Nike Case

Nike eccentric person 1. Should Nike be held obligated for working conditions in contradictory factories that it does non own, only if where subcontractors pull back products for Nike? No, I do non believe Nike should be responsible for working conditions in foreign factories. I do believe that in that respect should be working standards in post and adhered to but I do not believe that is Nikes responsibility. Nike is a concern in revision to run a successful business one must inhabit by good business practices including respecting others beliefs and values.It would be no different than if a Nike employee another employee how to raise their kids. As long as they be stay on by the laws governed in that their own country people atomic number 18 on the loose(p) to raise their churlren how they please. 2. What labor standards regarding safety, working conditions, overtime, and the like, should Nike hold foreign factories to those prevailing in that country, or those pr evailing in the join States? Nike should uphold the standards prevailing in the particular country.If there are issued regarding safety, working conditions, overtime, etc, they should be discussed through withdraw entities, for antecedent the United Nations. 3. An income of $2. 28 a day, the base pay of Nike manufactory workers in In through with(p)sia, is double the daily income of ab come on half the working population. one-half of every adults in Indonesia are farmers, who receive less than $1 a day. Given this, is it correct to criticize Nike for the low pay estimates of its subcontractors in Indonesia? It is not appropriate to criticize Nike for low pay rates.According to salary. gov, the average Ameri kindle income is 46,326. If a company from United Arab of Emirates came exports products from a store in the U. S. and pay the works 105,623 (equal to the percentage raise Nike is paying in Indonesia), Ameri skunks would be grateful. 4. Could Nike down handled the negativ e publicity over sweatshops better? What might it have done differently, not just from a public relations perspective, but alike from a policy perspective? Yes, Nike could have handled the negative publicity better.For instance Andrew Young should have brought is own interpreter into the factories. There is no guidance of knowing what is actually being said and the motives behind a foreign interpreter. Nike took the remediate steps when it mandated hours worked per week, minimum wage per governing country, and raising the child labor laws. They set emplace standards and followed up with them. When they found businesses not adhering to the regulations they transpose magnitude them, and gave the business a clear definition of what the regulation mandates.I dont think Nike could/should have done anything else. 5. Do you think Nike needs to make any changes to its current policy? If so, what? Should Nike make changes even if they hinder the efficiency of the company to compete in the marketplace? No, I do not believe Nike needs to make changes to its current policy. The fact that they even imbed policy shows their character. If Nike did make changes and couldnt compete in the market place thousands of Americans would be upset near losing their favorite sports brand, and millions of people would be out of jobs.The failure of Nike to compete in the market place could literally wet the down turn of foreign economies. 6. Is the WRC right to argue that the FLA is a spear of industry? The WRC is correct in stating FLA is a tool of the industry. However, the businesses involved are exactly that, businesses. The FLA was an appropriate step in the right direction for the pursuit of better business practices by other countries while maintaining the best business relationship possible. Disrespect, is not only a great bureau to put down business, but wars are literally started over it.FLA takes the times to look at the beliefs, and values of the companies it is w orking with and not just do what they feel is the right thing to do. 7. If sweatshops are a global problem, what might be a global solution to this problem? The United Nations should handle the sweatshop issue. That way it is not just the U. S. attacking, or implementing their business structures on other countries. The United Nations is specifically designed to handle global issues. Having multiple nations give their infix and suggests would be an incredibly helpful and compromising tool for employees and employers in all countries.Nike CaseCorporate Finance Nike, INC comprise of majuscule 1. What is the WACC and why is it grand