Case ID: UVAF1353     Solution ID: 22127     Words: 1368 Price $ 75

Nike Inc Cost of Capital Case Solution

Case Solution

This is a Darden contextual investigation. Presents the weighted normal expense of capital (WACC).Gives a WACC computation, despite the fact that it has been deliberately intended to misdirect students. In this way, their errand is to recognize and clarify the "errors" in the examination, which are expected to highlight applied issues in regards to WACC and its segments. Such issues are regularly misjudged by students. Expect that students have been presented to the WACC, CAPM, the profit rebate model, and the income capitalization model.

Excel Calculations

WACC - CAPM

Dividend Discount Model

Earnings Capitalization Ratio

Questions Covered

What is the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not?

If you do not agree with Cohen’s analysis, calculate your own WACC for Nike and be prepared to justify your assumptions.

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?

What should Kimi Ford recommend regarding an investment in Nike?