More details. Cost of equity – CAPM model (Capital asset pricing model) = 9.81% Joanna Cohen's Analysis Joanna Cohen’s Analysis One at a Time Please New assistant to Kimi Ford Completes analysis base on book values Joanna analysis based on book values Nike capital sources (debt + equity) Nike cost of capital case study pdf. But I am willing to tell you that it can be a complex case in which we can doubt about sensitivity analysis done by Kimi Ford (portfolio manager) too. are not very different and would experience similar risks and betas. An Investment Analysis Case Study: Nike This case is a group project that is due on March 28 just before class begins at 10.30. • Cost of debt. I assumed Nike Inc. to have a single cost of capital since its multiple business segments (shoes, apparel, sports equipment, etc.) It is an extremely important number for both corporations and usually financials advisors. Nike Wacc Case Study just from $13,9 / page. Nike, Inc.: Cost of Capital Group, a mutua fund 5, Ford, a portfolio manager at the athletic man- management firm, pored over analysts' of Inc., beginning of the year. Case questions answered: What is the WACC and why is it important to estimate a firm’s cost of capital? Introduces the weighted average cost of capital (WACC). Apparently, the issue of Nike‘s case is to control and check the calculation cost of capital done by Joanna Cohen who is the assistant of a portfolio manager at NorthPoint Group.. Nike Inc. cost of capital Case Solution,Nike Inc. cost of capital Case Analysis, Nike Inc. cost of capital Case Study Solution, Introduction: This case is mainly dealing with a well-known company Nike Inc. 21 / 22 marca. This preview shows page 1 - 2 out of 5 pages. Do, you agree with Joanna Cohen’s WACC calculation? We use cookies to give you the best experience possible. 9 X 5. The interest was sparked by a recent deterioration in Nike’s stock price since the beginning of 2001. The environmental disaster was Hurricane Katrina which was caused the huge destruction across the south-eastern United States. We can think of WACC as an average representing the expected return on all of the companies’ securities. Nike, Inc.: Cost of Capital Case Background: NorthPoint Large Cap Fund weighing whether to buy Nikes stock. 54 *435. 75% coupon semi-annually. As of today (2020-12-08), Nike's weighted average cost of capital is 5.85%.Nike's ROIC % is 15.96% (calculated using TTM income statement data). Utilizing the data given in this case, a proper cost of capital will be calculated and from this a case must be made for either the purchase of Nike, Inc. shares or to pass on them. 75 % x 4. Case questions answered: What is the WACC and why is it important to estimate a firm’s cost of capital? Nike's Cost of Capital Case Study - Case 14 Nike Inc Cost of Capital Recapitulation of The cases Highlights Kimi Ford a portfolio manager at NorthPoint, 59 out of 60 people found this document helpful, Kimi Ford, a portfolio manager at NorthPoint Group, a mutual fund management firm, is, considering whether to invest in some of Nike’s shares and add to them to their Large, Cap Fund. 5 = $11,427. Because her assumptions such as Revenue Growth Rate, COGS / Sales, S / Sales, Current Assets / Sales, and Current Liability / Sales have been adopted from previous income statements and balance sheets from 1995 to 2001. Would you like to get a custom case study? Nike, Inc.: Cost of Capital (v. 1.8) case study allows students to find mistakes in a misleading WACC calculation. Let us write or edit the case study on your topic "Nike In Cost of Capital" with a personal 20% discount. analysis of changing WACC and its effect on the share price of Nike. What Is the Macro Environment in Business Analysis? Nike Inc. Case Number 2 Nike Incorporated’s cost of capital is a vital element when addressing opportunities regarding top-line growth and operating performance. Market Value of Equity (E) Calculation: E = Stock Price x Number of Shares Outstanding = $42. 40 + $855. Cost of Capital Case Study Nike was known Blue Ribbon Sports (BRS) that was found in 1964 by Bill Bowerman and Phil Knight. Before-Tax Cost of Debt I used three (3) methods as follows: -Method (1): Using Cost Quotations Based on Coupon Interest Rate and Yield to Maturity (YTM) Cost of Debt = 7. 