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Hi, I'm Nguyen Dinh Tien
MSc13, UCD 2011-2012.
I've done my main assignment and get good results, so i post my analysis on
my blog, if anyone interested in my assignment, pls enjoy it! )
My main assignment including Nike Inc., analysis and Compass Records
analysis, so at the end of Compass Records analysis, i posted my references
for my analysis. Compass Records is below this article.
---------------------
Case 1: Nike Inc.,Summary of the case study
rthPoint Large-Cap Fund, which invested mostly in Fortune 500 companies,ighing whether to buy Nikes stock. Nike has experienced sales growth decline,
lines in profits and market share. Nike has reveal that it would increase exposure
id-price footwear and apparel lines. It also commits to cut down expenses. The
rket responded mixed signals to Nikes changes. Kimi Ford had done a cash flow
imation, and asked her assistant Joanna Cohen to estimate cost of capital. The
takes appeared.This analysis will determine basic and general theory about cost
apital and relations, find out the mistakes in case analysis of Joanna Cohen, give
advises for Kimi Ford. Moreover, this analysis also giving some of limitations
en using DDM, CAPM, WACC for calculating the cost of capital.
estion 1: Why is it important to estimate a firms cost of capital? What
es it represent? Is the WACC set by investors or by managers?
t, cost of capital is required return necessary to make a capital budgeting
ject/company. Cost of capital includes the cost of debt and the cost of equity.
st of debt includes cost of junk bonds, cost of ordinary bonds, cost of bank loan
bilities), while cost of equity includes cost of ordinary shares (Modigliani & Miller,
8). In general, according to Ibbotson(1999) that the cost of capital is function of
estment, not the investor. The marketplace is a place where investors can
imate the risk of assets, projects and so on. Origin of cost of capital born from
rketplace while investors estimate, assessment the ability success of a project,
pany (Pratt & Grabowski, 2008).
imate a firms cost of capital is a very important mission must be done while
lyze and find out the decision about invest in a project or company. These
sons are considered the effect of capital structure to cost of capital, investment
isions (Myers, 1974), firm value, share price of a company, which may affect to
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value and cost of capital by changing the capital structure. It also help predict
would be happen with a company (risk management). Moreover, estimate a
s or projects cost of capital help investors can diversification their invest, reduce
in invest, maximization profits:
t of all, cost of capital using to Capital Budgeting Decision as the measuring
decision an investment proposal (Myers, 1974). Normally, the company/investors
choose the project (compare with many other projects) which give a higher
rn and lower risk on investment. If company must decide the individual project,
pany will choose the project which give satisfactory return on investment (Dixit,
3). Of course, all of the projects which are chosen must be get higher return
n the cost of capital invest in that projects. It also help determine the acceptability
nvestment opportunities.
ondly, cost of capital also help for Designing the Corporate Finance
ucture. In one side, they always follow the changing of capital market for get
rmation and choose the best way for capital structure of company. In the other
e, managers can use various methods to minimize companys cost of capital,nging the market price, the earning per share, bring out the benefit to company
ches, 1982). Many companies before designing their corporate finance
cture, they try to figures their information such as accounting reports, their cost
capital to market. After that, they listen carefully the market before decide their
porate finance structure. Even they get positive or negative reply from market,
y will have their decisions in designing their corporate finance structure: cancel or
est in project (Kaua et al., 2008).
reover, cost of capital help managers Decide the Method of Financing.
derstanding about financial situations and the rate of interest on loan, normal
idend rate in the market is need conditions of financial managers. It help
nagers can give out better react and balancing sources of finance when faced
requires additonal finance, which help mimimize the cost of capital (Kaua et al.,
8). Moreover, it also very important when using it for considerations of control
te factors and reduce the risk for company.
addition, cost of capital can also help board of management/investors estimate
Performance of top Managers. The cost of capital can used to estimate,
pare managing ability of f inancial managers (CEOs, CFOs), which
se on evaluation between profit of projects (company) and cost of
ital. As mention above that a company might listen the market reply
present their accounting report, their cost of capital, a better
nager is a manager can get sensitivity reply from market, reduce the
k, increase the profit for company (Kaua et al., 2008). That means we
use calculating cost of capital for estimate the work ability of
nagers by assessment managers ability to earn profit, reduce risk
d errors, manage debt including bad debt. Moreover, i t also helps
imate, manage the actual cost incurred in rising funds when manager
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uire rising funds for project.