to estimate a firms cost of capital? Do you agree with Joanna Cohens WACC calculation? Why or why not? Definition of WACC (Weighted Average Cost of Capital) WACC is basically the average of the cost of finance (debt and equity). Since a companys assets can be financed by debt or equity, WACC can show the averages of the costs involved in the sources of funding. These costs are then weighted by the users of the information as required in a specific situation.This shows how much both debt holders expect to pay in interest and how much return the shareholder can expect to receive, for to each one dollar of financing (Investopedia, ND). The calculation of the cost of capital is one of the weighty elements that decide the enterprise value. The value of the enterprise can significantly change when the percentage of cost of capital changes in the business model, with the cost of capital representing the expected return for shareholders. We disagree with Joannas WACC calculation for following reasons The calculations of WACC and DCF can be effected as they are subjective by her charitable judgment.Even though there are no right answers to make these decisions, our team disagrees with some of the assumptions Joanna Cohen made. i. symmetry of debt financing and Ratio of equity financing It has to be applied the market value because cur rent shareholders expected return has to be reflected. Both ratios should be reckond not by using leger Value but foodstuff Value. ii. Cost of Debt Cost of Debt can be calculated with the current yield publicly traded in the market, because we are projecting the future cash flows. Joanna calculated this by using diachronic data.However cost of debt should be calculated using current YTM of debt. iii. Cost of lawfulness Joanna calculated cost of debt by using following CAPM formula Cost of justness = 5. 74% (20 year exchequer bond) +0. 80 (Average Historic Nike beta) *5. 9% (Average premium of the market over Treasury) =10. 5% When calculating the beta, using the close to current beta is better than using the average, because the current beta reflects the to the highest degree recent environment of Nike mental straintaking. 2. If you do not agree with Cohens analysis, calculate your own WACC for Nike and be prepared to justify your assumptions. i. Ratio of debt financing and Ratio of equity financing grocery value of debt = 5. 4 + 855. 3 + 435. 9 = $1,296. 6million Market Value of equity= There is no information about market value of debt. We will use Book Value $1296. 6million Market Value of equity= plowshare price ($42. 09) * Shares outstanding (271. 5million) =$11,427. 4million Ratio of debt financing=1,296. 6 / (1,296. 6+11,427. 4) = 10. 19% Ratio of equity financing=11,427. 4/ (1,296. 6+11,427. 4) = 89. 81% WACC=9. 81%*89. 81%+7. 168 %*( 1-38%)*10. 19% =9. 26% ii.Cost of Debt Market value of debt should be Current price of debt $95. 60 Coupon rate 6. 75%(semiannual) =coupon $3. 375 per 6month Period to maturity 20 years =40 period Face value $100 YTM (=cost of debt) =3. 584% (semi annual) =7. 168% (annual) iii. Cost of Equity Using CAPM formula Cost of Equity = 5. 74% (20 year Treasury bond) +0. 69 (Latest beta) *5. 9% (Average premium of the market over Treasury) =9. 81% 3. guess the costs of equity using CAPM and the dividend discount model . What are the advantages and disadvantages of each rule? * CAPM Cost of Equity = 5. 4% (20 year Treasury bond) +0. 69 (Latest beta) *5. 9% (Average premium of the market over Treasury) =9. 81% Advantage * CAPM considers only arrogant risk, beta. It does not consider company specific risk. * It is useful to see an one-on-one stock in entire portfolio. Disadvantage * Some inputs are wicked to reflect the situation of real world. * Relatively difficult to use compared to DDM * DDM Share Price($42. 09) = Dividend($0. 48) / (re Dividend Growth(5. 5%)) re(Cost of Equity) = 6. 64% Advantage * DDM only focuses on an individual stock rather than a portfolio. Always use, when calculating stock price. * Relatively sonant to use compared to CAPM. Disadvantage * Results are very sensitive to change when assumptions are inputted 4. What should Kimi Ford recommend regarding an investment in Nike? RECOMMENDATION should buy NIKE stock. NIKE stock price should be $58. 22 under the condition W ACC, 9. 26%. currently Nike stock is $42. 09. Now Nike stock is under value by $58. 22 $42. 09 = $16. 13 per share. Works Referenced Investopedia, ND. M&A, Preferred Shares, Investopedia. Online Available at http//www. investopedia. com/terms/w/wacc. asp Accessed 1 April 2013.