Nike

1. What is yield to maturity for Nikes bonds 1. Why is it important to betoken a firms follow of capital? What does it control? Is the WACC set by postors or by managers? WACC is basically the hustle of return required by a capital supplier in exchange for not winning on another(prenominal) trustment funds in another project with similar risk. In or so ways, you toilette describe it as opportunity price. WACC is the lower detain return required by capital providers and managers should totally invest in projects that give return in excess of WACC. WACC takes into peak all capital resources such as common stock, preffered stock, bonds and whatever other long-term debt. Usually a troupes assets are financed by either debt or uprightness. By victorious a weighted average we can stupefy travel along out of the closet how much interest a company has to pay for every(prenominal) dollar it finances. The WACC is set by investors and not the managers and because of that we can only estimate it. 2. What was your estimate of WACC? What mistakes did Joanna Cohen make in her compendium? Which rule is best for calculating the cost of equity? cost of equity =I utilise the 20 year at 5.74%+ geometric mean=5.9%x most recent beta .69=9.81% approach of Debt I employ Yield to maturity to find cost of debt From Exhibit 4 PV= 95.60 N=40 (20years x 2) since its paid semiannually Pmt=-3.375 (6.

75/2) FV=-100 Comp I = 3.58% (semiannual) 7.16% (annual) After appraise cost of debt = 7.16%(1-38%) = 4.44% E = securities industry place take account stat ement of the firms equity To find Market v! alue of rightfulness you work out share price by amount of shares $42.09x273.3= 11503. D = market value of the firms debt I valued book value of debt at 1,291 Then divide 11503/(11503+1291)=89.9 so the weight for debt is 10.1 percent When I calculated WACC 4.44%x.101+9.81%x.899= 9.27% Cohen made a few mistakes when she calculated her WACC. First, she used historical data in estimating cost of debt. She ended up dividing interest expenses by the average balance of debt to communicate...If you want to soak up a full essay, order it on our website: OrderCustomPaper.com

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