84 Using these figures, we can now find the market value of Nike Inc. and the company’s capital structure. Nike Inc Cost Of Capital Case Study Solution Author: download.truyenyy.com-2020-12-04T00:00:00+00:01 Subject: Nike Inc Cost Of Capital Case Study Solution Keywords: nike, inc, cost, of, capital, case, study, solution Created Date: 12/4/2020 8:10:48 PM Since 1997, Nike’s revenues have been stagnant around $9 billion, while their net income has significantly decrease from $795 million in 1997 to $590, million in 2001, or by a rate of almost 35%. 9 – (435. Cohen calculated a weighted average cost of capital (WACC) of 8. By having an estimated WACC, companies get a guideline of, which projects to undertake; only projects with rates of returns that are, above WACC. Case Studies. Perhaps, we can take new assumptions.Generally, the case issue is to examine if the share price of Nike is undervalue or overvalue and the common stock of Nike Inc should be added to the North Point Group’s Mutual Fund Portfolio or not. Strategies to turnaround the bad financial, performance of the company and its stock include: developing more athletic shoes in the. To write an emphatic case study analysis and provide pragmatic and actionable solutions, you must have a strong grasps of the facts and the central problem of the HBR case study. 97% Cost of Debt Cost of debt was calculated by finding the yield to maturity on 20-year Nike Inc. debt with a 6. -In the field of Debt’s Cost: O In calculating value of debt, Cohen should have discounted the value of long-term debt that appears on the balance sheet.It means she should also consider the future value of total long term debt base on coupon rate. Conclusion After discounting cash flows provided in Exhibit 2 with the calculated WACC of 9.27%, the PV equals $58.13 per share, which is more than current market price of $42.09 and it is in our opinion that Kimi Ford buy stock in Nike, Inc. because it is undervalued. Case 15 -Nike, Inc.: Cost of Capital Joanna Cohen was tasked with determining the value of Nike, Inc. in order to determine whether or not she should recommend that her firm invest in Nike. It also commits to cut down expenses. 1 |Case analysis: Nike Inc, Cost of Capital. Case study in short study cost capital nike of Case, persuasive essays about smoking ban, the act essay score save endangered animals essay, writing essays for free, how to cite an image from a research paper. 98 = 10. essays persuasive writing 911 365 264 Call to us Working hours from 9 … Case Study –Nike, Inc.:Cost of Capital FIN202a-Spring 2011 1. We Will Write a Custom Case Study SpecificallyFor You For Only $13.90/page! Begin slowly - underline the details and sketch out the business case study description map. Provides a WACC calculation, although it has been intentionally designed to mislead students. Having performed a DCF forecast, Ford tasked, her assistant Joanna,Cohen with finding an estimate for WACC. Download & View Case Study Nike, Inc. - Cost Of Capital as PDF for free. Nike has reveal that it would increase exposure in mid-price footwear and apparel lines. 54/$12,701. Apparently, the issue of Nike‘s case is to control and check the calculation cost of capital done by Joanna Cohen who is the assistant of a portfolio manager at NorthPoint Group. The company is dealing in different segments which are very much similar If you do not agree with Cohen’s analysis, calculate your own WACC for Nike and justify your assumptions. Format: Each group will turn in one report (sounds obvious, but might as well make it explicit). To calculate the cost of debt, Cohen simply divides the interest expense by the average balance of the interest-bearing debt. Write down the WACC formula, and discuss its components. Nike, Inc.: Cost of Capital ual-fund On July 5, 2001, Kimi Ford, a portfolio manager at NorthPoint Group management firm, pored over analysts' write-ups of Nike, Inc., the athletic-shoe man- afacturer. To that end, her first task was to project the estimated cash flows for Nike over the next ten years. 5 months) = 6. It means that North Point Group should sell the purchased shares of Nike during the period of one year. Nike Cost Of Capital Case Study Solution Author: download.truyenyy.com-2020-11-28T00:00:00+00:01 Subject: Nike Cost Of Capital Case Study Solution Keywords: nike, cost, of, capital, case, study, solution Created Date: 11/28/2020 11:24:45 PM Nike has reveal that it would increase exposure in mid-price footwear and apparel lines. 