Consider the following data for Nike? Inc.: In 2009 it had $19,200 million in sales with a 10?% growth rate in? 2010, but then slows by 1% to the? long-run growth rate of 55?% by 2015. Nike expects EBIT to be 10?% of? sales, increases in net working capital requirements to be? 10% of any increases in? sales, and capital expenditures to equal depreciation expenses. Nike also has $2,300 million in? cash, $32 million in? debt, 486 million shares? outstanding, a tax rate of 24?%, and a weighted average cost of capital of 10?%.
a. Suppose you believe? Nike's initial revenue growth rate will be between 7% and 11% (with growth slowing linearly to 55?% by year? 2015). 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?