Financial Modeling and Valuation about Nike, Inc

NIKE, Inc

Research Summary Financial Modeling and Valuation (Section 83)

Baozheng Ge 4-28-2016

Financial Modeling and Valuation Baozheng Ge

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Johns Hopkins University – Student Research

Consumer Goods Sector, Footwear & Accessories Industry

New York Stock Exchange

Nike, Inc.

Date: 5/29/2015 Current Price: $50.84 (5/29/15) Recommendation: Hold

Ticker – NYSE: NKE Headquarter: Beaverton, OR Target Price: $59.92

Highlights

According to the result from various valuation approaches done to Nike, we faithfully suggest

our clients to hold Nike’s stock for the upcoming period, which would have a projected 17.86%

increase compared to its current market price $50.84 on May 29th, 2015. And the main reason

come up with our recommendations is as follows:

Valuation – According to the valuation we have done to Nike, the intrinsic share value

is targeted at $59.92, which is much higher than the current market price $50.84. There

is wide range of space for the increase of its share price. The valuation method we

implemented is Full Pro Forma approach.

Expansion Plan – Nike plans to grow the NIKE Brand in all six of its geographies

including driving mid-single-digit growth through broader expansion in its developed

geographies (North America, Western Europe, and Japan) and to invest aggressively in

its developing market geographies (Greater China, Central & Eastern Europe, and

Emerging Markets) targeting low double-digit growth.

Growth Drivers – Nike keeps growing its revenue on a yearly basis with a relative stable

rate of growth which is around 10% throughout the time and it is a good indicator for all

the investors because the latitude of growth rate of sales is the main driver for larger

future cash flow into the company.

Business Description

NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic

footwear, apparel, equipment, and accessories for men, women, and kids worldwide. The

company offers products in eight categories, including running, basketball, football, men’s


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training, women’s training, sportswear, action sports, and golf under the NIKE and Jordan

brand names. It also markets products designed for kids, as well as for other athletic and

recreational uses, such as cricket, lacrosse, tennis, volleyball, wrestling, walking, and outdoor

activities. In addition, the company sells sports apparel and accessories; and markets apparel

with licensed college and professional team and league logos. The company was formerly

known as Blue Ribbon Sports, Inc. and changed its name to NIKE, Inc. in 1971. NIKE, Inc.

was founded in 1964 and is headquartered in Beaverton, Oregon (Business Summary, n.d).

NIKE, Inc. includes five distinct brands, each with a powerful connection to its customers:

NIKE Brand designs, Converse, Inc, Hurley International LLC designs, Jordan Brand designs

and NIKE Golf designs. NIKE, Inc. is a growth company. Over the last 10 years, they have

more than doubled their revenue. According to Nike’s FY10/11 Sustainable Business

Performance Summary, their overall employee base grew to approximately 48,000 at the end of

FY13, an increase of 10,000 employees (Business Overview, n.d).

There are five major competitive advantages about Nike. First is branding, the creation of a

strong image among its teenage customer base—a must have mentality that allows the company

to charge premium price over its competitors. Second is scale, the cost savings associated with a

larger corporate size. Nike has close to $29 billion in revenues by the mid-2014, almost twice

its closest competitor, Adidas AG. Third is scope, the cost savings associated with offering

different products by a single corporation for sale, rather than products by different

corporations. Nike has a broad range of shoes, clothing, and gear, catered to men, women, and

children. Fourth is customization, the benefits associated with offering customer-tailored

solutions. NikeiD allows customers to customize some of the products they buy. The last is

innovation, the discovery of new products that have a number of distinct features separate from

those of conventional competing products – features that stir up emotion and desire, seducing

consumer fantasy (Mourdoukoutas, 2014).

Financial Analysis and Valuation

As seen from the past 5-year performance, Nike did a nice job in keep growing its revenue on a

yearly basis with a relative stable rate of growth which is around 10% throughout the time. This

is a good indicator for all the investors because the latitude of growth rate of sales is the main


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driver for larger future cash flow into the company. And the GOGS takes about 54.6% to 56.9%

of the total sales with a gross margin of 0.46 that is slightly higher than the industry average,

0.39. As a marketing-oriented company, SG&A expense for Nike took up higher percentage of

sales from 30.7% to 32.2% during last 5 years, but the operating margin for Nike still has a big

advantage over its competitors, which is 6% higher than the industry norm (Competitors, n.d).

Since we are optimistic about Nike’s future revenue growth, the projected net income from

2016 to 2020 has a gradual increasing trend overall.

When we look at Nike’s balance sheet from 2011 to 2015, we see an obvious decreasing in total

accounts receivable from 15% to 10.9% of sales, which indicates a more efficient cash

collection cycle. Moreover, Nike constantly bought in PP&E during this time, however,

PP&E’s growth is not as remarkable as that of sales and during the year 2015, Nike might have

a large sale of its PP&E because in this year, the accumulated depreciation has a 0.05 billion

decline compared to the year before.

