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Questions for Case 1: (Nike, Inc.) 1. What is the WACC and why is it important to estimate a firms cost of capital? Is the

Questions for Case 1: (Nike, Inc.)

1. What is the WACC and why is it important to estimate a firms cost of capital? Is the WACC set by investors or by managers?

2. Do you agree with Joanna Cohens WACC calculation? Why or why not?

3. If you do not agree with Cohens analysis, calculate your own WACC for Nike.

4. Calculate the costs of equity using CAPM, the dividend discount model, and the earnings capitalization ratio. What are the advantages and disadvantages of each method?

5. What should Kimi Ford recommend regarding an investment in Nike?

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