Nike essay

1 . What is the WACC and why is it important to approximate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not?

Solution:

The price tag on capital refers to the maximum rate of come back a firm need to earn in its expense so that the the true market value of business equity stocks and shares will not drop. This is a consonance with all the overall business’s objective of wealth optimization. WACC is known as a calculation of a firm’s cost of capital by which each group of capital can be proportionately weighted.

All capital sources ” common inventory, preferred share, bonds and any other long lasting debt ” are incorporated into a WACC calculation. All else equal, the WACC of your firm raises as the beta and rate of return on equity boosts, as an increase in WACC records a decline in valuation and a higher risk. The WACC of a firm is an extremely important both equally to the wall street game for inventory valuation uses and to you’re able to send management to get capital cash strategy purposes.

In an analysis of a potential investment by the company, expense projects that have an expected returning that is higher than the company’s WACC will make additional free cash flow and may create confident net present value for stock owners. Thus, since the WACC is a minimum rate of go back required by simply capital companies, the managers in the business should invest in the projects which will generate returns in excess of WACC.

We do not go along with Joanna Cohen’s calculation about the WACC by 3 elements: 1) When Joanna Cohen computed the amount of weight or proportions of debts and value, she employed the publication value rather than the market value. The book ideals are famous data, not really current types; on the contrary, the industry recalculates the values of every type of capital on a ongoing basis, therefore , market ideals are more ideal. 2) The cost of debt ought not to be calculated simply by “taking total interest expenditure for the season 2001 and dividing that by the provider’s average financial debt balance. These types of historical data would not reveal Nike’s current or future cost of financial debt. 3) The lady mistakenly applied the average Beta from yr 1996 to 2001. The typical Beta wasn’t able to represent the near future systemic risk, and we ought to find the most recent Beta since Beta estimation in this situation.

2 . Should you not agree with Cohen’s analysis, compute your very own WACC pertaining to Nike and stay prepared to justify your assumptions.

Answer:

1)Weights of equity and debt:

Market value of equity = Current reveal price x Current stocks and shares outstanding = $42. 2009 x 271. 5m = $11, 427. 44m

Due to the absence information of market value of debt, we’re able to use the book value to get calculation: The true market value of financial debt = Current portion of long-term debt & Notes payable + Long-term debt sama dengan $5. 4m + $855. 3m + $435. 9m = $1, 296. 6m We sama dengan $11, 427. 44m/($11, 427. 44m +$1, 296. 6m) = fifth 89. 81%

Wd = $1, 296. 6m/($11, 427. 44m +$1, 296. 6m) = 10. 19%

2)Cost of Debt:

We are able to calculate the existing yield to maturity in the Nike’s bond to represent Nike’s current expense of debt. Po=$95. 6 N=20×2=40 PAR=$100 PMT=$100×6. 75%/2=3. 375

By making use of financial calculator: r=3. 58%(semiannual)

So Rd=3. 58% x a couple of = several. 16%

3)Cost of Equity:

Use 20-year T-bond charge to represent free of risk rate, while the rate of return of a T-bond with 20 years maturity is the longest rate which is available right now. Thus Rf=5. 74% Use a geometric mean of market risk premium five. 9% because Market Risk Premium As we mentioned in Q1, the newest beta will most relevant to that end, so we will use B=0. 69 Re=Rf+B(Market Risk Premium)

=0. 0574 + 0. 69×0. 059 = being unfaithful. 81%

4)WACC:

Use tax rate = US lawful tax level + condition tax

= 35% + 3% = 38%

WACC=Wd x Rd x (1-T) + We x Lso are

= 10. 19% x 7. 16% x (1- 38%) + fifth 89. 81% times 9. 81% = being unfaithful. 26%

three or more. Calculate the expenses of equity using CAPM, and the dividend discount unit.

Exactly what are the advantages and drawbacks of each style?

