Nike Inc PDF

2/16/2016 NikeInc.
,analysis(CFMCorporateFinanceManagement)
NikeInc.,analysis(CFMCorporateFinance
Management)
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Case1:NikeInc.,
Summaryofthecasestudy
NorthPoint LargeCap Fund, which invested mostly in Fortune 500 companies,
weighing whether to buy Nikes stock. Nike has experienced sales growth decline,
declinesinprofitsandmarketshare.Nikehasrevealthatitwouldincreaseexposure
inmidpricefootwearandapparellines.Italsocommitstocutdownexpenses.The
marketrespondedmixedsignalstoNikeschanges.KimiFordhaddoneacashflow
estimation,andaskedherassistantJoannaCohentoestimatecostofcapital.The
mistakesappeared.Thisanalysiswilldeterminebasicandgeneraltheoryaboutcost
ofcapitalandrelations,findoutthemistakesincaseanalysisofJoannaCohen,give
the advises for Kimi Ford. Moreover, this analysis also giving some of limitations
whenusingDDM,CAPM,WACCforcalculatingthecostofcapital.

Question 1: Why is it important to estimate a firms cost of capital? What
doesitrepresent?IstheWACCsetbyinvestorsorbymanagers?
First, cost of capital is required return necessary to make a capital budgeting

project/company. Cost of capital includes the cost of debt and the cost of equity.
Costofdebtincludescostofjunkbonds,costofordinarybonds,costofbankloan
(liabilities),whilecostofequityincludescostofordinaryshares(Modigliani&Miller,
1958).Ingeneral,accordingtoIbbotson(1999)thatthecostofcapitalisfunctionof
investment, not the investor. The marketplace is a place where investors can
estimate the risk of assets, projects and so on. Origin of cost of capital born from
marketplace while investors estimate, assessment the ability success of a project,
company(Pratt&Grabowski,2008).
stimateafirmscostofcapitalis a very important mission must be done while

analyze and find out the decision about invest in a project or company. These
reasonsareconsideredtheeffectofcapitalstructuretocostofcapital,investment
decisions(Myers,1974),firmvalue,sharepriceofacompany,whichmayaffectto
http://tienucd.blogspot.in/2012/05/nikeincanalysiscfmcorporatefinance.html 1/20
2/16/2016 NikeInc.,analysis(CFMCorporateFinanceManagement)
the value and cost of capital by changing the capital structure. It also help predict
risk would be happen with a company (risk management). Moreover, estimate a
firmsorprojectscostofcapitalhelpinvestorscandiversificationtheirinvest,reduce
riskininvest,maximizationprofits:
Fristofall,costofcapitalusingtoCapitalBudgetingDecision as the measuring

fordecisionaninvestmentproposal(Myers,1974).Normally,thecompany/investors
will choose the project (compare with many other projects) which give a higher
returnandlowerriskoninvestment.Ifcompanymustdecidetheindividualproject,
companywillchoosetheprojectwhichgivesatisfactoryreturnoninvestment(Dixit,
1993). Of course, all of the projects which are chosen must be get higher return
thanthecostofcapitalinvestinthatprojects.Italsohelpdeterminetheacceptability
ofinvestmentopportunities.
Secondly, cost of capital also help for Designing the Corporate Finance
Structure. In one side, they always follow the changing of capital market for get
informationandchoosethebestwayforcapitalstructureofcompany.Inthe other
e, managers can use various methods to minimize companys cost of capital,
changingthemarketprice,theearningpershare,bringoutthebenefittocompany
(Pinches, 1982). Many companies before designing their corporate finance
structure,theytrytofigurestheirinformationsuchasaccountingreports,theircost
of capital to market. After that, they listen carefully the marketbefore decide their
corporate finance structure. Eventhey get positive or negative reply from market,
theywillhavetheirdecisionsindesigningtheircorporatefinancestructure:cancelor
investinproject(Kauaetal.,2008).
oreover, cost of capital help managers Decide the Method of Financing.