For all the financial ratios, the most memorable thing is the continuous increase in EPS from

$1.12 in 2011 to $1.90 in 2015 and we estimated that the EPS will keep growing in the

following years till 2020 to a level of $3.10. This is certainly a good news for current and

perspective investors. The ROE seems to grow healthily from 2011 to 2015, but then it will

experience a downward trend as we estimated from 2016 to 2020 and this is due to the fewer

dividends that will be paid out in the following years which increases the shareholder’s equity

and drives down the ROE later on. The reason we estimated there will be less dividend is that

during this year’s investors meeting, the CEO of Nike, Mark Parker, announced plans to invest

$500-600 million in capital over the next five years to develop the Direct to Consumer business

and build capabilities to support both owned and wholesale retail productivity and performance

in order to build and strengthen its global retail presence (Parker, 2010). The leverage ratio for

Nike fluctuated in a small range, an obvious increase in the year 2013 and following decrease

till the year 2020, but overall the capital structure is relatively stable and in the future, Nike

would rely more on its equity rather than its debt as seen from the leverage. We believe this

would cause an increase in future cash flow because the interest expense would also come down

with the debt to a certain level.


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For the valuation part, there is one thing need to mention that we come up with all negative

numbers for net debt throughout 2011 to 2015, which means during this time, Nike always got

excessive cash & ST investment over all the debts. We calculated WACC using three

approaches, Gordon per-share dividend, classic CAPM and tax-adjusted CAPM. Finally we

took the average of the last two methods, because the number generated from the first method is

deviated from that of rest two methods. The WACC we obtained is around 0.07. Moreover, for

enterprise value computation, we use long-term FCF growth rate as 3%, although the recent

FCF growth rate is higher than this. The reason is that we need to hold a conservative mind

about future growth, because there will be lots of unpredicted things happening in the future.

Next, we took Pro Forma and Simplified DCF methods and came up with share values as

$59.92 and $66.21. And at this point, we choose to adopt the answer by Pro Forma method,

since it is the more accurate method with less assumptions though. However, both numbers

suggests that Nike, at current stage, is pretty much undervalued with a current market price of

just $50.84.

Investment Risk and Opportunities

There are certainly some investment risks currently. First is considered as market risk, which

mainly comes from its competitors. Among them is Baltimore-based Under Armour

(NYSE:UA), which is nearly five times smaller than Nike in terms of market capitalization and

generated revenue of around $3 billion for all of 2014 – a 29% jump over last year. More than

90% of that revenue was generated in the U.S., which means Under Armour will pose an even

greater threat as it begins to ramp up its international expansion later on. The second is about

economic risk. One of Nike's biggest challenges in delivering consistent growth lies in

managing currency headwinds. There was a shares plunging two quarters ago after CFO Don

Blair told investors that "this year's devaluation of developing market currencies will be a

significant drag on next year's reported revenue, gross margin, and profit growth." Although

Nike has multiple financial levers it can pull to mute the effects of such currency volatility,

including temporarily minimizing the level of receivables in those respective markets. But that

doesn't mean Nike will be capable of perfectly managing such fluctuations in perpetuity

(Symington, 2014). The third one is called operational risk. From the financial analysis about


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10 past and future years, we have seen that the Nike’s asset turnover ratio started to drop since

2014 and this trend would continue till the year 2020 without exception. In addition, Nike’s

ROE is also experiencing the same kind of problem. Those phenomenon suggests that there is a

lack in Nike’s operating efficiency and this lack would further lead to the decrease in its

profitability performance. All the perspective investors need to consider about the above

investment risks before you make your decision.

However, there are also opportunities associated with it. According to the Monte Carlo

Simulation we have done using crystal ball, Nike has 60.24% of possibility to be priced higher

towards its actual share value we computed in the valuation part and the total upward possibility

of its share price is targeted to be 93.72%, which is thrilling for all the investors. According to

the sensitivity diagram generated from the simulation, COGS, SG&A expense and sales growth

rate are three most important value drivers for the final enterprise value, which account for a

total 90.1% of change. So Nike should better cut their COGS and SG&A expense as a

percentage of sales in order to achieve a better future cash flow as well as a higher share value.

Additionally, from a broader view, Nike has announced plans to grow the NIKE Brand in all six

of its geographies including driving mid-single-digit growth through broader expansion in its

developed geographies (North America, Western Europe, and Japan), targeting an additional

$3.0-3.5 billion of annual revenue. Moreover, NIKE plans to invest aggressively in its

developing market geographies (Greater China, Central & Eastern Europe, and Emerging

Markets) targeting low double-digit growth and an additional $3.0-3.5 billion of annual revenue

(Parker, 2010). This news definitely facilitates our confidence in the increase of Nike’s future

share price.


