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?
—‐————————–
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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