Understanding about financial situations and the rate of interest on loan, normal
dividend rate in the market is need conditions of financial managers. It help
managers can give out better react and balancing sources of finance when faced
withrequiresadditonalfinance,whichhelpmimimizethecostofcapital(Kauaetal.,
2008). Moreover, it also very important when using it for considerations of control
relatefactorsandreducetheriskforcompany.
In addition, cost of capital can also help board of management/investors estimate

thePerformanceoftopManagers.T hecost of capital can used to estimate,
compare managing ability of financial managers (CEOs, CF Os), which
se on evaluation between profit of projects (company) and cost of
capital. As mention above that a company might listen the market reply
by present their accounting report, their cost of capital, a better
manager is a manager can get sensitivity reply from market, reduce the
risk, increase the profit for company(Kaua et al., 2008).T hat means we
can use calculating cost of capital for estimate the work ability of
managers by assessment managers ability to earn profit, reduce risk
and errors, manage debt including bad debt. Moreover, it also helps
estimate,manage the actual cost incurred in rising funds when manager
requirerisingfundsforproject.
ost of capital represent by WACC (Weighted Average Cost of

apital). Therequiredreturnwillreflecttheriskoftheinvestmentandthereturnof
alternatives.WACCissumofcostofdebt(Kd)andcostofequity(Ke).Usually,cost
of debt calculating is very easy but cost of equity is more difficult. Ke calculate by
using DDM (Dividend Discount Model) or CAPM (Capital Asset Pricing Model). In
many case, many companies does not pay dividend at the end of the period, it
might lead to inaccurate calculating Ke, that is the reason why CAPM using more
popular than DDM. Beside that, CAPM also have advantages and disadvantages
thatwewillreviewandevaluationmoreinthepartofquestion2:whichmethodis
thebestforcalculatedcostofequity?).
find the average cost of capital, we weight individual cost of capital by their
proportionsinthefirmscapitalstructure:
WACCformula:WACC=(KexE)/(D+E)+[Kdx(1Ct)xD]/(D+E)
AsmentionabovethatWACCisrequiredreturnwillreflecttheriskoftheinvestment
and the return of alternatives. Companies need information about the cost of
differentsourcesoffinanceinordertofindtheoverallcostoffinanceandtomake
investment, financing decisions. So, basically, WACC set by investors in the
marketplace.AccordingtoPrattandGrabowski(2008:5)isthatThecostofcapital,
derivedfrominvestorsexpectationandthemarketconsensusofthoseexpectations,
isappliedtoexpectedeconomicincome,usuallymeasuredbyintermofcashflows,
in order to estimate the present value or to compare investment alternatives of
similarofdifferentrisk.WACCsetbyinvestorswhentheycalculateandfindoutthe
decisionsaboutinvestorrejectinvestintoacompany/project.Managers just listen
the market reply and react by estimate their options in invest in a project or
restructuretheircompany,giveitallforboardofmanagement(investors)whohave
the final decisions. Beside that, it also help managers can adjusted share prices,
marketvalueofthefirmforfirmsbenefit.
Question 2: What was your estimate about WACC? What mistake Joana
Cohenmakeinheranalysis?Whichmethodisbestforcalculatingthecostof
equity?
UsingWACCformula:
WACC=(E/V).KE+(D/V).KD.(1T)
V=D+E=TotalCapital
D:AmountofDebt
E:Equity
KD:CostofDebt
KE:Equity
T:Taxrate
Accordingtocasestudywehave:
T=38%(inExhibit2)1T=0.62
E:Equity2001=$3494.5
D:Debt2001=
=Currentportionoflongtermdebt+Notespayable+Longterm
debt
=$5.4+$855.3+$435.9
=$1296.6
Besidethat,wehave:
E/V=27%(proportionofequity)
D/V=73%(proportionofdebt)
CalculateKE:CostofEquity
*UsingDDM(DividendDiscountModel)forcalculateKe
Ke=D1/Po+g
D1=D0(1+g)
D0=0.48g=5.5%
D1=0.48x(1+0.055)
=0.5064
P0=42.09
Sowehave:
Ke=D1/Po+g
=0.5064/42.09+5.5%
=1.20%+5.50%
=6.70%
BecauseNikedidnotpaydividendforshareholderssinceafterJune30,2001,so
thismodel(DDM)cannotacceptforusingforcalculateKeinthiscasebecauseit
doesnotreflectthetruecostofcapital.
ingDDM(Dividend Discount Model) have also advantages and disadvantages.

