Using the Dividend Discount Model

Step 1: Find the discount rate using CAPM model with Treasury bill rate of 4% and a historical market risk premium of 7%

Step 2: Find two growth rates:

a. sustainable growth rate, g₁

b. the geometric average growth rate, g₂, of dividends from 2013 2017.

Step 3.

Estimate P₂₀₁₈ using g₁

Estimate P₂₀₁₈ using g₂

Target Price Range Hd0116461111300211121826 2001 2002 2003 2004 2005 16 2017 2018 VALUE LINE PUB CAPITAL STRUCTURE as of 1130/17 Total Debt $4711 mil Due in 5 YrsS800 mil 16326 18627 19176 19014 20862 24128 25313 27799 30601 32376 3435036000 Sales (Smill) A 147 147% 14.5% 147% 15.1% 14.1% 14.6% 15.1% 156% 15.9% 15.9% 15.8% oper tingMari 1458.3 1734.1 17274 19067 2133.0 2223.0 2464.0 2693.0 3273.0 37600 42400 4065 Net Profit Smill Leases, Uncapitalized Annual rentals$491 mil. | 33.7% | 30.7% 26,7% | 242% 250% | 25.5% | 24.7% | 24.0% | 222% | 18.7% | 13.2% f9.0% income Tax Rate 409.9441 4372445.8 276.0 228.0 1210.0 1199.0 1079.0 20100 3471.0 3500 Long-Term Debt (Smill) 3000 70254 78253 8693.1 97537 9843.0 10381 11156 10824 12707 12258 12407 12500 Shr. Equity (Smi 19.9% | 21.2% | 19.1% | 18.7% | 21.1% | 21.0% | 20.0% | 22.6% | 23.8%| 26.5% | 26.9% 25.0% Return on Total Capil 34.5% 20.8% | 22.2% | 19.9% | 19.5% | 21.7% | 21.4% | 22.1% | 24.9% | 25.8% | 30.7% | 34.2% 32.5% Return on Shr 15.9% 16.9% | 14.5% | 14.4% | 16.0% | 15.5% | 15.8% | 17.5% | 18.7%| 22.3% 25.0% 22.0% Retained to Com Eq 30.0% Class B shares: 1,297,874,881 MARKET CAP: $103 billion BUSINESS: NIKE designs, develops and markets footwear, ap- cluding part-timers Swoosh, LLC, owns 78.1% CL A shares, pare, equipment, and accessories Sells products to retail ac- 16.4% CL B (representing director Travis Knight's holdings); other counts, through NIKE-owned stores and the Internet, and trough a officers/directors. 3.9% of CL B: The Vanguard Group, 7.0%; Black. m ot independent distributors and licensees in approximately 1 Rock 59% 7/17 p oxy Chairman & CEO Mark G. Parker Inc. countries. Has 384 domestic and 758 international locations (includ Oregon. Address: One Bowerman Drive, Beaverton, OR 97005. 5457.0 6179.0 6389.0 Current Assets 15025.0 1606 0 165820 45.0 331.0 1239.0 ing faciory stores) as of 531/17. Has about 74,400 employees Telephone: 503-671-6453. Internet:www.nikeinc.com 50NIKE put up a solid November and the ensuing discounts tha such a quarter (years end May 31st) that scenario creates. Adidas is coming on scall were 9% higher. Yes, equipment revenues of excitement created by its product erica, and the allow shoppers to tailor their footwear EMEA region. Factoring all this in, we This untimely blue chip s a isr@irtiln W'liniiles ecells RAtgin frQtr riskk..iaud aedl 022 2018 15 95 50 80 N 4 1 31