The market has a 3 percent expected rate of return and the risk free rate is 3%. What is the required rate of return for N'KE using the CAPM? 0 5.75% o 9.25% e 4.05% 0 3.5096 Question 11 What is the weight of the debt as it relates to the rm's weighted average cost of capital? 0 23% o 51% O 67% G 73% Question 12 What is the weight at the common stock as it relates to the rm's weighted average cost of capital? 0 23% a 49% o 32% O 75% Question 13 Assuming that the market risk premium is 5% and the risk free rate is 3%. What is NIKE's weighted average cost of capital? 0 4.42% a 9.12% o 5.19% O 6.37% NIKE, INC. 'B NYSE-INKE PRICE 129.46 RATIONMF (Trailing: 67.4 PE RATIO NMF 9 0.8% VALUE LINE TIMELINESS 3 Lowered 10/23/20 High: 16.7 23.1 Low: 9.6 15.2 21.3 25.7 34.9 68.2 65.4 50.3 62.1 191-8 60 0 Target Price Range SAFETY 1 Raised 8/1 1/06 2023 2024 2025 LEGENDS - 16.0 x "Cash Flow" p sh TECHNICAL 3 Lowered 10/23/20 zoreeve price Strength - 160 1.10 (1.00 = Market) or-1 split 12/15 2 For.1 WWWWWW 120 Options: Yes 100 18-Month Target Price Range |Shaded area indicates recession -80 Low-High Midpoint (% to Mid) $52-$160 $106 (-20%) -50 -40 2023-25 PROJECTIONS -30 Price Gain Ann'l Total -20 Low 140 115 (-10%) -2% - 15 Institutional Decisions % TOT. RETURN 9/20 VL ARITH. 402019 102020 202020 STOCK 842 shares 38 traded 10 - 150.1 98 Hid's(000)102490510079701005810 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 @VALUE LINE PUB. LLC 23-25 6.54 7.22 8.10 9.48 9.87 9.82 10.97 13.17 14.16 15.98 17.85 19.25 20.91 22.73 24.95 27.05 Sales per sh A 37.65 66 .80 86 1.04 1.06 1.15 1.30 1.42 1.62 1.85 2.26 262 3.01 3.02 24.01 3.30 "Cash Flow" per sh 7.25 44 56 .66 .72 86 88 97 1.10 1.18 1.35 1.85 2.16 2.51 2.40 2.49 1.85 2.85 Earnings per sh AB 6.30 .12 .15 .18 22 25 1.49 27 .30 35 41 47 .54 62 .70 78 .86 .93 1.00 Div'ds Decl'd per sh CD. 1.40 .10 .12 .16 .16 23 23 -17 23 33 51 56 64 .75 Cap'l Spending per sh .95 2.27 2.69 3.03 3.49 3.98 4 48 5.04 5.18 5.67 6.24 6.22 7.41 7 29 7.55 .71 .70 6.13 5.77 5.17 5.95 Book Value per sh 9.00 2104.8 2100.8 2072.0 2015.2 1964.4 1942.0 1936.0 1902.0 1832.0 1788.0 1740.0 1714.0 1682.0 1643.0 1601.0 1568.0 1558.0 1550.0 Common Shs Outst'g F 1500.0 18.4 17.9 16.0 16.5 17.8 15.3 16.4 18.2 20.4 19.4 24.2 24.4 27.5 21.6 25.3 32.0 48.6 Avg Ann'l P/E Ratio 20.0 .97 .95 .86 .88 1.07 1.02 1.04 1.14 1.30 1.09 1.27 1.23 1.44 1.09 1.37 1.70 2.40 Relative P/E Ratio 1.10 1.1% 1.2% 1.4% 1.5% 1.4% 1.8% 1.7% 1.5% 1.4% 1.5% 1.3% 1.2% 1.0% 1.3% 1.3% 1.1% 1.0% Avg Ann'l Div'd Yield 1.1% CAPITAL STRUCTURE as of 8/31/20 19014 20862 24128 25313 27799 30601 32376 34350 36397 39117 37403 41950 Sales (Smill) A 56500 Total Debt $9546 mill. Due in 5 Yrs $4800 mill. 14.7% 15.1% 14.1% 14.6% 15.1% 15.6% 15.9% 15.9% LT Debt $9408 mill. LT Interest $515 mill. 14.3% 14.0% 11.3% 14.2% Operating Margin 19.0% (51% of Capital) 323.7 335.0 373.0 438.0 518.0 606.0 649.0 706.0 7 747.0 705.0 721.0 725 Depreciation ($mill) 900 1906.7 2133.0 2223.0 2464.0 2693.0 3273.0 3760.0 