The following summary numbers (in millions of dollars) were calculated from Nike's 2005 balance sheet:

Net operating assets ............. 4,632

Net financial assets .............. 1.012

Common equity (261.1 million shares outstanding) 5,644

Analysts were forecasting $5.08 in earnings per share for 2006. Nike's after-tax return on its net financial assets is 3.2 percent and its required return for operations is 8.6 percent.

a. What return on net operating assets (RNOA) are analysts implicitly forecasting for 2006?

b. Value a share of Nike on the assumption that the forecasted 2006 RNOA will continue indefinitely and residual operating income (ReOI) and net operating assets will grow at 4 percent per year.

c. Repeat the valuation from forecasts of abnormal operating income.

d. What is the value of Nike's operations with these forecasting assumptions?

e. If forecasted RNOA is expected to be constant in the future, how can residual operating income grow?

f. Calculate Nike's levered forward P/E and its enterprise forward P/E. Show how they relate to each other. Explain why one is higher than the other.

g. In the press release announcing 2005 results, Nike made the following statement:

During the fourth quarter, the Company purchased a total of 1,853,500 shares for approximately $152.7 million in conjunction with the Company's four-year, $1.5 billion share repurchase program that was approved by the Board of Directors in June 2004.

To date, the Company has repurchased a total of 6,924,400 shares under this program.

Discuss how the stock repurchases will affect forecasts of future operating income and earnings per share.