Answer:

1)Cost of Equity employing CAPM:

Market Risk-free Rate (Rf)= 5. 74% (20-year produce on ALL OF US Treasuries) Beta (B) =. 69 (most recent beta used since several relevant beta to determine Nike’s valuation) Market Risk Premium = 5. 9% (Geometric Indicate used while Historic Fairness Risk Premium) Cost of Fairness using CAPM = Re = Rf + B(Market Risk Premium) Re = 9. 81% = 5. 74% +. 69(5. 9%)

Advantages:

-CAPM contains systematic risk by incorporating Beta in the Cost of Equity formula. Using the stock’s Beta to calculate collateral will provide an excellent return rate based on how risky the stock is perceived by investors. The greater the risk, the greater the Beta will be and definitely will result in a bigger required price of go back on the investment. Systematic risk can’t be diversified away, when unsystematic risk can be varied away by managing a diversified portfolio. -CAPM proves to be a better model than other folks such as the Gross Discount Version, because the valuation behind CAPM is based on risk and costs of go back while the Dividend Discount Unit relies heavily on dividends and a growth rate.

Down sides:

-When using CAPM, it can be tough determining the estimate of Beta. Distinct investments may well involve several risks plus the Beta found in calculating CAPM should indicate the appropriate amount of risk relating to the precise investment. -The risk free prices used in establishing CAPM are continually changing as with the values from the investments in the marketplace which make in the market risk premium. The changes in the market can include negative affects on the valuation of CAPM. -Another disadvantage in making use of the CAPM in investment appraisal is that investment appraisal is usually premised on the long-term time horizon, although CAPM takes on a single-period time horizon, i. elizabeth. a keeping period of twelve months. While CAPM variables can be assumed continuous in successive future times, market actuality often shows that this is not the case.

2)Cost of Equity making use of the Dividend Low cost Model:

Growth (g) = your five. 5%

Dividend (D0) = dollar. 48

Share Price (P0) sama dengan $42. 2009

Expense of Equity using Dividend Low cost Model = Re sama dengan (D0 x (1+g)/P0) +g Re sama dengan 6. seven percent = (. 48 x (1+5. 5%)/42. 09+5. five per cent

Advantages:

-Using the Dividend Price cut Model is incredibly easy to compute because the formulation is not complicated. You will discover no actual technical or perhaps difficult measurements involved with that way. -The inputs that are used inside the calculations on this model are market details and can be easily obtained. -The Dividend lower price model attempts to put a valuation in shares, based on forecasts of the sums to become paid out to investors. This could, in theory, supply a very sound basis to determine the share’s authentic value in present terms.

Disadvantages:

-The Dividend Discount Style relies heavily on the expansion rate to calculate the pace of returning. If growth slows or becomes temporarily negative, it could result in measurements which may not really truly symbolize future predicted returns. -This model is definitely calculated employing dividends and can’t be employed in instances where a company is definitely not paying out dividends. This is also a disadvantage for virtually any investment with no reasonably frequent growing gross stream. -The Dividend Low cost Model is incredibly sensitive to minor changes in input numbers. If the progress rate adjustments by one particular % the cost of equity will even change by simply that charge. -The Dividend Discount Unit does not explicitly consider the risks which the organization faces.

4. What should Kimi Honda recommend relating to an investment in Nike?

Response:

To ensure that Kimi Honda to make a decision regarding an investment in Nike, she need to compare an accurately computed WACC towards the sensitivity of equityvalue to discount level chart proven in Demonstrate #2. The sensitivity chart in Demonstrate #2 says that at a discount rate of 11. 17%, Nike’s current share cost is fairly respected at $42. 09. If the discount charge were to be computed below 10. 17% then a Nike stocks and shares would be under-valued in the current marketplace, but if their discount level were greater than the eleven. 17% Nike share selling price would be regarded as over-valued when compared to the current talk about price. Once we calculated Nike’s discount level, we identified that their particular appropriate WACC should be on the lookout for. 26%. Since this WACC of 9. 26% is listed below 11. 17%, we believe that Nike’s shares are currently under-valued in the market. We feel that Nike’s equity value based on the WACC of 9. 26% should show up somewhere between $55. 68 and $61. 25. Kiki Kia should recommend adding Nike shares towards the NorthPoint Large-Cap Fund based upon our research.

03/03/2011

CIRCUMSTANCE OVERVIEW

Kimi Ford is a portfolio administrator at a sizable mutual-fund administration firm known as, NorthPoint Group. Ford is considering the addition of Nike Inc. towards the Large-Cap Pay for at NorthPoint Group. Nike’s share price has particularly declined considering that the beginning of the year. Her decision whether or not to add Nike towards the portfolio needs to be made by looking at the 2001 fiscal yr end 10-K report.