Advantages of using DDM are allow significant flexibility when estimating future
dividend streams, provide useful value approximations even when the inputs are
overlysimplified,canbereversedsothecurrentstockpricecanbeusedtoimpute
market assumptions for growth and expected return, specifying the underlying
assumptions allows for sensitivity testing and analyzing market reactions to
changing circumstances. Beside that, DDM also have its disadvantages are
ubjective inputs can result in unspecified models and bad results,overreliance
onavaluationthatisatheartanestimate,highsensitivitytosmallchangesininput
assumptions(Michaud,1985).
*UsingCAPM(popular)forcalculateKe
KE=KRF+(KMKRF)xBeta
Beta:isseenasanindexofresponsivenessofchangesin
a securitys returns relative to changes in returns on the
market,inthiscaseissportutilityindustry)
(InExhibit4ofNikeInc.,givenfrom1996isAveragebeta
=0.80,betain2001is0.69)
KRF:riskfreerate
(K K ):Riskmarketpremium
(KMKRF):Riskmarketpremium
KM:Returnonmarket.
UsingKRF=ProfitabilityrateofGovernmentbonds(U.S.Treasury),inExhibit4we
haveU.STreasury20yearKRF=5.74%
According to Joana Cohen, she got risk premium = 5.90% (in Exhibit 4:
geometricmean=5.90%,arithmeticmean=7.50%)
Because of arithmetic mean is better for oneyear period estimated expected

returns,whilegeometricmeanisbetterforlongtermperiodvaluation.So,forlong
lifevaluation,wecanfindstablevaluation(Jacquieretal.,2003).Thatstheanswer
forJoanaCohenchosesgeometricmeanforhercalculated.
JoannaCohencalculated:KE=5.74%+5.90%x0.80
=10.46%(rounding10.5%)
Cohen uses average beta from 1996 to July 2001, 0.80 to be the measure of
systematicrisk,butweneedtofindoutabetathatismostrepresentativetofuture
beta.Assuch,mostrecentbetaisthebestchoiceinthissituation(Sharpe,1995).
Somostrecentbetaestimateisrecentbetaat06June2001is0.69.
Wehave:KE=5.74%+5.90%x0.69
=9.81%
CAPMmodelofWilliamSharpe(1964)andJohnLintner(1965)hastheadvantage
of simplicity and can be applied in practice. However, like many other models,
CAPM inevitable limitations and criticism (Vintila, 2006). Maybe the attraction of
CAPMissimplicityandeasytoapply,butmaybeCAPMtoosimpletoapply,itlead
toreflectnotreallytruehappen,itsnormallyjustamodel(Fama & French, 2003).
There is only limited discussion highlights some of the CAPM model. These
abnormalitiesinclude:
Theeffectoffirmsizeitwasdiscoveredthatthefirmsshareshavesmallmarket
value(marketcapitalization=pricepersharexnumberofshare)mightgethigher
profitability of the firms stock value market, if other factors the same (William,
1983).EffectofPEandMBratiositwasfoundthatthestocksofcompanieswith
PEratios(price/earningratio)andtheratioofMB(markettobookvalueratio)might
gethigherprofitabilitysharesofcompanieswithPEratiosandhighMB.
JanuaryEffectThosewhoholdsharefortheperiodfromDecembertoJanuary
usually have higher margins than other months. However, it was also noted that
although the January Effect was found in January in many years but not always
occur(Thaler,1987).
Criticism from researchers Multifactor model: proponents of Multifactor Model