st of capital represent by WACC (Weighted Average Cost of
pital) . The required return will reflect the risk of the investment and the return of
rnatives. WACC issum of cost of debt (Kd) and cost of equity (Ke). Usually, cost
debt calculating is very easy but cost of equity is more difficult. Ke calculate by
ng DDM (Dividend Discount Model) or CAPM (Capital Asset Pricing Model). In
ny case, many companies does not pay dividend at the end of the period, it
ht lead to inaccurate calculating Ke, that is the reason why CAPM using more
ular than DDM. Beside that, CAPM also have advantages and disadvantages
t we will review and evaluation more in the part of question 2: which method is
best for calculated cost of equity?).
find the average cost of capital, we weight individual cost of capital by their
portions in the firms capital structure:
WACC formula: WACC = (Ke x E)/(D + E) + [Kd x (1-Ct) x D]/(D + E)
mention above that WACC is required return will reflect the risk of the investment
the return of alternatives. Companies need information about the cost of
erent sources of finance in order to find the overall cost of finance and to make
estment, financing decisions. So, basically, WACC set by investors in the
rketplace. According to Pratt and Grabowski (2008:5) is that The cost of capital,
ived from investors expectation and the market consensus of those expectations,
pplied to expected economic income, usually measured by in term of cash flows,
order to estimate the present value or to compare investment alternatives of
ilar of different risk. WACC set by investors when they calculate and find out the
isions about invest or reject invest into a company/project. Managers just listen market reply and react by estimate their options in invest in a project or
tructure their company, give it all for board of management (investors) who have
final decisions. Beside that, it also help managers can adjusted share prices,
rket value of the firm for firms benefit.
estion 2: What was your estimate about WACC? What mistake Joana
hen make in her analysis? Which method is best for calculating the cost of
ity?
Using WACC formula:
WACC = (E/V). KE + (D/V). KD . (1-T)
V = D + E = Total Capital
D: Amount of Debt E: Equity KD: Cost of Debt
KE: Equity
T: Tax rateAccording to case study we have:
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T= 38% (in Exhibit 2)1 T= 0.62
E: Equity 2001 = $3494.5
D: Debt 2001 =
= Current portion of long-term debt + Notes payable + Long-term
debt
= $5.4 + $855.3 + $435.9
= $1296.6
Beside that, we have:
E/V = 27% (proportion of equity)D/V = 73% (proportion of debt)
Calculate KE: Cost of Equity
* Using DDM(Dividend Discount Model) for calculate Ke
Ke = D1/Po + g
D1 = D0(1+g)
D0= 0.48 g = 5.5%
D1= 0.48 x (1 + 0.055)
= 0.5064P0 = 42.09
So we have:
Ke = D1/Po + g
= 0.5064/42.09 + 5.5%
= 1.20% + 5.50%
= 6.70%
ause Nike did not pay dividend for share holders since after June 30, 2001, so
model (DDM) can not accept for using for calculate Ke in this case because it
s not reflect the true cost of capital.
ng DDM(Dividend Discount Model) have also advantages and disadvantages.
antages of using DDM are allow significant flexibility when estimating future
idend streams, provide useful value approximations even when the inputs are
rly simplified, can be reversed so the current stock price can be used to impute
rket assumptions for growth and expected return, specifying the underlying
umptions allows for sensitivity testing and analyzing market reactions to
nging circumstances. Beside that, DDM also have its disadvantages are
jective inputs can result in unspecified models and bad results, over-reliance
a valuation that is at heart an estimate, high sensitivity to small changes in input
umptions (Michaud, 1985).
