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Single or Multiple Costs of Capita

Autor:   •  February 10, 2014  •  Essay  •  313 Words (2 Pages)  •  1,931 Views

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Nike, Inc.: Cost of Capital

Analyst of Joanna Cohen’s memo

Single or Multiple Costs of Capital?

In Joanna’s report she started off explaining why she chose the single cost of capital approach over the multiple cost of capital approach for Nike. Even though Nike does have many different departments selling everything from clothing to shoes to exercise equipment, Joanna stated it would be best to use the single cost of capital approach and only find one WACC for the company instead of different ones for each department. We agree with Joanna in this aspect and believe only one cost of capital is needed to be computed to find an appropriate WACC for Nike. We believe this because even though there are different departments to this company, all pose the same risk, thus we only need a single cost of capital for the analysis of Nike.

Methodology for Calculating the Cost of Capital: WACC

Cost of Debt

Cost of Equity

Putting it All Together

Nike, Inc.: Cost of Capital

Analyst of Joanna Cohen’s memo

Single or Multiple Costs of Capital?

In Joanna’s report she started off explaining why she chose the single cost of capital approach over the multiple cost of capital approach for Nike. Even though Nike does have many different departments selling everything from clothing to shoes to exercise equipment, Joanna stated it would be best to use the single cost of capital approach and only find one WACC for the company instead of different ones for each department. We agree with Joanna in this aspect and believe only one cost of capital is needed to be computed to find an appropriate

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