Question 2 3 pts What is the cost of debt capital for NIKE using the YIELD on their corporate bonds? [enter your answer in % with two decimal points precision] A B D E F G H j K L M N Discounted Cash Flow Analysis All numbers (except per share) are million of dollars DCF Assumptions 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Discounted Free Cash Flow Assumptions Tax Rate Free Cash Flow 764.1 663.1 777.6 866.2 1014 1117.6 1351.7 1483.7 Risk Free Rate 1275.2 14% 1572.7 6% 38% 5.39% 0.8 5.90% -13% 17% 11% 17% 10% 6% 10% Beta growth Discounted Free Cash Flow $ 697.60 $ 552.70 $ 591.73 $ 601.79 $ 643.16 $ 647.18 $ 674.18 $ 652.43 $ 653.82 $ 632.72 Sum of Discounted Cash Flows 2002-2011 $6,347 Market Risk Premium % Equity % Debt Credit Spread Cost of Debt Cost of Equity (CAPM) WACC 89.81% 10.19% 1.78% 7.17% 10.11% 9.53% Equity Debt E rwacc =TE E + D +TD D (1 Tc) E +D 5.4 855.3 435.9 Semi-annual coupon Maturity Current Price Current Date Face Value YIELD $11,427.44 1296.6 Debt Current port Notes payab Long-term d 0.0675 7/15/21 95.6 Pr 7/5/01 Settlement 100 Redeption 7.17% Estimated Value per Share Terminal Growth Rate Terminal Value as of 2011 PV of Terminal Value Sum of PV Free Cash Flows (10 years) Estimated Enterprise Value Total Debt Cash Estimated Equity Value Fully Diluted Shares Implied Equity Value Per Share Current Price Undervalued 3.00% $24,797 $9,976 $6,347 $16,324 $1,297 304.00 $15,331 271.50 | Eyield YIELD (settlement, maturity, rate, pr, redemption, frequency, [basis]) $56.47 $42.09 34%