* Using CAPM (popular) for calculate Ke
KE = KRF + (KM KRF) x Beta
Beta: is seen as an index of responsiveness of changes ina securitys returns relative to changes in returns on themarket, in this case is sport utility industry)
(In Exhibit 4 of Nike Inc., given from 1996 is Average beta
= 0.80, beta in 2001 is 0.69)
KRF: risk free rate
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(KM - KRF) : Risk market premium
KM: Return on market.
ng KRF = Profitability rate of Government bonds (U.S. Treasury), in Exhibit 4 we
e U.S Treasury 20-yearKRF= 5.74%
cording to Joana Cohen, she got risk premium = 5.90% (in Exhibit 4:
metric mean = 5.90%, arithmetic mean = 7.50%)
ause of arithmetic mean is better for one-year period estimated expectedrns, while geometric mean is better for long-term period valuation. So, for long
valuation, we can find stable valuation (Jacquier et al., 2003). Thats the answer
Joana Cohen choses geometric mean for her calculated.
nna Cohen calculated: KE= 5.74% + 5.90% x 0.80
= 10.46% ( rounding 10.5%)
hen uses average beta from 1996 to July 2001, 0.80 to be the measure of
tematic risk, but we need to find out a beta that is most representative to future
a. As such, most recent beta is the best choice in this situation (Sharpe, 1995).most recent beta estimate is recent beta at 06 June 2001 is 0.69.
We have: KE= 5.74% + 5.90% x 0.69
= 9.81%
PM model of William Sharpe (1964) and John Lintner (1965) has the advantage
simplicity and can be applied in practice. However, like many other models,
PM inevitable limitations and criticism (Vintila, 2006). Maybe the attraction of
PM is simplicity and easy to apply, but may be CAPM too simple to apply, it lead
eflect not really true happen, its normally just a model (Fama & French, 2003).
re is only limited discussion highlights some of the CAPM model. These
ormalities include:
e effect of firm size it was discovered that the firms shares have small market
ue (market capitalization = price per share x number of share) might get higher
fitability of the firms stock value market, if other factors the same (William,
3). Effect of PE and MB ratios it was found that the stocks of companies with
ratios (price/earning ratio) and the ratio of MB (market-to-book value ratio) might
higher profitability shares of companies with PE ratios and high MB.
uary Effect Those who hold share for the period from December to January
ally have higher margins than other months. However, it was also noted that
ough the January Effect was found in January in many years but not always
ur (Thaler, 1987).
icism from researchers Multifactor model: proponents of Multifactor Model
CAPM is useful though for purposes of corporate finance but it does not provide
precise measurement of the expected return of a particular stock. Multifactor
del for stock that profits fluctuate depending on many factors, not only the
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ments of change in generalmarket (Ng et al., 1992), so if other factors adding to
risk factors to explain the profit risk is much richer than just relying on a single
tor such as CAPM model.
o Calculate KD: Cost of Debt
ording to Joanna Cohen: Total interest expense (2001) divide by companys
rage debt balance (With debt balance of May 31, 2000 is $1444.6 millions and
1 is $1296.6 millions)
WACC is used for discounting cash flows in the future (Lloyd & Davi, 2007),
s all components of cost must reflect firms concurrent or future abilities in
ing capital. But Joanna Cohen uses the historical data in estimating the cost of
t -> She did a mistake here. She divided the interest expenses by the average
ance of debt to get 4.3% of before tax cost of debt. It may not reflect Nikes
rent or future cost of debt.
hen is wrong to use book values as the basis for debt and equity weights the
rket values should be used in calculating weights. The reasoning of using
rket weights to estimate WACC is that it is how much it will cause the firm to
e capital today. That cost is approximated by the market value of capital, not by
book value of capital. Cost of capital based on market value not book value
ratt & Grabowski, 2008).
market value of equity = Current Share Price x Average Shares Outstanding
= $42.09 x 273.3m
= $11,503m.
e to the lack of information of the market value of debt, book value of debt,
291m, is used to calculate weights.
s, the market value weight for equity is
= 1-[11,503 / (11,503+1,291)]
= 1 - 89.9% = 10.1%
, the weight for debt is 10.1%.
cost of debt, if it is intent to be forwarding looking, should be estimated byyield
aturity of bondor according to credit rating.
more appropriate cost of debt can be calculated by using data provided in
ibit 4. We can calculate the current yield to maturity of the Nikes bond to
resent Nikes current cost of debt.
