solution
solution.
Consider the valuation of Nike given in Example 10.1.
a. Suppose you believe Nike’s initial revenue growth rate will be between 7% and 11%
(with growth always slowing linearly to 5% by year 2018). What range of prices for
Nike stock is consistent with these forecasts?
b. Suppose you believe Nike’s initial revenue EBIT margin will be between 9%
and 11% of sales. What range of prices for Nike stock is consistent with these
forecasts?
c. Suppose you believe Nike’s weighted average cost of capital is between 9.5% and
12%. What range of prices for Nike stock is consistent with these forecasts?
d. What range of stock prices is consistent if you vary the estimates as in parts (a),
(b), and (c) simultaneously?
a. Suppose you believe Nike’s initial revenue growth rate will be between 7% and 11%
(with growth always slowing linearly to 5% by year 2018). What range of prices for
Nike stock is consistent with these forecasts?
b. Suppose you believe Nike’s initial revenue EBIT margin will be between 9%
and 11% of sales. What range of prices for Nike stock is consistent with these
forecasts?
c. Suppose you believe Nike’s weighted average cost of capital is between 9.5% and
12%. What range of prices for Nike stock is consistent with these forecasts?
d. What range of stock prices is consistent if you vary the estimates as in parts (a),
(b), and (c) simultaneously?
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