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Nike Apparel

Executive Summary
� On a stand-alone basis, this project is a good project, albeit not a
great one.
• The average return on capital, even under the more conservative finite life
assumption, is 13.47%, which is higher than the cost of capital of 9.71%.
• The net present value of this project, using a cost of capital of 9.71%
• is $ 88 million, under the conservative assumption of a finite life of 12 years
• is $ 94 million, under the more realistic assumption of an infinite life
• On the two variables that are the most critical - market share and
operating margin - the firm has a reasonable margin for error on market
share and a narrower margin for error on operating margins.
� If we consider the potential project synergies (i.e. the gains to the
shoe division from having an apparel division), it will make this
project a more attractive one.

Cost of Capital: Nike Apparel
� Debt to Equity ratio for Nike
• Market Value of Equity = $......

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Approximate Word Count: 812
Approximate Pages: 4 (250 words per double-spaced page)

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