PV= 95.60
n=40
FV=100
I = 3.375% (semiannual) 6.75% (annual)
95.6 = I x [1/(1+r) + 1/(1+r)2 + 1/(1+r)3++1/(1+r)40] + 100/(1+r)40
95.6 = {3.375 x [1-(1+r)-40]/r} + 100/(1+r)40
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If r=4% -> NPV1= 3.375x[1-(1+0.04)-40/0.04] + 100/(1+0.04)40
= 87.65
If r=3% -> NPV1= 3.375x[1-(1+0.03)-40/0.03] + 100/(1+0.03)40
= 108.65
IRR = 3 + (4-3)x [87.65/(108.65-87.65)]
= 7.16%
-> Cost of debt (after tax) is: 7.16%(1-38%) = 4.44% (Tax = 38%)
KDdo Joanna Cohen calculated (wrong) = 4.3%oApply in to formula WACC:
WACC = (E/V). KE + (D/V). KD . (1-T)
Joanna Cohen calculated:WACC = 10.5% x 73.0% + 4.3% x 0.62 x 27%
= 10.5% x 73.0% + 2.7% x 27.0%
= 8.4%
We have :WACC = 10.1% x 4.44% + 89.9% x 9.81%
= 0.45% + 8.82% = 9.27%
estion 3: What should Kimi Ford recommend regarding an investment in
e?
discount cash flows in Exhibit 2 with the calculated WACC is 9.29%, the present
ue of Nike approximately $58.13 per share, which is much higher (1.38times)
n Nikes current market price of $42.09. So Nike shares price is underestimate
undervalued by $16.04 as Nike is currently trading in 2001. Some might think
value is still understated, due to that current growth rate (6% to 7%) is much
er than that estimated by manager is 9.27% (8% to 10%). Moreover, Nike also
nged their business strategy by more concentrate in midpriced segment, whichike less concentrate for a long time before. Thats mean their total of sales might
rease, lead to avenue increase, lead to profit increase, of course, Nikes share
es and dividend will beincrease in long-term.
ng this data, we found that NorthPoint Large-Cap Fund should buy Nike Inc.,
res at this time because the stock is undervalued because it has growth potential
t would be beneficial to the fund. Along with this fact, management has goals for
near future that could provide a great deal of profit for Nike Inc. As we know that
onference, Nike was showed that the company is heading on the recovery path
new strategy and there is potential for abnormal profits given the growthacity that Nike has got as elaborated by ratio analysis. And the set targets by
management are easily achieved if they stay focused since they have the
acity. Technical analysis also supports a buy decision, because looking on
past performance of the Nike Inc., share against the market index. It has shown
t Nike can outperform the market returns and now that it had gown down, it is left
the upside given plans that are being put in place.
reover, Look in to exhibit 8 we can see that P/E of Nike Inc., in 2012 is 19.8,
her than other competitors such as Adidas (14.8), higher than Industry Average
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201
Free Cash
Flows to
Firm
764.1 663.1 777.6 866.2 1014 1 117.6 1275.1 1351.7 1 483.7 1572.
Terminal
Value25835.4226
Cash flows 764.1 663.1 777.6 866.2 1014 1117.6 1275.1 1351.7 1483.7 27408.1226
The Firm
Value$17,079
Less:
Current 1296.6
.0), higher than S&P 500 (13.1). At the same compare P/E in 2013 (future), Nike
o higher than others factors and so on. In other hand, Nikes current trailing 12-
nth earnings multiple is 20.9 compared with the 22.9 industry average and 17.2
&P 500. Over the last five years, Nikes shares have traded in the range of 10.9x
1.8x trailing 12-month earnings. So, We can see that Nike Inc., shares not only
very interest share at present, it also are very potential shares in future.
ddition, EPS Earning Surprise and Estimate Revision History given that from 20
rch 2007 to 25 October 2011, EPS nearly the same with market predict or if had,
ost time are positive EPS surprise, just have three time EPS negative surprise.