tCAPMisusefulthoughforpurposesofcorporatefinancebutitdoesnotprovide
the precise measurement of the expected return of a particular stock. Multifactor
Model for stock that profits fluctuate depending on many factors, not only the
elementsofchangeingeneralmarket(Ngetal.,1992),soifotherfactorsaddingto
theriskfactorstoexplaintheprofitriskismuchricherthanjustrelyingonasingle
factorsuchasCAPMmodel.
oCalculateKD:CostofDebt
According to Joanna Cohen: Total interest expense (2001) divide by companys
averagedebtbalance(WithdebtbalanceofMay31,2000is$1444.6millionsand
2001is$1296.6millions)
TheWACCisusedfordiscountingcashflowsinthefuture(Lloyd&Davi,2007),
thus all components of cost must reflect firms concurrent or future abilities in
raisingcapital.ButJoannaCohenusesthehistoricaldatainestimatingthecostof
debt>Shedidamistakehere.Shedividedtheinterestexpensesbytheaverage
balanceofdebttoget4.3%ofbeforetaxcostofdebt.ItmaynotreflectNikes
currentorfuturecostofdebt.
Coheniswrongtousebookvaluesasthebasisfordebtandequityweightsthe
market values should be used in calculating weights. The reasoning of using
market weights to estimate WACC is that it is how much it will cause the firm to
raisecapitaltoday.Thatcostisapproximatedbythemarketvalueofcapital,notby
the book value of capital. Cost of capital based on market value not book value
(Pratt&Grabowski,2008).
Formarketvalueofequity=CurrentSharePricexAverageSharesOutstanding
=$42.09x273.3m
=$11,503m.
Duetothelackofinformationofthemarketvalueofdebt,bookvalueofdebt,
$1,291m,isusedtocalculateweights.
Thus,themarketvalueweightforequityis
=1[11,503/(11,503+1,291)]
=189.9%=10.1%
So,theweightfordebtis10.1%.
Thecostofdebt,ifitisintenttobeforwardinglooking,shouldbeestimatedbyyield
maturityofbondoraccordingtocreditrating.
The more appropriate cost of debt can be calculated by using data provided in
Exhibit 4. We can calculate the current yield to maturity of the Nikes bond to
representNikescurrentcostofdebt.
PV=95.60
n=40
FV=100
I=3.375%(semiannual)6.75%(annual)
95.6=Ix[1/(1+r)+1/(1+r)2+1/(1+r)3++1/(1+r)40]+100/(1+r)40
<>95.6={3.375x[1(1+r)40]/r}+100/(1+r)40
Ifr=4%>NPV1=3.375x[1(1+0.04)40/0.04]+100/(1+0.04)40
=87.65
Ifr=3%>NPV1=3.375x[1(1+0.03)40/0.03]+100/(1+0.03)40
=108.65
IRR=3+(43)x[87.65/(108.6587.65)]
=7.16%
>Costofdebt(aftertax)is:7.16%(138%)=4.44%(Tax=38%)
KDdoJoannaCohencalculated(wrong)=4.3%
oApplyintoformulaWACC:
WACC=(E/V).KE+(D/V).KD.(1T)
JoannaCohencalculated:
WACC=10.5%x73.0%+4.3%x0.62x27%
=10.5%x73.0%+2.7%x27.0%
=8.4%
Wehave:
WACC=10.1%x4.44%+89.9%x9.81%
=0.45%+8.82%
=9.27%
Question 3: What should Kimi Ford recommend regarding an investment in