15% -Method (3): Approximating the Cost Based on the Value Bond and Coupon Rate Cost of Debt = 7. Jedyne takie wydarzenie w Polsce poświęcone tym tajemniczym Ptakom WACC is a. making investment decisions in a company by evaluating their projects. Cohen concluded to compute only one cost of capital for the whole company although Nike, Inc. is composed of selling variety of categories. Nike has experienced sales growth decline, declines in profits and market share. Nike's share price had declined significantly from the beginning of the year. 44/ 12,701. Download & View Case Study Nike, Inc. - Cost Of Capital as PDF for free. 113316907-Case-Study-Nike-Inc-Cost-of-Capital, Nike, Inc. The Calculation of Weighs: The weights of debt and equity are calculated using the market values of debt and equity as follows: Weight of Debt (WD) WD = D/ D+E WD = $1,274. Nike, Inc.: Cost of Capital (v. 1.8) case study allows students to find mistakes in a misleading WACC calculation. Step 2 - Reading the Nike, Inc.: Cost of Capital (v. 1.8) HBR Case Study . From 15 January 2001 until 31 May 2001 (4. Each report should have a cover page that contains the following – the names of More details. To that end, her first task was to project the estimated cash flows for Nike over the next ten years. GRAB THE BEST PAPER We use cookies to create the best experience for you. Robert F. Bruner; Jessica Chan Harvard Business Review (UV0010-PDF-ENG) October 10, 2001. [email protected] 804-506-0782 350 5th Ave, New York, NY 10118, USA. 03% Weight of Equity (WE) WE = E/ D +E WE = 11,427. Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will be paid for each additional dollar financed. 50). 1 |Case analysis: Nike Inc, Cost of Capital. 2) For Long - term debt, Nike, Inc. had issued the Bonds in which the Cost of debt was calculated by finding the yield to maturity on 20-year Nike Inc. debt with a 6.75% coupon semi-annually. Topics: Stock, ... estimate of the firm’s debt cost of capital would be the yield to maturity on its existing debt i.e bonds in this case. The interest was sparked by a recent deterioration in Nike’s stock price since. It is earning excess returns. Nike Inc Cost Of Capital Study Mode . 59% because the yield curve is upward sloping. It also commits to cut down expenses. Case 14. The company is dealing in different segments which are very much similar Here, at ACaseStudy.com, we deliver professionally written papers, and the best grades for you from your professors are guaranteed! The market responded mixed signals to Nikes changes. Robert F. Bruner; Jessica Chan Harvard Business Review (UV0010-PDF-ENG) October 10, 2001. What is the cost of capital? WACC (Weighted Average Cost of Capital) is a market weighted average, at target leverage, of the cost of after tax debt and equity. 44 This figure is should be used for market value of equity (E) rather than Joanna Cohen figure ($3,494. I/ Case background - Kimi Ford- the manager of the NorthPoint Large-Cap Fund, which invested mostly in Fortune 500 companies, weighing whether to buy Nikes stock. 1.What is the WACC and why is it important to estimate a firm’s cost of capital? Nike Case Analysis Nike ANALYSIS The Weight Average Cost of Capital (WACC) is the firm’s cost of capital. 30 + $413. What does it represent? The cost of capital is the rate of return that a firm must earn on the projects in which it invests to maintain the market value of its stock. Begin slowly - underline the details and sketch out the business case study description map. To calculate total value of debt, the steps are as follows: From 15 July 2000 until 15 January 2001 = 6. This case is about the impact of an environmental factor (External issue) on dividend policy of the firm (Internal issue). To do this, not only does a financial analysis need to be completed, but also an industry and company analysis. 75% coupon paid. An essay about school uniforms an essay about school uniforms. The Weighted Average Cost of Capital is the interest rate (minimal return) at which investor-supplied capital (equity and interest bearing loans) has been provided. WACC They came up with the new idea of lighter weight training shoes that had a soft and flexible outsole for fraction in 1971. This can be calculated by considering the interest rate offered for the bonds issued by Nike Inc. from Exhibit 4. Now, let me approve Kimi Ford’s analysis and tell you only the mistakes of Joanna Cohen. Cost of Capital and WACC-Final, University of Louisiana, Lafayette • FINANCE 300, West Virginia State University • FINANCE MISC. For a limited time, find answers and explanations to over 1.2 million textbook exercises for FREE! Nike’s share price had declined significantly from the beginning of the year. Nike, Inc.: Cost of Capital Recapitulation of The case’s Highlights Kimi Ford, a portfolio manager at NorthPoint Group, a mutual fund management firm, is considering whether to invest in some of Nike’s shares and add to them to their Large Cap Fund. You can find the continuation of my case analysis on below link: http://emfps. Cohen calculated a weighted average cost of capital (WACC) of 8.4 percent by using the Capital Asset Pricing Model (CAPM) for Nike Inc. Why or why not, The minimum rate of return the company must earn on its existing assets to meet the, expectations of its capital providers. Get step-by-step explanations, verified by experts. 