Consider the following data for Nike Inc.: In 2022, it had $48,460.00 million in sales with a 10.0% growth rate in 2023, but then slows by 1% to the long-run growth rate of 5.0% by 2028. Nike expects EBIT to be 16% of sales, increases in net working capital requirements to be 5% of any increases in sales, and capital expenditures to equal depreciation expenses. Nike also has $13,235.72 million in cash, $12,904.54 million in debt, 1,803.66 million shares outstanding, a tax rate of 21%, and a weighted average cost of capital of 9.0%. a. Suppose you believe Nike's initial revenue growth rate will be between 7.5% and 12.5% (with growth slowing linearly to 5.0% by year 2028). What range of prices for Nike stock is consistent with these forecasts? b. Suppose you believe Nike's initial revenue EBIT margin will be between 15% and 17% 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 8.5% and 11.0%. What range of prices 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? a. Suppose you believe Nike's initial revenue growth rate will be between 7.5% and 12.5% (with growth slowing linearly to 5.0% by year 2028). What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $ 106.67. (Round to the nearest cent.) Lowest price per share: $ 93.67. (Round to the nearest cent.) b. Suppose you believe Nike's initial revenue EBIT margin will be between 15% and 17% of sales. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $ 106.38. (Round to the nearest cent.) Lowest price per share: $ 93.64. (Round to the nearest cent.) c. Suppose you believe Nike's weighted average cost of capital is between 8.5% and 11.0%. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $114.38. (Round to the nearest cent.) Lowest price per share: $ 66.48. (Round to the nearest cent.) d. What range of stock prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously? First, compute the stock price when the initial revenue growth begins at 12.5%, the EBIT is 17% of sales, and the company's WACC is 8.5%. Then, compute the stock prices when the initial revenue growth begins at 7.5%, the EBIT is 15% of sales, and the WACC is 11.0%. Lowest price per share: $ 93.67. (Round to the nearest cent.) b. Suppose you believe Nike's initial revenue EBIT margin will be between 15% and 17% of sales. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $106.38. (Round to the nearest cent.) Lowest price per share: $ 93.64. (Round to the nearest cent.) c. Suppose you believe Nike's weighted average cost of capital is between 8.5% and 11.0%. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $ 114.38. (Round to the nearest cent.) Lowest price per share: $ 66.48. (Round to the nearest cent.) d. What range of stock prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously? First, compute the stock price when the initial revenue growth begins at 12.5%, the EBIT is 17% of sales, and the company's WACC is 8.5%. Then, compute the stock prices when the initial revenue growth begins at 7.5%, the EBIT is 15% of sales, and the WACC is 11.0%. The range of prices will be: Highest price per share: $129.84. (Round to the nearest cent.) Lowest price per share: $ 58.42. (Round to the nearest cent.)

Consider the following data for Nike Inc.: In 2022, it had $48,460.00 million in sales with a 10.0% growth rate in 2023, but then slows by 1% to the long-run growth rate of 5.0% by 2028. Nike expects EBIT to be 16% of sales, increases in net working capital requirements to be 5% of any increases in sales, and capital expenditures to equal depreciation expenses. Nike also has $13,235.72 million in cash, $12,904.54 million in debt, 1,803.66 million shares outstanding, a tax rate of 21%, and a weighted average cost of capital of 9.0%. a. Suppose you believe Nike's initial revenue growth rate will be between 7.5% and 12.5% (with growth slowing linearly to 5.0% by year 2028). What range of prices for Nike stock is consistent with these forecasts? b. Suppose you believe Nike's initial revenue EBIT margin will be between 15% and 17% 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 8.5% and 11.0%. What range of prices 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? a. Suppose you believe Nike's initial revenue growth rate will be between 7.5% and 12.5% (with growth slowing linearly to 5.0% by year 2028). What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $ 106.67. (Round to the nearest cent.) Lowest price per share: $ 93.67. (Round to the nearest cent.) b. Suppose you believe Nike's initial revenue EBIT margin will be between 15% and 17% of sales. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $ 106.38. (Round to the nearest cent.) Lowest price per share: $ 93.64. (Round to the nearest cent.) c. Suppose you believe Nike's weighted average cost of capital is between 8.5% and 11.0%. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $114.38. (Round to the nearest cent.) Lowest price per share: $ 66.48. (Round to the nearest cent.) d. What range of stock prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously? First, compute the stock price when the initial revenue growth begins at 12.5%, the EBIT is 17% of sales, and the company's WACC is 8.5%. Then, compute the stock prices when the initial revenue growth begins at 7.5%, the EBIT is 15% of sales, and the WACC is 11.0%. Lowest price per share: $ 93.67. (Round to the nearest cent.) b. Suppose you believe Nike's initial revenue EBIT margin will be between 15% and 17% of sales. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $106.38. (Round to the nearest cent.) Lowest price per share: $ 93.64. (Round to the nearest cent.) c. Suppose you believe Nike's weighted average cost of capital is between 8.5% and 11.0%. What range of prices for Nike stock is consistent with these forecasts? The range of prices will be: Highest price per share: $ 114.38. (Round to the nearest cent.) Lowest price per share: $ 66.48. (Round to the nearest cent.) d. What range of stock prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously? First, compute the stock price when the initial revenue growth begins at 12.5%, the EBIT is 17% of sales, and the company's WACC is 8.5%. Then, compute the stock prices when the initial revenue growth begins at 7.5%, the EBIT is 15% of sales, and the WACC is 11.0%. The range of prices will be: Highest price per share: $129.84. (Round to the nearest cent.) Lowest price per share: $ 58.42. (Round to the nearest cent.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 7P

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