Nike?
TodiscountcashflowsinExhibit2withthecalculatedWACCis9.29%,thepresent
value of Nike approximately $58.13 per share, which is much higher (1.38times)
than Nikes current market price of $42.09. So Nike shares price is underestimate
and undervalued by $16.04 as Nike is currently trading in 2001. Some might think
this value is still understated, due to that current growth rate (6% to 7%) is much
lowerthanthatestimatedbymanageris9.27%(8%to10%).Moreover,Nikealso
changedtheirbusinessstrategybymoreconcentrateinmidpricedsegment,which
isNikelessconcentrateforalongtimebefore.Thatsmeantheirtotalofsalesmight
increase, lead to avenue increase, lead to profit increase, of course, Nikes share
pricesanddividendwillbeincreaseinlongterm.
ing this data, we found that NorthPoint LargeCap Fund should buy Nike Inc.,
sharesatthistimebecausethestockisundervaluedbecauseithasgrowthpotential
thatwouldbebeneficialtothefund.Alongwiththisfact,managementhasgoalsfor
thenearfuturethatcouldprovideagreatdealofprofitforNikeInc.Asweknowthat
inconference,Nikewasshowedthatthecompanyisheadingontherecoverypath
with new strategy and there is potential for abnormal profits given the growth
capacitythatNikehasgotaselaboratedbyratioanalysis. And the set targetsby
the management are easily achieved if they stay focused since they have the
capacity. Technical analysis also supports a buy decision, because looking on
thepastperformanceoftheNikeInc.,shareagainstthemarketindex.Ithasshown
thatNikecanoutperformthemarketreturnsandnowthatithadgowndown,itisleft
withtheupsidegivenplansthatarebeingputinplace.
Moreover, Look in to exhibit 8 we can see that P/E of Nike Inc., in 2012 is 19.8,
higherthanothercompetitorssuchasAdidas(14.8),higherthanIndustryAverage
(14.0),higherthanS&P500(13.1).AtthesamecompareP/Ein2013(future),Nike
alsohigherthanothersfactorsandsoon.Inotherhand,Nikescurrenttrailing12
monthearningsmultipleis20.9comparedwiththe22.9industryaverageand17.2
ofS&P500.Overthelastfiveyears,Nikesshareshavetradedintherangeof10.9x
to21.8xtrailing12monthearnings.So,WecanseethatNikeInc.,sharesnotonly
areveryinterestshareatpresent,italsoareverypotentialsharesinfuture.
Inaddition,EPSEarningSurpriseandEstimateRevisionHistorygiventhatfrom20
March2007to25October2011,EPSnearlythesamewithmarketpredictorifhad,
almost time are positive EPS surprise, justhave three time EPS negative surprise.
So, basically, almost predict about Nike is right in long term market and Nikes
shares have a little bit undervalue by market estimated. Beside that, consensus
index also proved that EPS from 13 March 2007 to 18 November 2011 is nearly
stableinayearperiodandincreaseddramaticallyinfiveyearsperiod.
Inconclusion,basedonalldataincludinghistorydata,recentlydataandfuturedata,
itisclearlythatdecisionisKimiFordshouldbuyNikessharesbecauseitquitesafe,
underestimate of market and growth dramatically compare with its history, other
companiesinindustryandothersharesinS&P500.Overall,Nikessharesarevery
potential. In details, Kimi Ford also should consider before buy Nikes shares
dependonsomeofreasons.Firstofall,asweknowthatJanuaryEffectnotreally
happeneveryyear,butitcanbehappenanytime,atthattime,almosteveryshares
become better by investors feeling and habit. If Kimi Ford buy Nikes share in this
moment, he should be careful because he might spend much more time than
normal market prices. Secondly, Nikes shares longterm always is wonderful
investment, but shorttime buying also shouldbe careful because of the changing
fastofindustry,thechangingofNike,thechangingoftrendinfootwearindustryand
so on. Beside that, Kimi Ford also dont forget monitor its activities very closely. If
NorthPoint LargeCap Fund want to invest in Nikes shares in shortterm, they
shouldbuyNikessharesattheendoftheyear,whileothersnotreallypayattention
tomuchinmarketandsellitinthefirstmonthofnextyear.InJanuary,whenpeople
have a little overestimate, NorthPoint LargeCap Fund can sell for achieve their
profit.
Exhibit5:
NikeAnnualDataSheet(20012011)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Free Cash
Flows to 764.1 663.1 777.6 866.2 1014 1117.6 1275.1 1351.7 1483.7 1572.7
Firm
Terminal
25835.42265
Value
Cashflows 764.1 663.1 777.6 866.2 1014 1117.6 1275.1 1351.7 1483.7 27408.12265
The Firm
$17,079
Value
Less:
Current 1296.6
debt
Equity
$15,782
Value
Shares
271.5
Number
Equity
Value per 58.13052469
share
Terminal
25835.42265
Value
2012Cash
1619.881
Flow
Permanent
0.03
Growth
WACC 0.0927
StockMarketline
(source:http://finance.yahoo.com)

