analyze Nike the stock price of the company (from a total return perspective) for the next five years?

The company working on is Nike. Document 1 is Nike the first part completed Doc 2 is nike 2 the bond part and the pdf is the one that has to be completed. All question will be located there and instructions. Any additional information I am here to help. thanks
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nike_2.doc

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Nike Company 1
Yesenia Maya Hernandez
Laura, Fittanto-Vande Vusse
Fin 444
4/21/18
Nike Company
The company manufactures and designs shoes, accessories, and clothing. In Europe, it is
the largest manufacturer of sportswear and the largest in the world. It was founded and
Beaverton, Oregon, United States. In the world’s most valuable brands, it is ranked 61st and has
positioned itself as the leader in the world’s market despite having more than 92 innovative
companies. Their sports-related products like sports shoes, clothing, watches, bags, shirts, and
other accessories make them world-renowned brands (Ranco, Aleksovski & Caldarelli, 2015).
Nike has risen to an extreme height of success. Through its slogan of the company has
infiltrated all spheres of people’s lives from sports, pop-culture, street and other fashion
statements like music. All these achievements have been gained by use of strong advertising and
marketing strategies that are accepted by its customers worldwide. Their strategic plan is
“Creating The New.” This attitude leads the company to the future as the industry is growing in
scope and size. The company has the power to change lives through sports. The cooperate
governance and Nike employees work hard to ensure that people appreciate the power of sports.
The company’s competence for sports is translated into street wear and fashion.
At Nike, corporate governance stands for; managing risks appropriately, transparency in
all their corporate communication, protecting the interests of their stakeholders and employees,
efficient cooperation between the supervisory board and the executive board, value-based
management, responsible, and monitoring focused on future success.
Nike Company 2
Adidas should use bonds to make their investments for their benefit. Bonds are
considered safer than stocks. Using grade rated bonds reduces the risk of loss of principle. The
corporate bond coupon is more stable for Nike to use rather than company dividend payments
(Ranco, Aleksovski & Caldarelli, 2015). The interests rates on bonds are higher than the savings
accounts paid in the banks. Nike should involve some factors such as risk tolerance, income, the
perception of the market, future goals, and their investment timeline (Childs & Jin, 2018). Bonds
can act as an element of stability because they are a conservative and safe investment.
The growth of the Nike Company has been as a result of innovative ideas among the
members and their focus on marketing strategies and brand awareness (Childs & Jin, 2018).
Right from its establishment, athletic prowess and sporty attitude have been its identity.
Nike Company 3
Reference
Ranco, G., Aleksovski, D., Caldarelli, G., & Mozetic, I. (2015). Investigating the
relations between twitter sentiment and stock prices. arXiv preprint arxiv:1506.02431.
Childs, M., & Jin, B. (2018). Nike: An Innovation Journey. In Product Innovation in the
Global Fashion Industry (pp. 79-111). Palgrave Pivot, New York.
Nike 1
Nike
Yesenia Maya Hernandnez
National Louis University
4/30/18
2
BONDS
Bonds
Both individuals and institutions can utilize bonds for saving, diversifying a portfolio,
maximizing income, managing interest-rate risks and more advanced uses. For Nike, company
bonds would be best since they are a haven for money. The difference between bonds and stocks
can be referred to and compared to debt versus equity. Bonds in most cases do represent debt
while equity is usually signified by the current equity ownership (Ehrmann, Fratzscher, &
Rigobon, 2011). For that reason it safer investing in debt rather than equity, In this case, it would
be more effective for Nike to utilize bonds since debt holders normally have more priority than
shareholders. In the event where an origination goes bankrupt, creditor or the debt holders are
usually paid first. Where things completely go out of hand, creditors usually stand in a better
position of at least having their money back unlike shareholders who lose all their initial
investment.
On the other hand, bonds are slow and steady which implies they have predictable
returns. In most cases, bonds can outperform stocks in an, especially when times go bad in the
economic cycle. For stocks, a loss of more than 10% is not something unusual in a year (Bell,
2018). Therefore when bonds make a huge proportion, it will be easy for Nike to withstand
difficult recession times. On the other hand, worker requires predictability and security as a
guarantee of life situations (Ehrmann, Fratzscher, & Rigobon, 2011). During retirement, the
retiree will rely on predictable income as their pension; however, it is easily generated through
bonds (Bolton & Freixas, 2010). In comparison to bonds having a portfolio that full of bonds it
would be disappointing for the retiree because in a bear market it would be difficult to cater for
them. By owning bonds, it is easy to predict the more certainty on income that will be generated
years later.
3
BONDS
Bonds do offer a better option than the bank. It’s evident that bonds are the best decent
