Consider the following data for Nike Inc.: In 2022, it had $46,710.00 million in sales with a 10.0% growth rate in2023, but then slows by 1% to the long-run growth rate of 5.0% by 2028. Nike expects EBIT to be 16% of sales,increases in net working capital requirements to be 5% of any increases in sales, and capital expenditures toequal depreciation expenses. Nike also has $12,997.00 million in cash, $12,627.00 million in debt, 1,574.00million shares outstanding, a tax rate of 25%, and a weighted average cost of capital of 9.0%.a. Suppose you believe Nike's initial revenue growth rate will be between 7.5% and 12.5% (with growth slowinglinearly to 5.0% by year 2028). What range of prices for Nike stock is consistent with these forecasts?b. Suppose you believe Nike's initial revenue EBIT margin will be between 15% and 17% of sales. What rangeof prices for Nike stock is consistent with these forecasts?c. Suppose you believe Nike's weighted average cost of capital is between 8.5% and 11.0%. What range ofprices for Nike stock is consistent with these forecasts?d. What range of stock prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously?

Approach to solving the question: Detailed explanation: Examples: Key references: General Finance

Answered: Consider the following data for Nike…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 20P

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