Exhibit6:
NikeAnnualDataBalanceSheet(20052011)
(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]
)
Allnumbersinthousands
PERIODENDING 05/2011 05/2010 05/2009 05/2008
BalanceSheetAssets
CashandEquivalents 1,955,000 3,079,100 2,291,100 2,133,900
MarketableSecurities 2,583,000 2,066,800 1,164,000 642,200
AccountsReceivable 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

FinishedGoods * * 2,357,000 *
OtherInventories 2,715,000 2,040,800 * 2,438,400
Inventories 2,715,000 2,040,800 2,357,000 2,438,400
PrepaidExpenses 594,000 873,900 765,600 602,300
Current Deferred Income

312,000 248,800 272,400 227,200
Taxes
TotalCurrentAssets 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 &

2,487,000 2,217,500 2,094,300 2,005,000
Equipment
ConstructioninProgress 127,000 177,000 163,800 196,700
TotalFixedAssets 4,906,000 4,389,800 4,255,700 4,103,000
Gross Fixed Assets (Plant,

4,906,000 4,389,800 4,255,700 4,103,000
Prop.&Equip.)
Accumulated Depreciation
2,791,000 2,457,900 2,298,000 2,211,900
&Depletion
Net Fixed Assets (Net

2,115,000 1,931,900 1,957,700 1,891,100
PP&E)
Intangibles 487,000 467,000 467,400 743,100
CostinExcess 205,000 187,600 193,500 448,800
NonCurrent Deferred
894,000 873,600 897,000 520,400
IncomeTaxes
TotalNonCurrentAssets 3,701,000 3,460,100 3,515,600 3,603,400
TotalAssets 14,998,000 14,419,300 13,249,600 12,442,700
BalanceSheetLiabilities,StockholdersEquity
AccountsPayable 1,469,000 1,254,500 1,031,900 1,287,600
NotesPayable 187,000 138,600 342,900 177,700
ShortTermDebt 200,000 7,400 32,000 6,300
AccruedLiabilities 1,985,000 1,904,400 1,783,900 1,761,900
OtherCurrentLiabilities 117,000 59,300 86,300 88,000
TotalCurrentLiabilities 3,958,000 3,364,200 3,277,000 3,321,500
LongTermDebt 276,000 445,800 437,200 441,100
DeferredIncomeTaxes 921,000 855,300 842,000 854,500
Other NonCurrent
* * 300 *
Liabilities
Preferred Equity outside

* 300 300 300
StockEquity
TotalNonCurrentLiabilities 1,197,000 1,301,400 1,279,800 1,295,900
TotalLiabilities 5,155,000 4,665,600 4,556,800 4,617,400
CommonStockEquity 9,843,000 9,753,700 8,692,800 7,825,300
CommonPar 3,000 2,800 2,800 2,800
AdditionalPaidInCapital 3,944,000 3,440,600 2,871,400 2,497,800
Cumulative Translation
* * * 356,400
Adjustment
RetainedEarnings 5,801,000 6,095,500 5,451,400 5,073,300

OtherEquityAdjustments 95,000 214,800 367,200 (105,000)
TotalCapitalization 10,119,000 10,199,500 9,130,000 8,266,400
TotalEquity 9,843,000 9,753,700 8,692,800 7,825,300
Total Liabilities & Stock

14,998,000 14,419,300 13,249,600 12,442,700
Equity
CashFlow 2,491,000 2,302,200 1,870,000 2,204,900
WorkingCapital 7,339,000 7,595,000 6,457,000 5,517,800
FreeCashFlow 825,000 2,323,700 813,700 749,100
InvestedCapital 10,119,000 10,199,500 9,130,000 8,266,400
*=Datanotavailable
Exhibit7:
NikeQuarterlyDataBalanceSheet(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]
)
All numbers in
QuarterlyData
thousands
PERIODENDING 11/2011 08/2011 05/2011 02/2011
BalanceSheetAssets
CashandEquivalents 1,929,000 1,608,000 1,955,000 2,132,000
MarketableSecurities 1,436,000 2,092,000 2,583,000 2,333,000
AccountsReceivable 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
OtherInventories 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
PrepaidExpenses 795,000 638,000 594,000 513,000
Current Deferred Income

