Nike

Paper Summary:

Several risk models are used in this paper to measure the value of investing in Nike, the primary one being WACC. Additional calculations are done to produce a WACC, such as a dividend discount model, capital asset pricing model, and an earnings capitalization ratio. It concludes that Nike is a safe investment.

From the Paper:

"An enterprise's weighted average cost of capital (WACC) is a method of determining the cost to the company of each source of financing employed. However, since not all sources of financing are equal, in a WACC calculation each source is weighted to reflect, theoretically, each source of capital's usage in different circumstances. At its most basic a WACC informs an investor, shareholder, or executive what the interest cost is for each dollar financed. Pagano and Stout frame WACC as, "An estimate of the firm's WACC is an attempt to quantify the average return expected by all investors in the firm: creditors of short-term and long-term interest-bearing debt, preferred stockholders, and common stockholders" (13). "

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