Executive summary In this report we focus on Nikes Inc. Cost of Capital and its pecuniary importance for the company and prospective investors. The management of Nike Inc. addresses issues both on top-line growth and operating performance. The companys price of capital is a fine element in such(prenominal) decisions and it is important to estimate scarce the weighted average personify of capital (WACC). In our analysis, we examine why WACC is important in decision making and we show how WACC for Nike Inc. is metric correctly. Also, we calculate the companys appeal of equity using three divergent models: the Capital addition Pricing clay sculpture (CAPM), the Dividend Discount Model (DDM) and the gain Capitalization Model (EPS/ Price), we analyze their advantages and disadvantages and finally we argue whether or not an investment in Nike is recommended. Our analysis suggests that Nike Inc.s special K stock should be added to the North Point Groups Mutual inventory Po rtfolio. I. The weighted Average Cost of Capital and its Importance for Nike Inc. The heavy Average Cost of Capital (WACC) is the average of the costs of a companys sources of financing-debt and equity, apiece(prenominal) of which is weighted by its respective handling in the condition situation. By taking a weighted average, we layabout key how much interest the company has to pay for every peripheral dollar it finances.
A firms WACC is the overall required cede on the firm as a whole and, as such, it is lots used internally by company directors to forge the economic feasibility of expansionary opport unities and mergers. Also, WACC is the appro! priate discount rate to use in stock valuation. II. Calculation of Nikes WACC The calculating methodology for Nikes Inc. WACC seems to be absurd with the principles1 that should be followed when estimating this measure. These are our... very simplistic analysis of the strengths of each method of calculating the cost of equity capital. There is no research at all. It doesnt even mention the widely acquire criticisms of the CAPM. If you want to get a full essay, order it on our website: OrderCustomPaper.com
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