Nike

1. What is yield to maturity for Nikes bonds 1. Why is it important to foreshadow a firms follow of capital? What does it keep back? Is the WACC set by postors or by managers? WACC is basically the swear of return required by a capital supplier in exchange for not winning on another(prenominal) enthronement in another project with similar risk. In slightly ways, you brook describe it as opportunity apostrophize. WACC is the lower marge return required by capital providers and managers should totally enthrone in projects that give return in excess of WACC. WACC takes into flyer all capital resources such as common stock, preffered stock, bonds and any(prenominal) other long-term debt. Usually a attach tos assets are financed by either debt or uprightness. By fetching a weighted average we can set out acquire 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 no t 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 digest? 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 utilize 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 measure cost of debt = 7.16%(1-38%) = 4.44% E = commercialize place take direct of the firms equity To find ! Market value of rightfulness you regurgitate 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 tucker out a full essay, order it on our website: OrderCustomPaper.com

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