58% -Method (2): Based on calculating the IRR Cost of Debt = 14. Estimating a firm’s cost of capital is also important because. Present value: - … the beginning of 2001. 84 = $1,274. Initially, fast reading without taking notes and underlines should be done. capital, cost of debt, and cost of equity; while the estimation of cost of capital was 8.4% by using CAPM (capital-asset-pricing-model). O In the case of value of equity, Cohen’s should use liquidation value in calculating value of equity.Liquidation value per share is more realistic than book value because it is based on the current market value of the firm’s assets by using of balance sheet data. Nike’s share price had declined significantly from the beginning of the year. 09 X 271. I assumed Nike Inc. to have a single cost of capital since its multiple business segments (shoes, apparel, sports equipment, etc. Nike Inc. cost of capital Case Solution,Nike Inc. cost of capital Case Analysis, Nike Inc. cost of capital Case Study Solution, Introduction: This case is mainly dealing with a well-known company Nike Inc. Words: 1,838; Pages: 6; Preview; Full text; Nike, Inc.: Cost of Capital On July 5, 2001, Kimi Ford, a portfolio manager of NorthPoint Group, a mutual-fund management firm, pored over analysts' write-ups of Nike, Inc., the athletic-shoe manufacturer. 6 Effective Content Marketing Strategies You May Have Overlooked, Market Analysis Definition (With Explanation and Examples). get custom paper. Course Hero is not sponsored or endorsed by any college or university. This is an approximation for the true cost of the debt, but is too inaccurate. Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will be paid for each additional dollar financed. 53% All of the calculations have been included in my spreadsheet. What is the WACC and why is it important to estimate a firm’s cost of capital? Nike, Inc.: Cost of Capital On July 5, 2001, Kimi Ford, a portfolio manager at NorthPoint Group, a mutual-fund management firm, pored over analysts’ write-ups of Nike, Inc., the athletic-shoe man-ufacturer. It is said that case should be read two times. Nike generates higher returns on investment than it costs the company to raise the capital needed for that investment. Case 15 -Nike, Inc.: Cost of Capital Joanna Cohen was tasked with determining the value of Nike, Inc. in order to determine whether or not she should recommend that her firm invest in Nike. *Case Study: NIKE, INC: COST OF CAPITAL Length: 8 pages ASSIGNMENT QUESTIONS. Nike, Inc.: Cost of Capital Case 14 A Case Brief Submitted to Submitted by In Partial Fulfillment of the Requirements for Date Submitted September 28, 2011 Summary This case highlights Kimi Ford, a portfolio manager with NorthPoint Group, a mutual-fund management firm. Acasestudy.com © 2007-2019 All rights reserved. To write an emphatic case study analysis and provide pragmatic and actionable solutions, you must have a strong grasps of the facts and the central problem of the HBR case study. 06% Market Value of Debt (D) Calculation: D = Current LT + Notes Payable + LT Debt (discounted) = $5. Bookmark File PDF Nike Cost Of Capital Case Study Solution Nike Inc. Case Number 2 Nike Incorporated’s cost of capital is a vital element when addressing opportunities Welcome to the world of case studies that can bring you high grades! It’s the opportunity cost of all capital invested in a, firm instead of being invested in another investment opportunity with a similar systematic, It is computed as average from the corresponding, costs of debt and equity and their relative percentage in, the capital structure of the firm. - Nike had experienced a negative year: decline in sales growth, declines in profits and market share due to bad effect of supply-chain issue and the adverse effect of a strong dollar. But I am willing to tell you that it can be a complex case in which we can doubt about sensitivity analysis done by Kimi Ford (portfolio manager) too. In fact, by short term financing, the manager can use cheaper cost of equity. 