, basically, almost predict about Nike is right in long term market and Nikes
res have a little bit undervalue by market estimated. Beside that, consensus
ex also proved that EPS from 13 March 2007 to 18 November 2011 is nearly
ble in a year-period and increased dramatically in five years-period.
onclusion, based on all data including history data, recently data and future data,
clearly that decision is Kimi Ford should buy Nikes shares because it quite safe,
erestimate of market and growth dramatically compare with its history, otherpanies in industry and other shares in S&P 500. Overall, Nikes shares are very
ential. In details, Kimi Ford also should consider before buy Nikes shares
end on some of reasons. First of all, as we know that January Effect not really
pen every year, but it can be happen anytime, at that time, almost every shares
ome better by investors feeling and habit. If Kimi Ford buy Nikes share in this
ment, he should be careful because he might spend much more time than
mal market prices. Secondly, Nikes shares long-term always is wonderful
estment, but short-time buying also should be careful because of the changing
t of industry, the changing of Nike, the changing of trend in footwear industry and on. Beside that, Kimi Ford also dont forget monitor its activities very closely. If
rth-Point Large-Cap Fund want to invest in Nikes shares in short-term, they
uld buy Nikes shares at the end of the year, while others not really pay attention
uch in market and sell it in the first month of next year. In January, when people
e a little overestimate, North-Point Large-Cap Fund can sell for achieve their
fit.
Exhibit 5:Nike Annual Data Sheet (2001-2011)
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debt
Equity
Value$15,782
Shares
Number271.5
Equity
Value per
share
58.13052469
Terminal
Value25835.42265
2012 Cash
Flow1619.881
Permanent
Growth0.03
WACC 0.0927
Stock Market line
(source: http://finance.yahoo.com)
Exhibit 6:
Nike Annual Data Balance Sheet (2005-2011)
(Source: http://finapps.forbes.com/finapps/jsp/finance/compinfo/FinancialIndustrial.jsp?
tkr=NKE [http://finapps.forbes.com/finapps/jsp/finance/compinfo/FinancialIndustrial.jsp?tkr=NKE]
)
All numbers in thousands
PERIOD ENDING 05/2011 05/2010 05/2009 05/2008
Balance Sheet Assets
Cash and Equivalents 1,955,000 3,079,100 2,291,100 2,133,900
Marketable Securities 2,583,000 2,066,800 1,164,000 642,200
Accounts Receivable 3,138,000 2,649,800 2,883,900 2,795,300
Receivables 3,138,000 2,649,800 2,883,900 2,795,300
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Finished Goods * * 2,357,000 *
Other Inventories 2,715,000 2,040,800 * 2,438,400
Inventories 2,715,000 2,040,800 2,357,000 2,438,400
Prepaid Expenses 594,000 873,900 765,600 602,300
Current Deferred Income
Taxes 312,000 248,800 272,400 227,200
Total Current Assets 11,297,000 10,959,200 9,734,000 8,839,300
Land & Improvements 237,000 222,800 221,600 209,400
Building & Improvements 2,055,000 1,772,500 1,776,000 1,691,900
Machinery, Furniture &
Equipment 2,487,000 2,217,500 2,094,300 2,005,000
Construction in Progress 127,000 177,000 163,800 196,700
Total Fixed Assets 4,906,000 4,389,800 4,255,700 4,103,000
Gross Fixed Assets (Plant,
Prop. & Equip.) 4,906,000 4,389,800 4,255,700 4,103,000
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Accumulated Depreciation
& Depletion 2,791,000 2,457,900 2,298,000 2,211,900
Net Fixed Assets (Net
PP&E) 2,115,000 1,931,900 1,957,700 1,891,100
Intangibles 487,000 467,000 467,400 743,100
Cost in Excess 205,000 187,600 193,500 448,800
Non-Current Deferred
