Nike Case Essay

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Nike, Inc.: Cost of Capital 1. a. Kimi Ford is a portfolio manager working at NorthPoint Group which is a mutual-fund-management firm. She is thinking about buying some Nike’s share for her fund and now trying to figure out the value of Nike’s stock. b. Joanna is Ford’s new assistant who helped her figure out Nike’s WACC. c. NorthPoint Large-Cap is focusing on value investing. It is very important to know because the main cause for a value investing company to invest a firm is whether the current price of this firm over or under its real value. d. Recently, Nike held an analysts’ meeting to disclose its fiscal-year 2001 results. The meeting, however, had another purpose which is that Nike wants to find a solution, or a strategy, for revitalizing the company. Nike’s revenues had plateaued at around $9 billion, while net income had fallen by 27.5%. Nike’s market share in U.S. athletic shoes has also fallen from 48% to 42%. In addition, recent supply-chain issues and the adverse effect of a strong dollar had negatively affected revenue. 2. a. WACC is the weighted average cost of capital of a firm. It is very important for determining a firm’s value and stock price, and it also used for a company’s capital budgeting. b. Investors decide the WACC because it is the weighted required return of investors. c. No. We use a lot of estimate data to calculate the WACC, for example, we use the estimated growth rate to calculate the cost of common

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