Consider the following data for NikeNike 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?Question content area bottomPart 1a. Suppose you believe NikeNike'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: $
Consider the following data for NikeNike 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?
Question content area bottom
Part 1
a. Suppose you believe NikeNike'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: $
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