In 1997 Nike’s revenues plateaued around $9 billion when net income got fallen from around hundreds of dollars million to $580 million. Also, from 1997-2000 Nike’s market share in U. H. athletic shoes chop down from 48% to 42%. Supply-chain concerns and the undesirable effect of a powerful dollar got negatively influenced revenue in recent years. At the 06 28, 2001 analyst getting together with Nike prepared to add both top-line growth and functioning performance. One particular goal was to develop even more mispriced ($70-$90) athletic shoes as well as the other to push its apparel line. As of this meeting a target long lasting revenue development rate between 8%-10% was handed and an earnings-growth focus on above 15%.

After reviewing all the analysts’ reports about the 06 28th meeting Fordstill did not have a clear picture showing how to worth Nike. Ford then performed her individual sensitivity analysis which exposed Nike was undervalued in discount rates under 11. 17%.

WHAT IS THE WACC?

A firm derives it is assets by either increasing debt or equity or perhaps both. There are costs associated with bringing up capital and WACC can be an average physique used to show the cost of funding a company’s asset foundation. More technically, the weighted average expense of capital (WACC) is the charge that a company is anticipated to pay to debt slots and investors to fund its resources. Companies raise money via a number of sources so the WACC is the minimal return a company must earn in existing property base to fulfill its creditors, owners, and other providers of capital.

WACC is calculated taking into account the relative weight load of each component of the capital composition which means it’s the proportional common of each group of capital inside a firm. This rate, also called as the low cost rate, is employed in assessing whether a job is possible or certainly not in the net present benefit (NPV) analysis, or in assessing the cost of an asset.

WACC = [Wdebt 5. Kdebt 2. (1-t)] + [Wequity 5. Kequity] + [Wpreferred * Kpreferred]

K sama dengan component cost of capital

W sama dengan weight of each component while percent of total capital

capital t = marginal corporate tax rate

WHAT MAKES IT IMPORTANT TO CALCULATE A BUSINESS COST OF CAPITAL?

The cost of capital is an important issue from the point of view of managing while getting a financial decision. We can list some basic problems related to the value of WACC and its interpretation by organizations:

* The importance of the WACC is in its relation to the evaluation of

projects. For a job to be feasible, not just successful, it must generate a return greater than the cost of increasing debt (Kd) and the expense of raising equity (Ke). WACC is influenced not only by Re and Rd, just about all varies with capital structure. Since Rd is usually less than Re, then your higher the debt level, the bottom the WACC. This to some extent explains for what reason firms generally prefer providing debt first before they increase more collateral. As part of their particular risk management procedures, some companies add a risk factor to the WACC to be able to include a risk cushion within their project analysis.

* The cost of capital is also important for the management when taking a decision about capital budgeting. The natural way, the job which gives a better (satisfactory) return on investment compared to the expense of capital incurred for its loans would be picked by the managing. Cost of capital is the key take into account deciding which in turn project to attempt out of numerous opportunities.

5. The cost of capital is significant in creating the business capital structure. It will immediate the administration about using the most appropriate and economical capital structure to get the organization which means the management may well try to replacement the various strategies of finance to reduce the cost of capital so as to increase the market price and the earning per share.

2. The cost of capital is also key point for taking a choice about the soundest way of financing to get the company whenever the company requires additional finance. The management may try to catch the origin of financing which carries the minimal cost of capital.

* The expense of capital may be used to evaluate the economic performance of the top managing by comparing actual profitability’s of the tasks and the forecasted overall expense of capital and an appraisal of the genuine cost incurred in increasing the required money.

DO WE GO ALONG WITH JOANNA COHEN’S WACC CALCULATION? WHY OR WHY NOT?

Do not completely go along with Joanna Cohen’s calculation of WACC. There areseveral complications in her calculation;

* In Cohen’s calculation, the girl used the book benefit for the weights of each capital structure component (debt and equity). Publication value of equity should not be used once calculating cost of capital. Instead she needs to have calculated the marketplace value of equity. As well, she must have discounted the significance of long-term financial debt that shows up on the balance sheet to find the the true market value of debt (even in case the book benefit of financial debt is recognized as a proposal of marketplace value).

2. Also, your woman should have considered the preferred inventory while calculating the weights with the components of capital structure (the redeemable preferred stock is comparatively small in Nike’s capital structure so it doesn’t affect the weights).

