Consolidated Balance Sheets 14-30 $ millions Current assets May 31, 2016 May 31, Prepaid expenses and other current assets. Total current assets ....... Property, plant and equipment, net Deferred income taxes and other assets Cash and equivalents. Short-term investments Accounts receivable, net Inventories ........ Identifiable intangible assets, net. Goodwill..... 2015 $ 3,138 2.319 3,241 4,838 1,489 15,025 3,520 281 131 2,439 $21,396 $ 3.852 2.072 3,358 4,337 1.968 15,587 3,011 281 131 2,587 $21,597 Total assets.. $ 44 2,191 3,037 85 Current liabilities 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 Total liabilities.. Shareholders' equity Class A convertible common stock Class B common stock Capital in excess of stated value Accumulated other comprehensive income. Retained earnings Total shareholders' equity Total liabilities and shareholders' equity. $ 107 74 2,131 3,949 71 6,332 1,079 1,479 5,358 2,010 1,770 9,138 8,890 0 3 7,786 318 4,151 12,258 0 3 6,773 1,246 4,685 12,707 $21,396 $21,597 Required a. Estimate the value of a share of Nike common stock using the residual operating income (ROPI) model as of May 31, 2016. For simplicity, prepare your forecasts in $ millions. Use the following assumptions: Sales growth.... Net operating profit margin (NOPM).. Net operating asset turnover (NOAT), year-end... 6% 2016 ratios rounded to three decimal places 2016 ratios rounded to three decimal places b. Nike's stock closed at $56.99 on July 21, 2016, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? What do you believe are some reasons for the difference? What investment decision is suggested from your results? P14-29. Forecasting with the Parsimonious Method and Estimating Share Value Using the ROPI Model does your for the difference? What investment decision Following are the income statement and balance sheet for Nike Inc. NIKE INC. Consolidated Income Statement May 31, 2016 May 31, For Year Ended ($ millions) 2015 Revenues. Cost of sales. $30,601 16,534 $32,376 17,405 14,971 3,278 7,191 14,067 3,213 6,679 9,892 Gross profit. .. Demand creation expense. Operating overhead expense.. Total selling and administrative expense Interest expense (income), net. Other (income) expense, net Income before income taxes Income tax expense. Net income.. 10,469 19 (140) 4,623 863 28 (58) 4,205 932 $ 3,760 $ 3,273 Module 14 Operating income-Based Valuation NIKE INC Consolidated Balance Sheets 14-30 $ millions Current assets May 31, 2016 May 31, Prepaid expenses and other current assets. Total current assets ....... Property, plant and equipment, net Deferred income taxes and other assets Cash and equivalents. Short-term investments Accounts receivable, net Inventories ........ Identifiable intangible assets, net. Goodwill..... 2015 $ 3,138 2.319 3,241 4,838 1,489 15,025 3,520 281 131 2,439 $21,396 $ 3.852 2.072 3,358 4,337 1.968 15,587 3,011 281 131 2,587 $21,597 Total assets.. $ 44 2,191 3,037 85 Current liabilities 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 Total liabilities.. Shareholders' equity Class A convertible common stock Class B common stock Capital in excess of stated value Accumulated other comprehensive income. Retained earnings Total shareholders' equity Total liabilities and shareholders' equity. $ 107 74 2,131 3,949 71 6,332 1,079 1,479 5,358 2,010 1,770 9,138 8,890 0 3 7,786 318 4,151 12,258 0 3 6,773 1,246 4,685 12,707 $21,396 $21,597 Required a. Estimate the value of a share of Nike common stock using the residual operating income (ROPI) model as of May 31, 2016. For simplicity, prepare your forecasts in $ millions. Use the following assumptions: Sales growth.... Net operating profit margin (NOPM).. Net operating asset turnover (NOAT), year-end... 6% 2016 ratios rounded to three decimal places 2016 ratios rounded to three decimal places b. Nike's stock closed at $56.99 on July 21, 2016, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? What do you believe are some reasons for the difference? What investment decision is suggested from your results