Constructing a Value-at-Risk Profile: Nike Inc. (Medium)

For fiscal year 2004, Nike reported after-tax core profit margins of 7.84 percent on an asset turnover of 2.759. An analyst forecasts that this margin and turnover will persist in the future on a sales growth rate of 5.1 percent per year. Nike reported $4,840 million of common equity and $4,551 million in net operating assets on it 2004 balance sheet. The risk-free rate is 4.5 percent and the required return for operations is 8.6 percent.

a. From this information, calculate the value per share at the end of 2004 on 263.1 million shares outstanding.

b. Generate a value-at-risk profile from scenarios 1–7 below:

Scenario Sales Growth (%) Profit Margin (%) Asset Turnover 1 1.0 4.0 1.5 234567 234566 2.0 3.0 4.5 1.9 4.0 5.1 6.0 6.5 c c ti c c 6.0 2.3 6.9 2.5 7.84 2.759 8.0 2.9 8.9 3.1