Income Taxes 894,000 873,600 897,000 520,400
Total Non-Current Assets 3,701,000 3,460,100 3,515,600 3,603,400
Total Assets 14,998,000 14,419,300 13,249,600 12,442,700
Balance Sheet - Liabilities, Stockholders Equity
Accounts Payable 1,469,000 1,254,500 1,031,900 1,287,600
Notes Payable 187,000 138,600 342,900 177,700
Short Term Debt 200,000 7,400 32,000 6,300
Accrued Liabilities 1,985,000 1,904,400 1,783,900 1,761,900
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Other Current Liabilities 117,000 59,300 86,300 88,000
Total Current Liabilities 3,958,000 3,364,200 3,277,000 3,321,500
Long Term Debt 276,000 445,800 437,200 441,100
Deferred Income Taxes 921,000 855,300 842,000 854,500
Other Non-Current
Liabilities * * 300 *
Preferred Equity outside
Stock Equity * 300 300 300
Total Non-Current Liabilities 1,197,000 1,301,400 1,279,800 1,295,900
Total Liabilities 5,155,000 4,665,600 4,556,800 4,617,400
Common Stock Equity 9,843,000 9,753,700 8,692,800 7,825,300
Common Par 3,000 2,800 2,800 2,800
Additional Paid In Capital 3,944,000 3,440,600 2,871,400 2,497,800
Cumulative Translation
Adjustment * * * 356,400
Retained Earnings 5,801,000 6,095,500 5,451,400 5,073,300
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Other Equity Adjustments 95,000 214,800 367,200 (105,000)
Total Capitalization 10,119,000 10,199,500 9,130,000 8,266,400
Total Equity 9,843,000 9,753,700 8,692,800 7,825,300
Total Liabilities & Stock
Equity 14,998,000 14,419,300 13,249,600 12,442,700
Cash Flow 2,491,000 2,302,200 1,870,000 2,204,900
Working Capital 7,339,000 7,595,000 6,457,000 5,517,800
Free Cash Flow 825,000 2,323,700 813,700 749,100
Invested Capital 10,119,000 10,199,500 9,130,000 8,266,400
* = Data not available
Exhibit 7:
Nike Quarterly Data Balance Sheet (2011)
(Source: http://finapps.forbes.com/finapps/jsp/finance/compinfo/FinancialIndustrial.jsp?tkr=nke&period=qtr
[http://finapps.forbes.com/finapps/jsp/finance/compinfo/FinancialIndustrial.jsp?tkr=nke&period=qtr]
)
Quarterly Data All numbers in
thousands
PERIOD ENDING 11/2011 08/2011 05/2011 02/2011
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Balance Sheet - Assets
Cash and Equivalents 1,929,000 1,608,000 1,955,000 2,132,000
Marketable Securities 1,436,000 2,092,000 2,583,000 2,333,000
Accounts Receivable 3,103,000 3,279,000 3,138,000 2,985,000
Receivables 3,103,000 3,279,000 3,138,000 2,985,000
Other Inventories 3,164,000 3,107,000 2,715,000 2,536,000
Inventories 3,164,000 3,107,000 2,715,000 2,536,000
Prepaid Expenses 795,000 638,000 594,000 513,000
Current Deferred Income
Taxes 298,000 315,000 312,000 286,000
Total Current Assets 10,725,000 11,039,000 11,297,000 10,785,000
Land & Improvements * * 237,000 *
Building & Improvements * * 2,055,000 *
Machinery, Furniture &
Equipment * * 2,487,000 *
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Construction in Progress * * 127,000 *
Other Fixed Assets 5,064,000 5,034,000 * 4,804,000
Total Fixed Assets 5,064,000 5,034,000 4,906,000 4,804,000
Gross Fixed Assets (Plant,
Prop. & Equip.) 5,064,000 5,034,000 4,906,000 4,804,000
Accumulated Depreciation
& Depletion 2,887,000 2,868,000 2,791,000 2,747,000
Net Fixed Assets (Net
PP&E) 2,177,000 2,166,000 2,115,000 2,057,000
Intangibles 532,000 536,000 487,000 472,000
Cost in Excess 201,000 204,000 205,000 194,000
Non-Current Deferred
Income Taxes 930,000 858,000 894,000 970,000
Total Non-Current Assets 3,840,000 3,764,000 3,701,000 3,693,000
Total Assets 14,565,000 14,803,000 14,998,000 14,478,000
Balance Sheet - Liabilities, Stockholders Equity
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Accounts Payable 1,411,000 1,421,000 1,469,000 1,147,000
