Forecasting with the Parsimonious Method and Estimating Share Value Using the ROPI Model Following are income statements and balance sheets for Nike Inc.

NIKE INC.
Consolidated Income Statements
	May 31,	May 31,
For Year Ended ($ millions)	2019	2018
Revenues	$39,117	$36,397
Cost of sales	21,643	20,441
Gross profit	17,474	15,956
Demand creation expense	3,753	3,577
Operating overhead expense	8,949	7,934
Total selling and administrative expense	12,702	11,511
Interest expense (income), net	49	54
Other (income) expense, net	(78)	66
Income before income taxes	4,801	4,325
Income tax expense	772	2,392
Net income	$4,029	$1,933

NIKE INC.
Consolidated Balance Sheets
	May 31,	May 31,
$ millions	2019	2018
Current assets
Cash and equivalents	$4,466	$4,249
Short-term investments	197	996
Accounts receivable, net	4,272	3,498
Inventories	5,622	5,261
Prepaid expenses and other current assets	1,968	1,130
Total current assets	16,525	15,134
Property, plant and equipment, net	4,744	4,454
Identifiable intangible assets, net	283	285
Goodwill	154	154
Deferred income taxes and other assets	2,011	2,509
Total assets	$23,717	$22,536
Current liabilities
Current portion of long-term debt	$6	$6
Notes payable	9	336
Accounts payable	2,612	2,279
Accrued liabilities	5,010	3,269
Income taxes payable	229	150
Total current liabilities	7,866	6,040
Long-term debt	3,464	3,468
Deferred income taxes and other liabilities	3,347	3,216
Commitments and contingencies (Note 18)
Shareholders equity
Common stock at stated value:
Class A convertible315 and 329 shares outstanding	-	-
Class B1,253 and 1,272 shares outstanding	3	3
Capital in excess of stated value	7,163	6,384
Accumulated other comprehensive income (loss)	231	(92)
Retained earnings	1,643	3,517
Total shareholders equity	9,040	9,812
Total liabilities and shareholders equity	$23,717	$22,536

Required a. Compute net operating assets (NOA) and net nonoperating obligations (NNO) for 2019. The companys NNO is negative because cash exceeds debt. NOA: $Answer NNO: $Answer b. Compute net operating profit after tax (NOPAT) for 2019 assuming a federal and state statutory tax rate of 22%. Note: Round your answer to the nearest whole dollar. NOPAT: $Answer c. Use the parsimonious forecast method, as shown in the Analysis Insight box on page 14-5, to forecast sales, NOPAT, and NOA for 2020 through 2023 using the following assumptions.

Sales growth	8%
Net operating profit margin (NOPM)	2019 ratios rounded to three decimal places
Net operating asset turnover (NOAT), year-end	2019 ratios rounded to three decimal places

Forecast the terminal period value assuming a 2% terminal period growth and using the NOPM and NOAT assumptions above. Note: Round your final answers to the nearest whole dollar.

Nike (NKE)			Forecast Horizon
	Reported					Terminal
($ millions)	2019	2020	2021	2022	2023	Period
Sales
NOPAT
NOA

d. Estimate the value of a share of Nikes common stock using the residual operating income (ROPI) model as of May 31, 2019; assume a discount rate (WACC) of 6.8% and common shares outstanding of 1,682 million. Note: Round your final answer to two decimal places (for example, round $15.555 to $15.56). Stock price per share: $Answer e. Nikes stock closed at $86.70 on July 23, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? Answer

Stock price is overvalued

Stock price is undervalued

Stock price is appropriately valued