Nike, Cost of Capital 资本成本分析案例

Nike,CostofCapital资本成本分析案例1.     WhatistheWACCandwhyisitimportanttoestimateafirm’scostofcapitalDoyouagreewithJoannaCohen’sWACCcalculationWhyorwhynotThedefinitionofWACCWeightedaveragecostofcapital(WACC),isaweighted-computationalmethodofanalyzingthecostofcapitalbasedonthewholecapitalstructureofafirm.TheresultofWACCistherateafirmusetomonitortheapplicationofthecurrentassetsbecauseitrepresentsthereturnthefirmMUSTget.Forexamplethisratecouldbeusedasthediscountrateofevaluatinganinvestment,andmaintainingthepriceoffirm’sstock.AnalysisofJohannaCohen’scalculationWeanalyzedtheprocessofJohannaCohen’scalculation,andfoundsomeflawswebelievecausedcomputationalmistakes.i.WhenusingtheWACCmethod,thebookvalueofbondisavailableasthemarketvaluesincebondsarenotquiteactiveinthemarket,butthebookvalueofequityisn’t.InsteadofJohanna’susingequity’sbookvalue,weshouldmultiplythecurrentpriceofNike’sstockpricebythenumbersofsharesoutstanding.ii.WhencalculatingtheYTMofthefirm’sbond,Johannaonlyusedtheinterestexpenseoftheyeardividedbytheaveragedebtbalance,whichfullyignoredthediscountedcashflowofthecostofdebt.2.     IfyoudonotagreewithCohen’sanalysis,calculateyourownWACCforNikeandbepreparedtojustifyyourassumptions.Combiningtheanalysisabove,wenowgiveourownWACCcalculationasfollowing:Thevalueofdebt(basedonEXIHIBIT3).Sincethebookvalueofdebtmayrepresentthemarketvalue,wemerelyneedtosumupthevaluesofLong-termdebt,Notespayable,andtheCurrentportionoflong-termdebt:++=$1,mThecostofdebt(basedonEXIHIBIT4):PV:FV:100n:40Pmt:2=(asit payssemiannually) So,wegettheYTMisi*2=*2=%Thevalueofequity(basedonEXIHIBIT1&4):Priceofstock*numbersofsharesoutstanding=*=$11,Thecostofequity(basedonEXIHIBIT4):E(Ri)=Rf+【E(Rm)-Rf】*βiBecausethegovernmentbondyieldis%,Geometricalhistoricalriskpremiumis%,andtheaveragehistoricalβofNikeis,thenweget:E(Ri)=%+%*=%Weightsofeachsecurity(basedon&Weightofdebt=1,(1,+11,=%Weightofequity=(1,+11,=%CostofcapitalbyWACCmethod(basedabove):Costofcapital=Weightofdebt*Costofdebt*(1–Taxrate)+Weightofequity*Costofequity=%*%*+%*%=%3. CalculatethecostsofequityusingCAPM,thedividenddiscountmodel,andtheearningscapitalizationratio.WhataretheadvantagesanddisadvantagesofeachmethodCalculatingthecostsofequitybyCAPM,anditsadvantages&disadvantagesi.Calculation:Accordingto,wehavealreadygottheresultofCAPM,whichis%.ii.AdvantagesFirst,becauseCAPMisatheorybasedonthewholemarket,itobviouslyincludestheeffectsbetweenthemarketastheintegrityandeachindividualstock.Second,withthecounterbalanceamongeachstockintheentiremarket,CAPMonlyneedstheconsiderationofsystematicrisk,whichmuchsimplifiesthecalculation.Third,CAPMalsobypassesthespecificvaluesoffuturecashflowbecausetheequationisactuallytherelationbetweensystematicriskandreturnrate,whichisalsoanothersimplificationofcalculating.Fourth,merelydependingonthesystematicrisk,CAPMcouldoffertheinvestorsareliablediscountingratetoassessthevalueofacertaininvestment.iii.Disadvantages:First,involvingthecounterbalanceamongtheentiremarket,CAPMacquiescesaneffective,activeandhealthymarketenvironment.Second,comparingtheconsiderationofmarketrisk,CAPMmayomitthesubtleriskdifferencesamongeachsinglefirm.Third,thecrucialsystematicrisk,thebetacoefficient,isobviouslyhardtocalculate.CalculatingthecostsofequitybyDDM,anditsadvantages&disadvantagesi.Calculation(basedonEXIHIBIT4)::Basedonthedividenddiscountmodel,P0=D0*(1+g)/(k–g),thenwegetthereturnrate(thecostofequity)k=D0*(1+g)/P0+g=*(1+/+=%ii.AdvantagesFirst,DDMfullyconsidersthetimevalueofconsistentcashflowofaninvestment.Second,itisprettyeasytogetthenecessaryhistoricaldata.ThirdDDMisflexibleenoughfortheadjustmentofanyfuturesituation.Fourth,oncethegrowthpatternisconfirmed,itisverystraightforwardtogetthediscountrateofassessinganinvestment.iii.DisadvantagesFirst,withoutenoughconsiderationofriskcost,DDMmayunderestimatetheequitycost.Second,allofthedataisbasedonhistoricalrecord,sotheresultisnotreliableconsideringofthefuturesituations.Third,withthepredeterminedgrowthrate,itisobviouslypracticalforthestockinvestorstoestimatethepossibleprofit,butmaymisleadthestockissuingfirmfromabetterbudgetingdecisiontoacomparativelyunsubstantialinvestment.Calculatingthecostsofequitybytheearningscapitalizationratio,anditsadvantages&disadvantagesi.Calculation(basedonEXIHIBIT1&4)Accordingtotheearningscapitalizationmodel,wehavecostofequity=E1/P0=/=%ii.AdvantagesFirst,it’sveryeasytocalculateandunderstand.Second,it’seasytogetthenecessaryaccountingdataiii.DisadvantagesWithoutanyconsiderationoftheriskandthegrowthofthefirm,itdoesn’treflectthetruevalueofaninvestmentorthecostofthebudgetingatall.4.  WhatshouldKimiFordrecommendregardinganinvestmentinNikeAccordingtoEXIHIBIT2,themarket’sforecastingsensitivityofequityvalueofNikeis%.ButbasedonourownanalysisbyWACC,webelievethediscountrateofNikeisaround%.ThatmeansthemarketunderestimatedthevalueofNike.SowerecommendtheNorthpointtopurchasethestockofNike.CTRL+A全选可调整字体属性及字体大小-CAL-FENGHAI.NetworkInformationTechnologyCompany.2020YEAR