298,000 315,000 312,000 286,000
Taxes
TotalCurrentAssets 10,725,000 11,039,000 11,297,000 10,785,000
Land&Improvements * * 237,000 *
Building&Improvements * * 2,055,000 *
Machinery, Furniture &

* * 2,487,000 *
Equipment
ConstructioninProgress * * 127,000 *
OtherFixedAssets 5,064,000 5,034,000 * 4,804,000
TotalFixedAssets 5,064,000 5,034,000 4,906,000 4,804,000
Gross Fixed Assets (Plant,

5,064,000 5,034,000 4,906,000 4,804,000
Prop.&Equip.)
Accumulated Depreciation
2,887,000 2,868,000 2,791,000 2,747,000
&Depletion
Net Fixed Assets (Net

2,177,000 2,166,000 2,115,000 2,057,000
PP&E)
Intangibles 532,000 536,000 487,000 472,000
CostinExcess 201,000 204,000 205,000 194,000
NonCurrent Deferred
930,000 858,000 894,000 970,000
IncomeTaxes
TotalNonCurrentAssets 3,840,000 3,764,000 3,701,000 3,693,000
TotalAssets 14,565,000 14,803,000 14,998,000 14,478,000
BalanceSheetLiabilities,StockholdersEquity
AccountsPayable 1,411,000 1,421,000 1,469,000 1,147,000
NotesPayable 123,000 164,000 187,000 139,000
ShortTermDebt 114,000 116,000 200,000 198,000
AccruedLiabilities 1,433,000 1,553,000 1,985,000 1,745,000
OtherCurrentLiabilities 482,000 506,000 117,000 113,000
TotalCurrentLiabilities 3,563,000 3,760,000 3,958,000 3,342,000
LongTermDebt 234,000 238,000 276,000 276,000
DeferredIncomeTaxes 925,000 906,000 921,000 958,000
TotalNonCurrentLiabilities 1,159,000 1,144,000 1,197,000 1,234,000
TotalLiabilities 4,722,000 4,904,000 5,155,000 4,576,000
CommonStockEquity 9,843,000 9,899,000 9,843,000 9,902,000
CommonPar 3,000 3,000 3,000 3,000
AdditionalPaidInCapital 4,335,000 4,138,000 3,944,000 3,839,000
RetainedEarnings 5,290,000 5,653,000 5,801,000 5,954,000
OtherEquityAdjustments 215,000 105,000 95,000 106,000
TotalCapitalization 10,077,000 10,137,000 10,119,000 10,178,000
TotalEquity 9,843,000 9,899,000 9,843,000 9,902,000
Total Liabilities & Stock

14,565,000 14,803,000 14,998,000 14,478,000
Equity
CashFlow 2,612,000 2,626,000 2,491,000 2,454,100
WorkingCapital 7,162,000 7,279,000 7,339,000 7,443,000
FreeCashFlow 49,000 (172,000) 825,000 259,000
InvestedCapital 10,077,000 10,137,000 10,119,000 10,178,000
*=Datanotavailable

Exhibit8
NikeIndicators
(Findoutmoreathttp://www.stockresearchwiki.com/Ticker/NKE/overview/
[http://www.stockresearchwiki.com/Ticker/NKE/overview/] )
Posted3rdMay2012byTienNguyen
5 Viewcomments
HowWaiTeoh March18,2013at9:18PM
GoodeveningTienNguyen,Ihadreadyourassignmentanditisbrilliant
casestudywork.
Iwishtogetthebibliographyforthiscasestudyformyfurtherstudyon
theintextcitationthatyouhadused.
thanks.
Reply
TienDinhNguyen August5,2013at4:37AM
DearHowWaiTeoh,
I so sorry bcs of my late support. I hope it still can be help you even i
thinkimlate.
Reply
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Reply
ErickAdiprawira September2,2015at11:44PM
Hi,Tien
IhaveasameassignmentwithyouaboutNikeInc.howevermygoalis
knowing about if nike. inc approach a credit to bank, will it approved by
bank to give Nike an investment ? And knowing about its financial
structure and investment structure. I just want to know about your
opinion with that question. Thank you Tien, hopefully you have a
prediction.
Reply

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2/16/2016 NikeInc.

