Nike had sales of $42 billion in 2019. Suppose you expect its sales to grow at a rate of 4% forever. Based on Nike’s past profitability and investment needs, you expect EBIT to be 8% of sales, increases in net working capital requirements to be 10% of any increase in sales, and capital expenditures to equal depreciation expenses. Nike pays 27% income tax. The opportunity cost of capital is 8%. 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. Round your final answer to one decimal place.

Nike had sales of $42 billion in 2019. Suppose you expect its sales to grow at a rate of 4% forever. Based on Nike’s past profitability and investment needs, you expect EBIT to be 8% of sales, increases in net working capital requirements to be 10% of any increase in sales, and capital expenditures to equal depreciation expenses. Nike pays 27% income tax. The opportunity cost of capital is 8%. 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. Round your final answer to one decimal place.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 9P

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