* Another problem with her calculation is about the cost of debt. Cohen used a cost of financial debt which is actually lower than treasury yield. In common sense, a firm, even it might be a large AAA firm, should be risky than US govt. Cost of debt should be determined by locating the yield to maturity about 20-year Nike Inc. personal debt with current coupon level paid semi-annually instead of by taking total curiosity expense intended for 2001 and dividing this by the provider’s average debt balance.

APPLYING SINGLE OR MULTIPLE COSTS OF CAPITAL IS APPROPRIATE FOR NIKE INC.?

Even Nike Inc. features multiple organization segments such as footwear, apparel, sports equipment and some non-Nike-branded products (which accounts for fairly small fraction of revenues), we all assumed Nike Inc. to have a single cost of capital as its multiple organization segments are certainly not very different and would experience similar dangers and betas.

WHICH EQUITY RISK HIGH QUALITY SHOULD BE ACCUSTOMED TO DETERMINE THE EXPENSE OF CAPITAL?

To get the cost of capital, the geometric mean is known as a better substitute for the math mean. Furthermore, the geometric mean can be described as more conservativemeasure to use in comparison to the arithmetic suggest. The average industry risk superior has fluctuated by large amounts in short time periods from 1926-1999. 1926-1929 noticed high market risk premiums; however , the 1930s and 1970s observed very low marketplace risk premiums. Therefore , we all use the geometric mean since it is a better measurement in comparison to arithmetic suggest when the scored period can be longer and has more changes.

VALUE OF EQUITY, BENEFIT OF PERSONAL DEBT AND WEIGHTINGS OF EACH COMPONENT

| Value(in millions $)| Weight|

Current Percentage of Long term Debt| 5. 40| 0. 04%|

Records Payable| 855. 30| six. 73%|

Long-Term Debt| 416. 72| 3. 28%|

Total Debt| 1, 277. 42| 10. 05%|

Equity| 11, 427. 44| fifth there’s 89. 95%|

Table 1 ) The weight of financial debt and value in total capital of Nike

CALCULATION OF THE COST OF FAIRNESS UNDER DISTINCT METHODS AND ADVANTAGES AND DISADVANTAGES OF EACH AND EVERY METHOD

1 . Capital Asset Pricing Style (CAPM)

Below CAPM we are able to find the price tag on equity since;

Ke = Rf + Betai 2. Equity Risk Premium

The first issue is to find an appropriate risk-free rate. We think the 20-year yields upon treasures would be the one since NIKE is definitely assumed being operated to get such long time, according to the rousing strategy proposed by the managing and the long term debt issued.

Next should be to determine the beta. The historic betas has been generally decreasing, and we assume it is the market condition and management`s purpose which will make NIKE to become a defensive company. Furthermore, we discover that the competitors such as K-Swiss and Lacrosse also have beta less than 1. So rather than the average, we use the YTD beta in to calculation. Alternatively, since the beta has been identified to be usually closer to the mean benefit of 1, which can be the beta of an average-systematic-risk security, we all calculate the adjusted beta, giving two-third weight to the YTD beta and a third weight to 1.

Regarding the risk premium, we use the geometric mean as it is a better measurement in comparison to arithmetic mean when the measured period is longer and contains more fluctuations.

Combining the above information, all of us calculate the price tag on equity as follows:

Using YTD Beta =>five. 74% & 0. 69*5. 9% = 9. 81%

Employing Adjusted Beta =>5. 74% + [(2/3)*0. 69 + (1/3)*1)]*5. 9% = twelve. 42%

Advantages:

5. It provides a great economically grounded and fairly objective process * That concentrates on the systematic risk that shareholders can`t steer clear of, rather than unsystematic risk that could be avoided through diversification 5. It is ideal for company that doesn`t pay out dividend

* It is widely used.

Disadvantages:

* The assumptions is probably not realistic. For instance , investors will not be all risk averse and rational that holds useful portfolio 2. Investors may well concern more than just market risk.

2 . Dividend Discount Model (DDM)

Underneath DDM we can find the price of equity because;

Ke sama dengan (D1/P0) & g

Ke sama dengan (0. 48*1. 055/42. 09) + five. 5% sama dengan 6. 70 percent

Here we assume NIKE will pay gross at regular growth level of 5. 5% which forecasted by simply Value Series, so we use the Gordon growth style to derive required rate of returning.