option since they have huge interest rates while compared to a bank savings account. Where one
is saving, and the intention is on long-term basis bonds are the most relative better option since
they have a huge guarantee returns without posing too much risk (Bolton & Freixas, 2010). On
the same note, bonds can manage the interest rate risk. Due to constant prevailing prices, the
bond rates fluctuate. The risk is usually experienced since the value of the bonds is usually a
culmination of both the present value and principal upon maturity returns.
Bonds also offer diversification. Nonetheless, this option is normally overlooked, but the
low correlation between other assets classes and bonds makes them a good diversification tool.
Since it is difficult to come across two assets which are negatively correlated, the diversification
offered by bonds during volatile markets makes them an exceptional tool (Ehrmann, Fratzscher,
& Rigobon, 2011). Bonds also offer expense matching. In most cases, bonds do help to meet the
future need for cash. For that reason, they form a strategy for immunization. Nike can use the
bonds for saving, maximizing income, diversifying the portfolio and long-term planning since
they provide a predictable stream of income when held till to maturity.
4
BONDS
References
Bell, S. (2018). Do taxes and bonds finance government spending?. Journal of Economic
Issues, 34(3), 603-620.
Bolton, P., & Freixas, X. (2010). Equity, bonds, and bank debt: Capital structure and financial
market equilibrium under asymmetric information. Journal of Political Economy, 108(2),
324-351.
Ehrmann, M., Fratzscher, M., & Rigobon, R. (2011). Stocks, bonds, money markets and
exchange rates: measuring international financial transmission. Journal of Applied
Econometrics, 26(6), 948-974.
Assignment Paper #3 Stock Review
You will analyze the stock price of the company you have chosen to review (from a total return
perspective) for the next five years. You must use a strategic justification (both Macroeconomic
and Industry analysis) for your stock price in the next five years. You must use at least one
stock valuation technique to justify the investment. (Example: dividend growth formula,
expected rate of return, present value analysis).
I have had students complete this assignment before. Most the students I have taught have
used the Expected Rate of Return in making this calculation. You are basing your projections
on what you think the economy and the industry will look like over the next five years. This is
your projection and is based on your decisions. There is no correct or incorrect response. You
only need to use two rates of return on investments and two probabilities of occurrence in your
projection – if you use the Expected Rate of Return. You would look at the current stock price
and multiply this stock price against your projection. Your projection can be based on previous
stock prices for your company r on any other factor you wish. I want you to be creative and use
your own ideas in your projections. It is very easy to obtain the current stock price. You only
need to google the company name and request the current stock price and it will pop up. Please
see my example below which is my projection for Coca Cola:
Expected rate of return: Er = r1 * Pb1 + r2 * PB 2 + rn * pbn. Please see my example below:
Rate of Return
Probability of Occurrence
3%
30%
4%
70%
*The total of the probability of occurrence must equal 100%.
Calculation of Expected Rate of Return
(.03 x .30) + (.04 x .7)
.009 + .028 = .037 = 3.7%
Coca Cola’s current stock price is $41.61
$41.61 x 1.037 = $43.15 – This is my projected stock price.
The reason I use 1.037 in my calculation is because the stock price will be the current stock
price 1 + the expected rate of return .037. You could also project the stock price in two steps:
$41.61 x .037 = $1.54 + $41.61 (current stock price) = $43.15
Paper Format: Size 12 type, double spaced, 1″ margins. The length of the paper should be 3
pages.
You must make a well thought out, concise, compelling argument on the first page followed by
some analytical justification and analysis on the following pages. My goal here is for you to have
some fun as well as help build your skills. You should explain what you think the economy will
look like over the next five years and how you think the industry in which your company
operates will look over the next five years based on the economy you predict. I would suggest
using the expected rate of return to determine your future stock price. I have included an
example of how to calculate the expected rate of return within the announcement.
You may wish to use one of the following websites:
•
•
•
•
https://nyse.nyx.com
http://www.sec.gov/cgi-bin/srch-edgar
http://www.marketwatch.com
http://dir.yahoo.com/Business_and_Economy/Finance_and_Investment
I have attached a paper for you to review as an example.
Please make certain to submit this paper in the Assignment section Assignment Paper #3.
Discussion Posting – Final Project Milestone #3 – Calculate your stock price and note it in this
discussion posting. I will check the stock price you calculated and privately respond to let you
know if your calculation is correct. This will allow you to write the paper with the correct
calculation.
Please note two additional scholarly sources that were not used in the first two assignment
papers.
If you have any questions please contact me 847-867-4389.

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