Calculate the Wacc of Nike company Use an excel spreadsheet and show how you cal

Question

Calculate the Wacc of Nike company
Use an excel spreadsheet and show how you calculate the components of the wacc


Calculate the Wacc of Nike company
Use an excel spreadsheet and show how you calculate the components of the wacc Calculate the Wacc of Nike company
Use an excel spreadsheet and show how you calculate the components of the wacc


IRE, Inc.Consolidated Statements of Shareholders' Equit Common Stock Class A Class B of Stated Comprehensive Retained Shares Amount Shares Amount Value Balance at May 31,2014 Stock options exercised Repurchase of Class B Common Stock Dividends on common stock ($O.54 per share) and preferred stock ($0.10 per Tota 27 58 2.5259 0.5 ssuance of shares to employees, net of shares withheld for employee taxes Stock-based compensation Net income 87 191 3,2733.27 1.161 1.246 4,685 S 12.70 365 1.37$ 3 6773 Conversion to Class B Common Stock Repurchase of Cless B Common Stock Dividends on common stock ($0.62 per share) and preterred stock (30.10 per (55) 3,230(3,238 ssuance of shares to employees, net of shares withhoid for employee taxes 1.053) (1,053 105 236 (tu) Net noome 3,7603,760 Balance at May 31.2016 Stock options exercised Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on common stock (S0.70 por share) and preferred stook ($0.10 per -1,329 7.786 (24) (60) (1,159) (1,159) Issuance of shares to employees, net of shares withheld for employce taxos Stock-based compensation Net income (13) 108 215 4,240 4,240 121 215 1.314 S The accompanying Notes to the Consolidsted Financial Statements ave an integral port of this statement 329 3 $ 8,638 213) $ 3,979 $ 12,407

Explanation / Answer

WACC = We*Re + Wd* Rd

where Wd = weight of debt

We = Weight of equity

Rd = cost of debt

Re = Cost of equity

Total debt = 3,471 (long term debt)

Total equity = 12,407

Total capital =3471+12407 = 15,878

Weight of debt = 3471/15878 = 0.2186

Weight of equity = 1-0.2186 = 0.7814

Cost of debt = Interest expense/total long term debt = 59/3471 = 0.017 = 1.70%

Tax rate =Income tax/ Income before taxes = 646/4886 = 0.1322

After tax cost of debt = 1.70%*(1-0.1322) = 1.475%

Cost of equity = rf + beta*(rm-rf)

Beta of Nike = 0.6 (From yahoo! finance)

rm = market return = 10%

rf = risk free return = t-bill rate = 2.5%

Cost of equity = 2.5+0.6*(10-2.5) = 7%

Re = 7% and Rd = 1.475%

WACC = 1.475%*0.2186 + 0.7814*7% = 5.79%

WACC for Nike = 5.79%

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