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2 parts with 3 questions each. No plagiarism Table 19.6

2 parts with 3 questions each. No plagiarism 

Table 19.6 is a simplified book balance sheet for Nike in November 2017. Here is some further

information:

● ● ● ● ●

Number of outstanding shares (N) 1.32billion

Price per share (P) $60

Beta 0.55

Treasury bill rate 0.8%

20-year Treasury bond rate 2.7%

Cost of debt (rD) 3.8%

Marginal tax rate (from 2018) 21%

⟩ TABLE 19.6 Simplified book balance sheet for Nike, November 2017

(figures in $ millions)

Current assets $16,582 Current liabilities $ 6,750

Net property, plant, and equipment 4,117 Long-term debt 3,472

Investments and other assets 3,356 Other liabilities 2,075

             Shareholders’ equity 11,758

Total $24,055 Total $24,055

a. Calculate Nike’s WACC. Use the capital asset pricing model and the additional information

given above. Make additional assumptions and approximations as necessary.

b. What is Nike’s opportunity cost of capital?

c. Finally, go to finance.yahoo.com and update your answers to parts (a) and (b).

—‐————————–

Go to finance.yahoo.com. Check out the delayed quotes for Amazon options for different exer-

cise prices and maturities. Take the mean of the bid and ask prices.

a. Confirm that higher exercise prices mean lower call prices and higher put prices.

b. Confirm that longer maturity means higher prices for both puts and calls.

c. Choose an Amazon put and call with the same exercise price and maturity. Confirm that 

put–call parity holds (approximately). (Note: You will have to use an up-to-date risk-free 

interest rate.)

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