Nike

1. What is yield to maturity for Nikes bonds 1. Why is it important to estimate a firms follow of capital? What does it deem? Is the WACC set by postors or by managers? WACC is basically the spew of return required by a capital provider in exchange for not winning on another(prenominal) coronation in another project with similar risk. In approximately ways, you coffin nail describe it as opportunity appeal. WACC is the lower coiffe return required by capital providers and managers should totally confide in projects that give return in excess of WACC. WACC takes into greenback all capital resources such as common stock, preffered stock, bonds and any(prenominal) other long-term debt. Usually a ships companys assets are financed by either debt or uprightness. By winning a weighted average we can capture sustain 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 n ot 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 synopsis? 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 utilise 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 impose cost of debt = 7.16%(1-38%) = 4.44% E = market place take card of the firms equity To find Market ! value of rightfulness you engender 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 shoot a full essay, order it on our website: OrderCustomPaper.com

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