Advantages:

* It is simple and widely used

5. Can be used to infer implied necessary rate of return

* It can be helpful to perform a sensitivity research on the inputs

Disadvantages:

* It is not suitable for company that doesn`t pay constant dividends and also the dividends aren’t tied to earnings * It is suitable for simply matured company

3. Profits Capitalization Ratio (ECM)

Under ECM we can find the cost of equity since;

Ke = E1/P0

Ke = 2 . 32/42. 09 sama dengan 5. 51%

Advantage:

* Basic

Disadvantages:

* This assumes the income would be the same in the future, which may not become true 5. It doesn`t take the growth of company into account.

Cost of Equity| | |

CAPM| | |

| Risk-free Rate| 5. 74%|

| Equity Risk Premium| 5. 90%|

| Year-to-Date Beta| zero. 69|

| Tweaked Beta| zero. 79|

| Expense of Equity with YTD Beta| 9. 81%|

| Cost of Value with Tweaked Beta| 10. 42%|

| | |

DDM| | |

| Current Dividend| 0. 48|

| Expansion Rate| 5. 50%|

| Current Stock Price| 42. 09|

| Forecasted Dividend| 0. 5064|

| Cost of Equity| 6. 70%|

| | |

ECM| | |

| Consensus Earnings Estimate| installment payments on your 32|

| Current Stock Price| 42. 09|

| Cost of Equity| 5. 51%|

| | |

Build-up Method| | |

| Free of risk Rate| a few. 74%|

| Value Risk Premium| 5. 90%|

| Cost of Equity| 11. 64%|

Stand 2 . Cost of Equity underneath different methods

WHICH CHARGE AS RISK FREE RATE IDEAL NOTES PAYABLE AND LONG LASTING DEBT?

Intended for long term debts, the 20-year yield upon U. S i9000. Treasuries is most beneficial as the risk free price. Considering the long time horizon of Nike, a 20-year connect is house. And also, it is comparable to the present 25-year relationship which Nike issued your five years ago. Though Nike’s current bond can be 25 years, we could consider it like a 20-year connect issued this coming year, and utilize the current cost to estimate the 20-year bond YTM.

And for temporary debt, as the note payable was a significant portion in the debt structure, the 1-year treasuries will be preferred because risk free level.

COST OF PERSONAL DEBT CALCULATION FOR NIKE

We’re able to not believe Cohen’s analysis. Because Cohen used a cost of financial debt

which can be even less than treasury deliver. In common impression, a company, actually it might be a big AAA company, should be high-risk than US government.

First, Cohen’s emphasis that recently, the powerful cost of debt of Nike was less than treasury yield due to its Japanese Yen paperwork. However , the rates of debt depending on currency transform are unstable and non-repeatable. We could affordable consider that Nike’s previous year’s low priced of personal debt is a kind of accommodement by possibility.

Second, to calculate the cost of debt, market value of personal debt should be applied rather than the publication value used by Cohen. The industry value of debt is definitely compounded by the current part of long-term personal debt, notes payable, and long- term debt discounted by Nike’s current coupon.

Therefore , we would like to recalculate the price of debt. Expense of debt was calculated by using the current liquidated 20-year connect of Nike, Inc. using a 6. 75% coupon semi-annually. Then we obtain a cost of long term financial debt before tax as six. 17%, and cost of short-run debt just before tax as 5. 02%.

As proven above in Table 1, short term debt took a significant portion in Nike’s debt framework; therefore , all of us use a measured cost of debt to combine both equally long term and short term debts effects just as following formula:

Here is the fat of short-term debt, although is the pounds of long term debt. And both expense of short-term and long-term debt are after tax.

Cost of Debt| | |

Permanent Debt| | |

| Voucher Rate| 6. 75%|

| A chance to Maturity| 40|

| Current Stock Price| $95. 60|

| Cost of Debt| 7. 17%|

| Following Tax Expense of Debt| 4. 44%|

Short Term Debt| | |

| 20-year Yield| 5. 74%|

| 1-year Yield| 3. 59%|

| Risk Premium| 1 . 43%|

| Tax Rate| 38. 00%|

| Cost of Debt| 5. 02%|

| After Taxes Cost of Debt| 3. 11%|

Last Weighted Cost of Debt Following Tax| zero. 36%|

Table installment payments on your Cost of debts

WHAT IS EACH OF OUR WACC CALCULATION FOR NIKE?