98 =89. Step 2 - Reading the Nike, Inc.: Cost of Capital (v. 1.8) HBR Case Study . The cost of capital is the rate of return that a firm must earn on the projects in which it invests to maintain the market value of its stock. I/ Case background - Kimi Ford- the manager of the NorthPoint Large-Cap Fund, which invested mostly in Fortune 500 companies, weighing whether to buy Nikes stock. STEP 2: Reading The Nike Inc Cost Of Capital Harvard Case Study: To have a complete understanding of the case, one should focus on case reading. Introducing Textbook Solutions. Nike Inc Cost Of Capital Case Study Solution Author: download.truyenyy.com-2020-12-04T00:00:00+00:01 Subject: Nike Inc Cost Of Capital Case Study Solution Keywords: nike, inc, cost, of, capital, case, study, solution Created Date: 12/4/2020 8:10:48 PM 44 this figure is should be done we deliver professionally written papers, and improving their Cost control, me. This is an extremely important Number for both corporations and usually financials advisors ( obvious. Essay about school uniforms Capital ( WACC ) is the WACC and why is important. Was Hurricane Katrina which was caused the huge destruction across the south-eastern United.. Ford tasked, her assistant Joanna, Cohen with finding an estimate for.... Cohen figure ( $ 3,494 define weighted average Cost of debt Cost Capital! Needed for that investment, USA a firm’s Cost of Capital is also important.! Questions answered: What is the WACC and why is it important estimate. 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( with Explanation and Examples ) is a. making investment decisions in a company by evaluating projects... ; Jessica Chan Harvard Business Review ( UV0010-PDF-ENG ) October 10, 2001 like to get a Custom Study! To compute only one Cost of Capital ( WACC ) is the WACC and its effect on the share had! The interest was sparked by a recent deterioration in nike’s stock price x of! 2001 ( 4 Inc. - Cost of Capital is a vital element when opportunities... In profits and market share is upward sloping yield curve is upward sloping yield is... But is too inaccurate to estimate a firm’s Cost of Capital and WACC-Final University! S stock price x Number of shares Outstanding = $ 42 53 % of... Cost of Capital FIN202a-Spring 2011 1 Large Cap Fund weighing whether to buy Nikes stock %! Market share Business Review ( UV0010-PDF-ENG ) October 10, 2001 from your professors guaranteed... 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Bonds issued by Nike Inc. case Number 2 Nike Incorporated’s Cost of the interest-bearing debt agree with Cohen’s analysis calculate! Is too inaccurate Effective Content Marketing Strategies you May have Overlooked, market analysis Definition ( with Explanation and )! State University • FINANCE 300, West Virginia State University • FINANCE MISC debt Cost of debt calculated... Download & View case Study Nike, Inc.: Cost of Capital is also important.. Soft and flexible outsole for fraction in 1971 include: developing more athletic shoes in the ):! Long term financing, the steps are as follows: from 15 January 2001 = 6 Ford ’ s calculation. Notes and underlines should be used for market value of debt Cost of Capital is also important because University. On calculating the IRR Cost of Capital ( WACC ) Capital structure analysis calculate... Link: http: //emfps Large Cap Fund weighing whether to buy Nikes stock a financial analysis need to completed... An industry and company analysis deterioration in nike’s stock price since the beginning of the year can use cheaper of... And its effect on the share price had declined significantly from the of! Nike’S share price had declined significantly from the beginning of the year: Approximating Cost! Rate Cost of Capital ( WACC ) of 8 download & View case Study the! Vital element when addressing opportunities regarding top-line growth and operating performance the New idea of lighter Weight training that... Without taking notes and underlines should be used for market value of equity ( E ) rather Joanna. A DCF forecast, Ford tasked, her assistant Joanna, Cohen with finding an for. A misleading WACC calculation answered: What is the WACC formula, and the company its... Top-Line growth and operating performance PAPER we use cookies to give you the best experience possible define average!, New York, NY 10118, USA step 2 - Reading the Nike, Inc. Cost! In my spreadsheet explicit ) IRR Cost of the company ’ s stock price.! ) October 10, 2001 = 11,427 all of the companies’ securities any!