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Case Study example - Nike In: Cost of Capital
Pages 4 (1004 words)
Nike In: Cost of Capital Investors require knowing the return on their capital in order to make long-term strategic plans in an investment. Cost of capital is the value of expected returns on capital. This rate is calculated by establishing the rate of return on the capital if it was invested in an investment of similar risk…
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Nike is a global investment and, therefore the cost of its capital has great implications to various stakeholders across the globe. Currently the company has been experience a decrease in the market value for its stock. Capital cost can therefore, be a useful ratio that manager in the company can apply to establish its worth. This paper will therefore, establish the cost of the company’s capital 1. WACC (The weighted cost capital) is the rate at which an investment is expected to meet its debts. WACC is therefore, the value at which a company is ready and able to pay for its capital. This involves the rate at which a company expects to pay its debtors and the rate at which the company is expected to pay dividend to its shareholders. Most companies consider raising capital from various sources such as debtors, sale of stocks and government subsidies. Using these ratios, investors are able to establish the most appropriate source of capital for their company. A company’s cost of capital is useful to a company since it evaluates the worth of an investment. The worth of an investment establishes the expected return on similar capital invested in an alternative investment. Therefore, the rate enables investors to make appropriate investment decisions. ...
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