Nike

1. What is yield to maturity for Nikes bonds 1. Why is it important to calculate a firms follow of capital? What does it fight back? Is the WACC set by postors or by managers? WACC is basically the swerve of return required by a capital supplier in exchange for not winning on another(prenominal) coronation in another project with similar risk. In well-nigh ways, you digest describe it as opportunity cost. WACC is the lower jell return required by capital providers and managers should totally dedicate in projects that give return in excess of WACC. WACC takes into bill sticker all capital resources such as common stock, preffered stock, bonds and whatever other long-term debt. Usually a partnerships assets are financed by either debt or uprightness. By taking a weighted average we can lend under ones skin get down 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 analysis? 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 of import .69=9.81% approach of Debt I use 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 valuate cost of debt = 7.16%(1-38%) = 4.44% E = market place pla ce take chronicle of the firms equity To! find Market value of rightfulness you figure 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 get a full essay, order it on our website: OrderCustomPaper.com

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