4240.0 3974.0 4029.0 2937.0 4420 Net Profit (Smill) 9450 Leases, Uncapitalized Annual rentals $553 mill. 24.2% 25.0% 2 25.5% 24.7% 24.0% 22.2% 18.7% 13.2% 8.1% 16.1% 36 10.6% 18.0% Income Tax Rate 21.0% No Defined Benefit Pension Plan 10.0% 10.2% 9.7% 9.7% 10.7% 11.6% 12.3% 10.9% 10.3% 7.9% 10.5% Net Profit Margin 16.7% 7595.0 7339.0 7666.0 9700.0 8669.0 9642.0 9667.0 10587 9094.0 8659.0 12272 13300 Working Cap'l ($mill) 15000 Preferred Stock None Common Stock 1,555,372,768 shares 445.8 276.0 228.0 1210.0 1199.0 1079.0 2010.0 3471.0 3468.0 3464.0 9406.0 6500 Long-Term Debt ($mill) 5000 Class A shares: 315,017,252 9753.7 9843.0 10381 11156 10824 12707 12258 12407 9812.0 9040.0 8055.0 9200 Shr. Equity (Smill) 13500 Class B shares: 1,240,365,515 18.7% 21.1% 21.0% 20.0% 22.6% 23.8% 26.5% 26.9% 30.3% 32.7% 17.6% 29.5% Return on Total Cap' 52.0% 19.5% 21.7% 21.4% 22.1% 24.9% 25.8% 30.7% 34.2% 40.5% 44.6% 36.5% 48.0% Return on Shr. Equity 70.0% MARKET CAP: $201 billion (Large Cap) 14.4% 16.0% 15.5% 15.8% 17.5% 18.7% 22.3% 25.0% 27.8% 29.8% 18.4% 31.0% Retained to Com Eq 54.5% CURRENT POSITION 2019 2020 8/31/20 27% 26% 28% 29% 30% 27% 27% 27% 31% 33% 49% 35% All Div'ds to Net Prof 22% (SMILL) Cash Asset 4065 8787 9480 BUSINESS: NIKE designs, develops, and markets footwear, ap- is another product line for kids. Has about 76,700 employees (in- Receivables 2749 3813 Inventory (LIFO) 3267 6705 parel, equipment, and accessories. Sells products to retail ac- cluding part-timers). Swoosh, LLC, owns 74.9% Cl. A shares, Other 1968 1653 1939 counts, through NIKE-owned stores and the Internet, and through a 15.9% Cl. B; offs/dirs., 3.8% of CI. B; Vanguard, 8.6%; BlackRock, Current Assets 16525 20956 21937 mix of independent distributors and licensees in numerous coun- 7.2% (7/20 proxy). Chairman: Mark G. Parker. CEO: John Accts Payable 2612 1983 tries. Offerings are focused in six categories: running, basketball, Donahoe. Inc.: Oregon. Addr.: One Bowerman Drive, Beaverton, Debt Due the Jordan brand, football (soccer), training, and sportswear. There OR 97005. Tel: 503-671-6453. Internet: www.nikeinc.com. 5785 6498 Current Liab. 7866 BORA 8619 NIKE shares have risen more than touch with younger shoppers has ANNUAL RATES Past Past Est'd '18- 20 30% in value over the past three faded fast. Several quarters ago there of change (per sh) 10 Yrs. to "23-25 months to fresh all-time highs. The fis- was a poor reading from the company's vi- Sales 9.5% 8 5% 9.5% cal first-quarter report (years end May tal North American business. The selloff "cash Flow 10.0% 21.0% 31st) was a major driver behind the in- following this disclosure proved to be Earnings 9.5% Dividends 13.5% 11.0% cline, as digital sales soared more than much ado about nothing, but at the time a Book Value 2.5% -3.0% 9.5% 80% year over year. This strong showing failure to connect with the youth of Amer- Fiscal QUARTERLY SALES ($ mill.) overcompensated for shortcomings on the ica was cited. The swoosh poured money Year Ends