Exercise - Discounted cash flow (DCF) valuation
The statement of cash flows extracted from Nike Inc. 2015 annual report is provided (attached)
Additional information & assumptions
- Nike's applicable tax rate is 35%.
- Nike's interest income figures for fiscal years 2015, 2014 and 2013 are $5, $6 and $12 million, respectively.
- Nike's cost of capital is 10%.
- Nike's free cash flow is expected to grow at 6% per annum from the fiscal year 2016 to 2020 and at 4% per annum from the fiscal year 2021 onwards.
- Nike's net interest payment (interest paid - interest received) before tax is assumed to be $28 million for all three years
Required
1. Calculate the free cash flows for fiscal years 2013, 2014 and 2015 and perform a discounted cash flow valuation as of the fiscal year end of 2015. Show all your workings and all item used in your calculations.
Attachment:- Assignment.rar