My main assignment including Nike Inc., analysis and Compass Records

First, cost of capital is required return necessary to make a capital budgeting

stimateafirmscostofcapitalis a very important mission must be done while

Fristofall,costofcapitalusingtoCapitalBudgetingDecision as the measuring

oreover, cost of capital help managers Decide the Method of Financing.

In addition, cost of capital can also help board of management/investors estimate

ost of capital represent by WACC (Weighted Average Cost of

ingDDM(Dividend Discount Model) have also advantages and disadvantages.

Because of arithmetic mean is better for oneyear period estimated expected

Criticism from researchers Multifactor model: proponents of Multifactor Model

Question 3: What should Kimi Ford recommend regarding an investment in

PERIODENDING 05/2011 05/2010 05/2009 05/2008

CashandEquivalents 1,955,000 3,079,100 2,291,100 2,133,900

MarketableSecurities 2,583,000 2,066,800 1,164,000 642,200

AccountsReceivable 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

OtherInventories 2,715,000 2,040,800 * 2,438,400

Inventories 2,715,000 2,040,800 2,357,000 2,438,400

PrepaidExpenses 594,000 873,900 765,600 602,300

Current Deferred Income

TotalCurrentAssets 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 &

ConstructioninProgress 127,000 177,000 163,800 196,700

TotalFixedAssets 4,906,000 4,389,800 4,255,700 4,103,000

Gross Fixed Assets (Plant,

Net Fixed Assets (Net

Intangibles 487,000 467,000 467,400 743,100

CostinExcess 205,000 187,600 193,500 448,800

TotalNonCurrentAssets 3,701,000 3,460,100 3,515,600 3,603,400

TotalAssets 14,998,000 14,419,300 13,249,600 12,442,700

AccountsPayable 1,469,000 1,254,500 1,031,900 1,287,600

NotesPayable 187,000 138,600 342,900 177,700

ShortTermDebt 200,000 7,400 32,000 6,300

AccruedLiabilities 1,985,000 1,904,400 1,783,900 1,761,900

OtherCurrentLiabilities 117,000 59,300 86,300 88,000

TotalCurrentLiabilities 3,958,000 3,364,200 3,277,000 3,321,500

LongTermDebt 276,000 445,800 437,200 441,100

DeferredIncomeTaxes 921,000 855,300 842,000 854,500

Preferred Equity outside

TotalNonCurrentLiabilities 1,197,000 1,301,400 1,279,800 1,295,900

TotalLiabilities 5,155,000 4,665,600 4,556,800 4,617,400

CommonStockEquity 9,843,000 9,753,700 8,692,800 7,825,300

CommonPar 3,000 2,800 2,800 2,800

AdditionalPaidInCapital 3,944,000 3,440,600 2,871,400 2,497,800

RetainedEarnings 5,801,000 6,095,500 5,451,400 5,073,300

OtherEquityAdjustments 95,000 214,800 367,200 (105,000)

TotalCapitalization 10,119,000 10,199,500 9,130,000 8,266,400

TotalEquity 9,843,000 9,753,700 8,692,800 7,825,300

Total Liabilities & Stock

CashFlow 2,491,000 2,302,200 1,870,000 2,204,900

WorkingCapital 7,339,000 7,595,000 6,457,000 5,517,800

FreeCashFlow 825,000 2,323,700 813,700 749,100

InvestedCapital 10,119,000 10,199,500 9,130,000 8,266,400

PERIODENDING 11/2011 08/2011 05/2011 02/2011

CashandEquivalents 1,929,000 1,608,000 1,955,000 2,132,000

MarketableSecurities 1,436,000 2,092,000 2,583,000 2,333,000

AccountsReceivable 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

OtherInventories 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