Aug.31 Nov.30 Feb.28 May 31 |Year wholesale side of operations and the shut- into its Web site and made customization 2017 9061 8180 8432 8677 34350 of some stores due to the a priority to appease the millennial gener- 2018 9070 8554 8984 9789 36397 coronavirus pandemic. North American ation and sales in this region perked up in 2019 9948 9374 9611 10184 39117 receipts actually dipped 2%, but that num- tandem. In early October, a survey 2020 10660 10326 10 10104 6313 37403 ber was applauded given the tough, un- revealed that NIKE has maintained its 2021 10594 10550 10 10790 11100 41950 precedented COVID-19 backdrop. top-ranking for apparel brands a EARNINGS PER SHARE AB Even with the negative effects of the teenagers, a title it has held for a decade Ends Aug.31 Nov.30 Feb.28 May 31 Year pandemic, we think earnings will now. In fact, its market share in this space reach record levels this fiscal year. We was up four percentage points, to 27%. 2017 -73 50 -68 2018 -60 2.51 2.40 have dialed our call up by $0.45 a share, to All the good news looks to be already 2019 .67 52 68 62 2020 86 70 2.49 $2.85. NIKE has proven it can thrive in baked into this high-quality, neutrally 78 d.51 the digital world and we expect things to ranked, selection's quotation. NIKE is 2021 95 60 .75 55 2.85 be more normalized with regard to shop- the cream of the crop in the shoe industry Cal- QUARTERLY DIVIDENDS PAID C. Full ping patterns in the back half of the year. and deserves a handsome premium as a endar Mar.31 Jun.30 Sep.30 Dec.31 Year If so, annual sales should eclipse the $40 result. Still, the lofty price tag sits well billion mark for the first time in company within our Target Price Range three to 2016 -16 .16 .16 .16 2017 -18 .18 64 .18 .18 .72 history. Healthy sales gains at the Jordan five years hence. This leaves very little 2018 20 20 20 .80 brand will get a good bit of the credit as- long-term appreciation potential for new 2019 22 22 22 22 88 suming such an accomplishment occurs. accounts. 2020 245 245 245 245 The belief that NIKE was losing its Erik M. Manning October 23. 2020 A) Fiscal years end May 31st. (B) Diluted change in share count. Next egs. report due available. (D) Includes 21c dividend paid De- Company's Financial Strength earnings. Excludes nonrecurring: '07, 2c; '08, mid-December. cember 2012. (E) In millions, adjusted for Stock's Price Stability ac; '09, (13c); "13, 1c; '18, ($1.23) due to tax C) Dividends historically paid in early January, splits. (F) Each share of Class A is convertible Price Growth Persistenc 85 law change; '20, (25c). May not sum due to | April, July, and October. " Reinvestment plan | to one share of Class B. Earnings Predictability 85 2020 Value Line, Inc. All samer from sources believed to be reliable and is provided with provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber's own, non-commercial, internal use. No part To subscribe call 1-800-VALUELINE of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product