Nike, Inc. Case Study
Cost of Capital
The Nike Inc. Cost of Capital case study solution
contains an 1,100 word answer to the four
questions below, a financial analysis in excel that
compares Joanna's financials to the correct
financials, and a PowerPoint presentation that
summarizes the case and walks the audience thru
the financial analysis.  

The cost of the solution (3 files; word solution, excel
financial analysis and PowerPoint presentation) is
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1.      What is the WACC and why is it important to estimate a firm’s
cost of capital? Do you agree with Joanna Cohen’s WACC
calculation? Why or why not? Why is it important to estimate a firm’s
cost of capital? What does it represent?

2.      Calculate the costs of equity using CAPM and the dividend
discount model. What are the advantages and disadvantages of
each of these methods? Are they any other methods you could use?
(Explain the method and calculate for extra credit).

3.      If you do not agree with Cohen’s analysis, calculate your own
WACC for Nike and be prepared to justify your assumptions. (The
key to this case is to re-estimate all the factors entering the WACC
calculation). What mistakes did Joanna Cohen make in her
analysis? Which method is best for calculating the cost of equity?

4.      What should Kimi Ford recommend regarding an investment in
Nike? Is the price of Nike overpriced, underpriced, or fairly priced?
Show calculations.
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