Notes Payable 123,000 164,000 187,000 139,000
Short Term Debt 114,000 116,000 200,000 198,000
Accrued Liabilities 1,433,000 1,553,000 1,985,000 1,745,000
Other Current Liabilities 482,000 506,000 117,000 113,000
Total Current Liabilities 3,563,000 3,760,000 3,958,000 3,342,000
Long Term Debt 234,000 238,000 276,000 276,000
Deferred Income Taxes 925,000 906,000 921,000 958,000
Total Non-Current Liabilities 1,159,000 1,144,000 1,197,000 1,234,000
Total Liabilities 4,722,000 4,904,000 5,155,000 4,576,000
Common Stock Equity 9,843,000 9,899,000 9,843,000 9,902,000
Common Par 3,000 3,000 3,000 3,000
Additional Paid In Capital 4,335,000 4,138,000 3,944,000 3,839,000
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Retained Earnings 5,290,000 5,653,000 5,801,000 5,954,000
Other Equity Adjustments 215,000 105,000 95,000 106,000
Total Capitalization 10,077,000 10,137,000 10,119,000 10,178,000
Total Equity 9,843,000 9,899,000 9,843,000 9,902,000
Total Liabilities & Stock
Equity 14,565,000 14,803,000 14,998,000 14,478,000
Cash Flow 2,612,000 2,626,000 2,491,000 2,454,100
Working Capital 7,162,000 7,279,000 7,339,000 7,443,000
Free Cash Flow 49,000 (172,000) 825,000 259,000
Invested Capital 10,077,000 10,137,000 10,119,000 10,178,000
* = Data not available
Exhibit 8Nike Indicators
(Find out more at http://www.stockresearchwiki.com/Ticker/NKE/overview/
[http://www.stockresearchwiki.com/Ticker/NKE/overview/] )
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Posted 3rd May 2012by Tien Nguyen
5 View comments
How Wai Teoh March 18, 2013 at 9:18 PM
Good evening Tien Nguyen, I had read your assignment and it is brilliantcase study work.I wish to get the bibliography for this case study for my further study onthe in text citation that you had used.thanks.
Reply
Tien Dinh Nguyen August 5, 2013 at 4:37 AM
Dear How Wai Teoh,I so sorry bcs of my late support. I hope it still can be help you even ithink im late.
Reply
Tien Dinh Nguyen August 5, 2013 at 4:38 AM
1. William, S..G., 1983. Size and stock returns, and other empiricalregularities. Journal of Financial Economics, 12(1), pp.2-12.2. Vintila, N., 2007. Assessing Discount Rate for a Project FinancedEntirely with Equity Capital. Theoretical and Applied Economics, 9(9),
p.514.3. Alessandria, T..M. et al., 2004. Managing risk and uncertainty incomplex capital projects. The Quarterly Review of Economics andFinance, 44(5), pp.751-67.4. Ali, A., Krapfel, J..R. & LaBahn, D., 1995. Product Innovativeness andEntry Strategy: Impact on Cycle Time and Break-even Time. Journal ofProduct Innovation Management, 12(1), pp.54-69.5. Blum, M., 1974. Unbiased Estimates of Long-Run Expected Rates ofReturn. Journal of the American Statistical Association, 39(47), pp.634-38.6. Boardman, C..M., Reinhart, W..L. & Celec, S..E., 1982. THE ROLEOF THE PAYBACK PERIOD IN THE THEORY AND APPLICATION OFDURATION TO CAPITAL BUDGETING. Journal of Business Finance &
Accounting, 9(4), pp.511-22.7. Brderl, J. & Preisendrfer, P., 1998. Network Support and theSuccess of Newly Founded Business. SMALL BUSINESSECONOMICS, 10(3), pp.213-25.8. Dixit, A., 1993. Choosing among alternative discrete investmentprojects under uncertainty. Economics Letters, 41(3), pp.265-68.9. Fama, E..F. & French, K..R., 2003. The Capital Asset Pricing Model:Theory and Evidence. CRSP Working Paper No. 550 Tuck BusinessSchool Working Paper No. 03-26, 1(1), pp.1-2.10. Ferderer, J..P., 1993. The Impact of Uncertainty on AggregateInvestment Spending: An Empirical Analysis. Journal of Money, Creditand Banking, 25(1), pp.30-48.