Under distinct methods, we would obtain diverse cost of collateral, then, certainly different WACCs which range from 5. 31% to 10. 83%. However , no matter what method we use, the stock cost of Nike is undervalued currently.

WACC| | |

| Under CAPM with Tweaked Beta| on the lookout for. 73%|

| Below CAPM with YTD Beta| 9. 18%|

| Under DDM| 6. 39%|

| Under ECM| 5. 31%|

| Under Build-up Method| 10. 83%|

Table 4. Weighted Normal Cost of Capital

As displayed in Desk 5, using the implied lower price rate simply by current price are 11. 17%, which is drastically beyond the product range of WACCs we determined and provided in Stand 4. Therefore , in our evaluation, Nike’s value would be considered as undervalued.

Price cut Rate| Fairness Value|

8. 00 %| bucks 75. 80|

almost eight. 50 %| 67. 85|

9. 00 %| 61. 25|

on the lookout for. 50 %| 55. 68|

12. 00 %| 54. 92|

15. 50 %| 46. 81|

14. 00 %| 43. 22|

eleven. 17 %| 42. 09|

10. 50 %| 40. 07|

12. 00 %| 37. 27|

Table 5. Awareness test about WACCs

RECOMMENDATION

This graph shows the estimated benefit provided under different WACCs, and NIKE is currently trading at forty two. 09 with corresponding 11. 17% WACC. So if the calculated WACC is beneath 11. 17%, the estimated value would be higher than the current price and NIKE is definitely undervalued; in the event the calculated WACC is beyond 11. 17%, the believed value would be lower than the latest price and NIKE is definitely overvalued.

After adjusting the possible faults that Joanna made, the table reveals the determined WACC under each approach:

Method| WACC|

CAPM (Adjusted Beta)| 9. 73%|

CAPM (YTD Beta)| 9. 18%|

DDM| 6. 39%|

ECM| 5. 31%|

Build-up| 10. 83%|

We can see none of them of them is definitely above eleven. 17%, indicating NIKE happens to be undervalued and Ford ought to add NIKE to the NorthPoint Large-Cap Fund. However , it is vital to keep monitoring the stimulating strategy the management provided, since the long term market state may have huge effect on this strategy and hence, predicted foreseeable future economic cash flow.

NorthPoint Group is a common fund managing firm that has the inclination on purchasing Fortune five-hundred companies, such as EXXONMobil, GMC, McDonald’s 3M and other large-cap. If we remember a decade ago, the fund acquired performed very well compared to the industry in general (we refer S&P500 to represent the market).

Kimi Ford was your portfolio director in NorthPoint Group, who had been concerned about whether to add Nike, Inc. stocks and shares into her fund. Since net income and market share was fallen via 1997, a new strategy was proclaimed by the Nike managing team through the meeting saved in June, 2001:

First, costly products shall no longer be their only target, right now they would develop the midpriced segment so that more buyers will be able to manage it.

Second, another way to boost the revenue is usually to focus on the apparel range, which they learned to be lucrative. Finally, Nike needs to lessen its costs by making more efforts on expenditure control. Company executives had been optimistic about the long-term revenue, wanting an 8%~ 10% clumps and income growth above 15%.

Experts had several opinion about the business prospects; Lehman Brothers advised a strong purchase while UBS and CSFB recommended a hold. Meanwhile, Ford planned to make her own prediction so your woman developed a discount cash flow to ascertain that, for less rate of 12%, Nike was overvalued at its current price $42. 09 and undervalued if the discount charge was beneath 11. 17%. She asked her associate, Joanna Cohen, to determine the company’s expense of capital accurately.

On the survey, Joanna Cohen used WACC to calculate the cost of capital, where the girl adopted book values to secure a proportion of 27% of debt and 73% of equity. Pertaining to cost of debt, she took total interest expense divided by common debt balance which come lower than treasury yields. Intended for cost of value, she employed 20-year Treasury bond as risk-free price and a few. 9% as market high grade. Moreover, the lady divided every single division simply by revenue, deciding to use one overall WACC. At the end, the girl came to a conclusion which the cost of capital for Nike, Inc was 8. 4%.

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