NIKE, INC.: COST OF CAPITAL Free Essay, Term Paper and Book Report
EXECUTIVE SUMMARY
In this report, we focus on the calculation of the cost of capital for Nike Inc. and the financial importance of this figure for the company as well as its future and current investors in light of the management¡¦s initiated plans to revitalize the brand both in terms of top-line growth and operating performance. Hence, the company¡¦s cost of capital is a critical factor in such decisions and it is of utmost importance to precisely estimate the weighted average cost of capital.
In our analysis, we examine why WACC is an important cost to consider in strategic decision making such as this one, and we show how to correctly calculate the WACC. Also, we show different techniques to compute the cost of equity, mainly using three techniques: Capital Asset Pricing Model (CAPM), the Dividend Discount Model (DDM) and the Earnings Capitalization Model (EPS/ Price). We then briefly go over their advantages and disadvantages, and justify our choice of the CAPM as the best estimate for the equity cost because it is more responsive to constant market changes.
We fi......
Word Count: 1854
Page Count: 7.4 (250 words a page / double spaced)
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