Nike Inc.: Cost of Capital

Executive summary In this report we focus on Nikes Inc. Cost of Capital and its pecuniary importance for the company and futurity investors. The management of Nike Inc. addresses issues both on top-line growth and operating performance. The companys be of capital is a fine element in such(prenominal) decisions and it is important to estimate scarce the weighted average address 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 plus Pricing clay sculpture (CAPM), the Dividend Discount Model (DDM) and the salary 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 fund Portfolio. I. The weighted Average Cost of Capital and its Importance for Nike Inc. The weight down Average Cost of Capital (WACC) is the average of the costs of a companys sources of financing-debt and equity, from each one(prenominal) of which is weighted by its respective handling in the given(p) situation. By taking a weighted average, we layabout bewitch how much interest the company has to pay for every marginal 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 scotch feasibility of expansionary opportun ities and mergers. Also, WACC is the appropr! iate discount rate to use in stock valuation. II. Calculation of Nikes WACC The calculating methodology for Nikes Inc. WACC seems to be uneven 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 received criticisms of the CAPM. If you want to get a full essay, order it on our website: OrderCustomPaper.com

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