Reply
http://tienucd.blogspot.com/2012/05/nike-inc-analysis-cfm-corporate-finance.html?showComment=1375648711035#c4325848953534075562http://www.blogger.com/profile/13114714001142237975http://tienucd.blogspot.com/2012/05/nike-inc-analysis-cfm-corporate-finance.html?showComment=1375648660694#c5323739954171572502http://www.blogger.com/profile/13114714001142237975http://tienucd.blogspot.com/2012/05/nike-inc-analysis-cfm-corporate-finance.html?showComment=1363612724106#c4079007549119743462http://www.blogger.com/profile/098975568233707458877/24/2019 Nike Inc.pdf
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Tien Dinh Nguyen August 5, 2013 at 4:39 AM
11. Harlow, W..V. & Brown, K..C., 1990. Understanding and AssessingFinancial Risk Tolerance: A Biological Perspective. Financial AnalystsJournal, 46(6), pp.50-62+80.12. Jacquier, E., Kane, A. & Marcus, A..J., 2003. Geometric or
Arithmetic Mean: A Reconsideration. Financial Analysts Journal, 1(1),pp.1-19.13. Kaua, J..B., Lincka, J..S. & Rubin, P..H., 2008. Do managers listen
to the market? Journal of Corporate Finance, 14(4), pp.347-62.14. Kisgen, D..J., 2006. Credit Ratings and Capital Structure. TheJournal of Finance, 61(3), pp.1035-72.15. Lloyd, W..J. & Davi, L.E., 2007. Building Long-Term Value.JOURNAL OF ACCOUNTANCY, 1(1), pp.1-2.16. Lohmann, J..R. & Baksh, S..N., 1993. THE IRR,NPV ANDPAYBACK PERIOD AND THEIR RELATIVE PERFORMANCE INCOMMON CAPITIAL BUDGETING DECISION PROCEDURES FORDEALING WITH RISK. The Engineering Economist: A Journal Devotedto the Problems of Capital Investment, 39(1), pp.17-47.17. Ng, V., Engle, R..F. & Rothschild, M., 1992. A multi-dynamic-factormodel for stock returns. Journal of Econometrics, 52(1-2), pp.245-66.18. Myers, S..C., 1974. Interactions of Corporate Financing and
Investment Decisions-Implications for Capital Budgeting. The Journal ofFinance, 29(1), pp.1-25.19. Malkiel, B..G. & Xu, Y., 1997. Risk and Return Revisited. TheJournal of Portfolio Management, 23(3), pp.9-14.20. Michaud, R..O., 1985. A Scenario-Dependent Dividend DiscountModel: Bridging the Gap between Top-down Investment Information andBottom-up Forecasts. Financial Analysts Journal, 41(6), pp.49-59.21. Modigliani, F. & Miller, M..H., 1958. The Cost of Capital, CorporationFinance and the Theory of Investment. The American Economic Review,47(3), pp.261-97.22. Pinches, G..E., 1982. Myopia, Capital Budgeting and DecisionMaking. Financial Management, 11(3), pp.6-19.23. Pratt, S..P. & Grabowski, R..J., 2008. Cost of Capital. In Cost of
Capital Basics. 3rd ed. New Jersey: John Wiley and Sons. p.5.24. Pratt, S..P. & Grabowski, R..J., 2008. Cost of Capital. In Cost ofCapital Basics. 3rd ed. New Jersey, US: John Wiley and Sons. p.6.25. Sharpe, W..F., 1995. Risk, Market Sensitivity, and Diversification.Financial Analysts Journal, 51(1), pp.84-88.26. Thaler, R..H., 1987. Amomalies: The January Effect. The Journal ofEconomic Perspectives, 1(1), pp.197-201.
Reply
Erick Adiprawira September 2, 2015 at 11:44 PM
Hi, Tien
I have a same assignment with you about Nike Inc. however my goal isknowing about if nike. inc approach a credit to bank, will it approved bybank to give Nike an investment ? And knowing about its financialstructure and investment structure. I just want to know about youropinion with that question. Thank you Tien, hopefully you have aprediction.
Reply
http://tienucd.blogspot.com/2012/05/nike-inc-analysis-cfm-corporate-finance.html?showComment=1441208658985#c1372575760500078082http://www.blogger.com/profile/06542062104781001816http://tienucd.blogspot.com/2012/05/nike-inc-analysis-cfm-corporate-finance.html?showComment=1375648751564#c9126989523071434140http://www.blogger.com/profile/131147140011422379757/24/2019 Nike Inc.pdf
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