• Risk Free Rate 3%

• Market Return 8%

• ERP = Market return Rf = 5%

• Perpetuity Growth Rates

  • Dividend Growth Rate 3%

  • FCFF Growth Rate 3%

  • FCFE Growth Rate 3%

  • Tax rate 20%.

Assuming that NIKE has $3.4 billion in long term debt.

Issue	Amount $(Mil)	Maturity Date	Yield To Maturity
NIKE 4.375%	750	1/15/2025	4.25%
NIKE 5.7%	800	1/15/2035	6.45%
NIKE 5.4%	800	1/15/2033	5.93%
NIKE 3.875%	500	12/1/2040	3.47%
NIKE 6.7%	550	12/1/2036	6.96%

1a) Assuming the marginal tax rate is 20%, what is the company's after-tax cost of debt?

9.2%

1.2%

4.38%

1b) What is the weighted average cost of debt (average pre-tax cost of debt)?

2.13%

5.49%

3.72%

4.23%

7.4%