Valuation of Nike using Discounted Cash Flow Model

Finance

Table of Contents
Introduction...........................................................................................................................................2
Main Context.........................................................................................................................................2
Valuation...........................................................................................................................................2
Free cash flow................................................................................................................................2
Weighted average cost of capital...................................................................................................3
Significant assumptions.................................................................................................................4
Cash flow estimation.....................................................................................................................4
Terminal value...............................................................................................................................4
Conclusion and recommendations.........................................................................................................5
References.............................................................................................................................................6
1

Introduction
Nike was established by Phil Knight and Bill Bowerman in January 1964 by. It has also
acquired other popular brands such as Hurley International LLC, Cole Haan, Umbro Ltd,
Converse INC. Nike has most of its contract factories in Vietnam and provides products all
over the world. The corporation has its retail shops in almost every corner of the world and
also sells products online through its website. The organization focuses more on its
shareholder’s value and its main objective is to make a profit for them. Nike mainly target
athlete and sportsman for selling products. Its main goal is to change the world of every
sportsman by providing quality products and services. The stock value of Nike will be
determined and examined with the use of a valuation technique. The discounted cash flow
model will be used for evaluating the stock value and providing significant information to the
investors (Nike, 2018).
Main Context
The discounted cash flow is considered to be a direct valuation method of valuing an
organization by projecting the future flow of cash and discounting with the present value of
money. Discounted cash flow is being used to measure the value of any corporation, asset or
any project through the conception of the time value of money. DCF helps to calculate the
money for an investor who supposed to receive from an investment. The estimation will be
carried out in two stages (Holton, 2012, p.244). The first stage depicts a high rate of growth
and the second stage is to assume the growth rate is stable. The measurement of the cash
flows for the next five years is to be done for the organization. The cash flows are to be
discounted to measure the present value. The uncertainties in the market can affect the
business operations of Nike which will lead to the uneven growth of the organization. The
share price of the organization depicts its current value in the market. The development of
business operations leads to an increase in the value of shares. The current share price of
Nike is $76.36
Valuation
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