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Nike Inc.: Cost of Capital: Assumptions

This document provides a discounted cash flow analysis and cost of capital calculation for Nike Inc. from 2011-2020. It shows projections for revenue, expenses, net operating profit after tax, capital expenditures, changes in net working capital, and free cash flows. It then calculates the enterprise value, equity value, and equity value per share under different discount rates. The bottom section shows Nike's capital structure, cost of debt and equity, and weighted average cost of capital of 9.26%.

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123 views

Nike Inc.: Cost of Capital: Assumptions

This document provides a discounted cash flow analysis and cost of capital calculation for Nike Inc. from 2011-2020. It shows projections for revenue, expenses, net operating profit after tax, capital expenditures, changes in net working capital, and free cash flows. It then calculates the enterprise value, equity value, and equity value per share under different discount rates. The bottom section shows Nike's capital structure, cost of debt and equity, and weighted average cost of capital of 9.26%.

Uploaded by

rizqighani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Nike Inc.

: Cost of Capital

Discounted Cash Flow Analysis

2011 2002 2003


Assumptions:
Revenue Growth (%) 7.00 6.50
COGS/Sales (%) 60.00 60.00
SG&A/Sales (%) 28.00 27.50
Tax Rate (%) 38.00 38.00
Current Assets/Sales (%) 38.00 38.00
Current Liabilities/Sales (%) 11.50 11.50
Yearly Depreciation and Capex Equal Each Other.
Cost of Capital (%) 9.26
Terminal Growth Rate (%) 3.00

Revenue 9,488.80 10,153.02 10,812.96


Current Asset 3,625.30 3,858.15 4,108.93
Current Liabilities 926.00 1,167.60 1,243.49
NWC 2,699.30 2,690.55 2,865.43
Discounted Cash Flow
(in millions of dollars except per-share data)
Operating Income 1,218.4 1,351.6
Taxes 463.0 513.6
NOPAT 755.4 838.0
Capex, net of depreciation - -
Change in NWC 8.8 (174.9)
Free cash flow 764.1 663.1
Terminal value
Total flows 764.1 663.1
Present value of flows 699.37 555.48
Enterprise Value 17,109.2
Less: current outstanding debt 1,296.6
Equity value 15,812.62
Current shares outstanding 271.5
Equity value per share 58.24

Sensitivity of equity value to discount rate:

Discount Rate Equity Value


8.00% 75.8
8.50% 67.85
9.00% 61.25
9.50% 55.68
10.00% 50.92
10.50% 46.81
11.00% 43.22
11.17% 42.09
11.50% 40.07
12.00% 37.27

Cost of Capital Calculation CORRECTION

Capital Structure
Debt5.4+855.3+435.9 27.0% 10.19% 1296.6
Equity 73.0% 89.81% 11427.435

Cost of Debt
Cost of Debt 4.3% 7.17%
Tax Rate 38.0% 38%
After-Tax Cost of Debt 2.7% 4.4%

Cost of Equity
Risk-Free Rate 5.7% 5.74%
Risk Premium 5.9% 5.90%
Beta 0.80 0.69
Cost of Equity 10.5% 9.8%

Weighted Average Cost of Capital (WACC)


Debt 27.0% 10.19% 1296.6
Equity 73.0% 89.81% 11427.435
After-Tax Cost of Debt 2.7% 4.4%
Cost of Equity 10.5% 9.8%
WACC 8.36% 9.26%
2004 2005 2006 2007 2008 2009 2010

6.50 6.50 6.00 6.00 6.00 6.00 6.00


59.50 59.50 59.00 59.00 58.50 58.50 58.00
27.00 26.50 26.00 25.50 25.00 25.00 25.00
38.00 38.00 38.00 38.00 38.00 38.00 38.00
38.00 38.00 38.00 38.00 38.00 38.00 38.00
11.50 11.50 11.50 11.50 11.50 11.50 11.50

11,515.80 12,264.33 13,000.19 13,780.20 14,607.02 15,483.44 16,412.44


4,376.01 4,660.45 4,940.07 5,236.48 5,550.67 5,883.71 6,236.73
1,324.32 1,410.40 1,495.02 1,584.72 1,679.81 1,780.60 1,887.43
3,051.69 3,250.05 3,445.05 3,651.75 3,870.86 4,103.11 4,349.30

1,554.6 1,717.0 1,950.0 2,135.9 2,410.2 2,554.8 2,790.1


590.8 652.5 741.0 811.7 915.9 970.8 1,060.2
963.9 1,064.5 1,209.0 1,324.3 1,494.3 1,584.0 1,729.9
- - - - - - -
(186.3) (198.4) (195.0) (206.7) (219.1) (232.3) (246.2)
777.6 866.2 1,014.0 1,117.6 1,275.2 1,351.7 1,483.7

777.6 866.2 1,014.0 1,117.6 1,275.2 1,351.7 1,483.7


596.19 607.81 651.24 656.92 686.04 665.57 668.64

Current share price 42.09


YTM CALCULATION
PERIOD
-95.6
1 3.375
2 3.375
3 3.375
4 3.375
5 3.375
6 3.375
7 3.375
8 3.375
9 3.375
10 3.375
11 3.375
12 3.375
13 3.375
14 3.375
15 3.375
16 3.375
17 3.375
18 3.375
19 3.375
20 3.375
21 3.375
22 3.375
23 3.375
24 3.375
25 3.375
26 3.375
27 3.375
28 3.375
29 3.375
30 3.375
31 3.375
32 3.375
33 3.375
34 3.375
35 3.375
36 3.375
37 3.375
38 3.375
39 3.375
40 103.375
YTM SEMI 3.584%
YTM ANNUALY
2011

6.00
58.00
25.00
38.00
38.00
11.50

17,397.19
6,610.93
2,000.68
4,610.26

2,957.5
1,123.9
1,833.7
-
(261.0)
1,572.7
25,876.8
27,449.5
11,321.98

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