Page 122 - DMGT207_MANAGEMENT_OF_FINANCES

Unit 5: Cost of Capital

Exhibit 3: Sensitivity of Equity Value of Discount Rate Notes

Discount rate Equity value
8.00% $75.80
8.50 67.85
9.00 61.25
9.50 55.68
10.00 50.92
10.50 46.81
11.00 43.22
11.17 42.09
11.50 40.07
12.00 37.27

Exhibit 4: Consolidated Balance Sheets (in millions) May 31
2005 2006
Assets 2005 2006
Current assets
Assets
Cash and equivalents $254.3 $304.0
Current assets
Accounts receivable 1,569.4 1,621.4
$254.3
$304.0
Cash and equivalents
Inventories 1,446.0 1,424.0
1,569.4
Accounts receivable
1,621.4
111.5
113.3
Deferred income taxes 1,446.0 1,424.0
Inventories
Deferred income taxes
Prepaid expenses 215.2 113.3
111.5
162.5
215.2
162.5
Prepaid expenses 3,596.4 3,625.3
Total Current assets
Total Current assets 3,596.4 3,625.3
Property, plant and equipment, net 1,583.4 1,618.8
Identifiable, intangible assets and goodwill, net 1,583.4 1,618.8
397.3
410.9
Property, plant and equipment, net
Deferred income taxes and other assets
410.9
178.2
Identifiable, intangible assets and goodwill, net 266.2 397.3
178.2
266.2
Deferred income taxes and other assets
Total assets $5,856.9 $5,819.6
Total assets $5,856.9 $5,819.6
Liabilities and shareholder's equity
Current liabilities
Liabilities and shareholder's equity
Current portion of long-term debt $50.1 $5.4
Current liabilities
Notes payable 924.2 855.3
$5.4
$50.1
Current portion of long-term debt
432
Notes payable
Accounts payable 543.8 855.3
924.2
432
Accounts payable 543.8 472.1
621.9
Accrued liabilities
Accrued liabilities 621.9 472.1
Income taxes payable
21.9
-----
Total current liabilities 2,140.0 1,786.7
-----
21.9
Income taxes payable
Long-term debt 2,140.0 1,786.7
Total current liabilities
470.3
435.9
102.2
470.3
Long-term debt
Deferred income taxes and other liabilities 110.3 435.9
Redeemable preferred stock 110.3 102.2
Deferred income taxes and other liabilities
0.3
0.3
Redeemable preferred stock
Share holder equity 0.3 0.3
Share holder equity
Common stock, par 2.8 2.8
Capital in excess of stated value 369.0 459.4
Common stock, par
2.8
2.8
11.7
9.9
Unearned stock comper 369.0 459.4
Capital in excess of stated value
9.9
Accumulated other comprehensive income 111.1 152.1
Unearned stock comper
11.7
Retained earnings
Accumulated other comprehensive income 2887.0 3194.3
111.1
152.1
2887.0
3194.3
Retained earnings 3136.0 3494.5
Total share holder equity
3136.0
Total share holder equity $5,856.9 $5,819.6
Total liabilities and shareholder's equity
3494.5
Total liabilities and shareholder's equity $5,856.9 $5,819.6
Exhibit 5: Dr. Bhatt's Analysis
Subject: Nike's Cost of Capital
Based on the following assumptions, my estimate of Nike's cost of capital is 8.4 percent:
Contd...
LOVELY PROFESSIONAL UNIVERSITY 117