Nike had sales of $35 billion in 2019. Suppose you expect its sales to grow at a rate of 6% forever. Based on Nike’s past profitability and investment needs, you expect EBIT to be 9% of sales, increases in net working capital requirements to be 12% of any increase in sales, and capital expenditures to equal depreciation expenses. Nike pays 25% income tax. The opportunity cost of capital is 11%. Nike has 0.9 billion shares outstanding, $3.3 billion in cash, $1.2 billion in debt. Calculate the share price for 2020 using the discounted free cash flow model.
Nike had sales of $35 billion in 2019. Suppose you expect its sales to grow at a rate of 6% forever. Based on Nike’s past profitability and investment needs, you expect EBIT to be 9% of sales, increases in net working capital requirements to be 12% of any increase in sales, and capital expenditures to equal depreciation expenses. Nike pays 25% income tax. The opportunity cost of capital is 11%. Nike has 0.9 billion shares outstanding, $3.3 billion in cash, $1.2 billion in debt. Calculate the share price for 2020 using the discounted free cash flow model.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Nike had sales of $35 billion in 2019. Suppose you expect its sales to grow at a rate of 6% forever. Based on Nike’s past profitability and investment needs, you expect EBIT to be 9% of sales, increases in net working capital requirements to be 12% of any increase in sales, and capital expenditures to equal
Calculate the share price for 2020 using the discounted
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