Question

Consider the following data for Nike Inc. In 2009 it had S19, 150 million in sales with a 10% growth ate in 2010 but then slows by 1% to the long un gowth rate of 5% by 2015 Nike expects E Tto be 10% sales ncreases nne work ng capital equ ements to be 10% of any creases n sales and capital expenditures to equal depreciation expenses. Nike also has S2.300 million in cash $32 million in de 486 million shares outstanding, a tax rate of 24%, and a weighted average cost of capital of 10% a Suppose you believe Nike's ntial revenue growth rate will be between 7% and 11% ith gr th slow ng linearly to 5% by year 2015) What range of p ces for Nike stock is consistent with these forecasts? Suppose you believe Nike's initial revenue EBIT margin will be between 9% and 11% of sales. What range of prices for Nike stock is consistent with these forecasts? c. Suppose you believe Nike's weighted average cost of capital is between 9 5% and 12% what range of pnces for Nike stock is consistent with these forecasts? d. What range of stock prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously?

Answer 1