Suppose that in April 2019, Nike Inc. had sales of $36,312 million, EBITDA of $5,217 million, excess cash of $5,253 million, $3,814 million of debt, and 1,578.2 million shares outstanding. a. Using the average enterprise value to sales multiple in the table here, E, estimate Nike's share price. b. What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples in the table above? c. Using the average enterprise value to EBITDA multiple in the table above, estimate Nike's share price. d. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in the table above?
Suppose that in April 2019, Nike Inc. had sales of $36,312 million, EBITDA of $5,217 million, excess cash of $5,253 million, $3,814 million of debt, and 1,578.2 million shares outstanding. a. Using the average enterprise value to sales multiple in the table here, E, estimate Nike's share price. b. What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples in the table above? c. Using the average enterprise value to EBITDA multiple in the table above, estimate Nike's share price. d. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in the table above?
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
Problem 1PS
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A-D please
![**Data Table**
*Instructions: Click on the following icon [insert icon here] to copy its contents into a spreadsheet.*
| | P/E | Price/Book | Enterprise Value/Sales | Enterprise Value/EBITDA |
|-------------------|------|------------|------------------------|-------------------------|
| **Average** | 23.99| 7.46 | 2.17 | 19.98 |
| **Maximum** | +81% | +193% | +96% | +73% |
| **Minimum** | -45% | -83% | -80% | -81% |
*Buttons:*
- **Print**
- **Done**
**Description**:
This table provides a summary of financial ratios for a particular dataset. It includes Price/Earnings (P/E), Price/Book value, Enterprise Value/Sales, and Enterprise Value/EBITDA. For each ratio, the average, maximum, and minimum percentages are provided, offering insights into the data's spread and trends.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1c9732cb-ae4a-4d93-bf70-995c53334240%2F3335cab9-e8eb-4c19-81b0-90508c8d170b%2Fl9qsa4r_processed.png&w=3840&q=75)
Transcribed Image Text:**Data Table**
*Instructions: Click on the following icon [insert icon here] to copy its contents into a spreadsheet.*
| | P/E | Price/Book | Enterprise Value/Sales | Enterprise Value/EBITDA |
|-------------------|------|------------|------------------------|-------------------------|
| **Average** | 23.99| 7.46 | 2.17 | 19.98 |
| **Maximum** | +81% | +193% | +96% | +73% |
| **Minimum** | -45% | -83% | -80% | -81% |
*Buttons:*
- **Print**
- **Done**
**Description**:
This table provides a summary of financial ratios for a particular dataset. It includes Price/Earnings (P/E), Price/Book value, Enterprise Value/Sales, and Enterprise Value/EBITDA. For each ratio, the average, maximum, and minimum percentages are provided, offering insights into the data's spread and trends.
Transcribed Image Text:### Transcription and Explanation:
**Context:**
This exercise evaluates the estimation of Nike Inc.'s share price using different financial multiples as of April 2019.
**Given Data:**
- Sales: $36,312 million
- EBITDA: $5,217 million
- Excess Cash: $5,253 million
- Debt: $3,814 million
- Shares Outstanding: 1,578.2 million
**Tasks:**
**a.** Using the average enterprise value to sales multiple, estimate Nike's share price.
**b.** Determine the range of share prices based on the highest and lowest enterprise value to sales multiples provided in the table.
**c.** Using the average enterprise value to EBITDA multiple, estimate Nike's share price.
**d.** Determine the range of share prices based on the highest and lowest enterprise value to EBITDA multiples provided in the table.
**Graph/Diagram Explanation:**
- **Table Icon:** There appears to be a reference to a table not visible in the image, which likely contains the average, highest, and lowest enterprise value to sales and EBITDA multiples. This table is essential for completing the above tasks.
**Approach:**
1. **Enterprise Value Calculation**:
- **Using Sales Multiple:** Multiply the average, highest, and lowest sales multiples by the total sales to estimate enterprise value.
- **Using EBITDA Multiple:** Multiply the average, highest, and lowest EBITDA multiples by the EBITDA to estimate enterprise value.
2. **Equity Value Estimation:**
- Deduct debt and add excess cash to the enterprise value to get the equity value.
3. **Share Price Calculation:**
- Divide the equity value by the number of shares outstanding to get the share price estimate.
This process will yield estimated share prices under different scenarios of market multiples which provide a range for potential valuation.
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