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References

Business Overview. (n.d.). Retrieved April 28, 2016, from

http://www.nikeresponsibility.com/report/content/chapter/business-overview

Business Summary. (n.d.). Retrieved April 28, 2016, from

http://finance.yahoo.com/q/pr?s=NKE Profile

Competitors. (n.d.). Retrieved April 28, 2016, from

http://finance.yahoo.com/q/co?s=NKE Competitors

Mourdoukoutas, P. (2014, September 28). How Nike Wins. Retrieved April 28, 2016, from

http://www.forbes.com/sites/panosmourdoukoutas/2014/09/28/how-nike-

wins/#32452fff166e

Parker, M. (2010, May 04). NIKE, INC. INTRODUCES 2015 GLOBAL GROWTH

STRATEGY. Retrieved April 28, 2016, from

http://news.nike.com/news/nike-inc-introduces-2015-global-growth-strategy

Symington, S. (2014, September 08). 3 Reasons Nike, Inc.'s Stock Could Fall. Retrieved April

28, 2016, from

http://www.fool.com/investing/general/2014/09/08/3-reasons-nike-incs-stock-could-

fall.aspx

2011 2012 2013 2014 2015

Sales/Revenue 20.89B 24.12B 25.33B 27.79B 30.7B

Cost of Goods Sold (COGS) incl. D&A 11.47B 13.62B 14.41B 15.34B 16.75B

COGS excluding D&A 11.12B 13.23B 13.95B 14.82B 16.15B

Depreciation & Amortization Expense 351M 395M 452M 518M 606M

Depreciation 335M 373M 438M 518M 606M

Amortization of Intangibles 16M 22M 14M - -

Gross Income 9.42B 10.5B 10.93B 12.44B 13.94B

2011 2012 2013 2014 2015

SG&A Expense 6.68B 7.41B 7.77B 8.77B 9.89B

Research & Development - - - - -

Other SG&A 6.68B 7.41B 7.77B 8.77B 9.89B

Other Operating Expense - - - - -

Unusual Expense (84M) (17M) (148M) 61M (615M)

EBIT after Unusual Expense 2.83B 3.11B 3.31B 3.62B 4.67B

Non Operating Income/Expense 29M (119M) (32M) (35M) (427M)

Non-Operating Interest Income 24M 30M 26M 5M 6M

Equity in Affiliates (Pretax) - - - - -

Interest Expense 34M 39M 28M 43M 39M

Gross Interest Expense 34M 39M 28M 43M 39M

Interest Capitalized - - - - -

Pretax Income 2.84B 2.98B 3.27B 3.54B 4.21B

Income Tax 711M 760M 808M 851M 932M

Income Tax - Current Domestic 346M 325M 503M 464M 676M

Income Tax - Current Foreign 441M 495M 398M 398M 369M

Income Tax - Deferred Domestic (61M) (50M) (3M) 5M (77M)

Income Tax - Deferred Foreign (15M) (10M) (90M) (16M) (36M)

Income Tax Credits - - - - -

Equity in Affiliates - - - - -

Other After Tax Income (Expense) - - - - -

Consolidated Net Income 2.13B 2.22B 2.46B 2.69B 3.27B

Minority Interest Expense - - - - -

Net Income 2.13B 2.22B 2.46B 2.69B 3.27B

Extraordinaries & Discontinued Operations - - 21M - -

Extra Items & Gain/Loss Sale Of Assets - - 231M - -

Cumulative Effect - Accounting Chg - - - - -

Discontinued Operations - - (210M) - -

Net Income After Extraordinaries 2.13B 2.22B 2.49B 2.69B 3.27B

Preferred Dividends - - - - -

Net Income Available to Common 2.13B 2.22B 2.25B 2.69B 3.27B

EPS (Basic) 1.12 1.21 1.26 1.53 1.9

Basic Shares Outstanding 1.9B 1.84B 1.79B 1.77B 1.72B

EPS (Diluted) 1.1 1.18 1.23 1.49 1.85

Diluted Shares Outstanding 1.94B 1.88B 1.83B 1.81B 1.77B

EBITDA 3.09B 3.49B 3.61B 4.2B 4.66B

Fiscal year is June-May. All values USD millions.

All the original data in income statement, balance sheet and

statement of cash flow is derived from

http://www.marketwatch.com/

Assets 2011 2012 2013 2014 2015

Cash & Short Term Investments 4.54B 3.76B 5.97B 5.14B 5.92B

Cash Only 1.96B 2.32B 3.34B 1.99B 2.48B

Short-Term Investments 2.58B 1.44B 2.63B 3.15B 3.44B

Total Accounts Receivable 3.14B 3.28B 3.12B 3.43B 3.36B

Accounts Receivables, Net 3.14B 3.28B 3.12B 3.43B 3.36B

Accounts Receivables, Gross 3.14B 3.28B 3.17B 3.51B 3.44B

Bad Debt/Doubtful Accounts - - (50M) (78M) (78M)

Other Receivables - - - - -

Inventories 2.72B 3.35B 3.43B 3.95B 4.34B

Finished Goods 2.72B 3.35B 3.43B 3.95B 4.34B

Work in Progress - - - - -

Raw Materials - - - - -

Progress Payments & Other - - - - -

Other Current Assets 906M 1.14B 1.11B 1.17B 2.36B

Miscellaneous Current Assets 906M 1.14B 1.11B 1.17B 2.36B

Total Current Assets 11.3B 11.53B 13.63B 13.7B 15.98B

2011 2012 2013 2014 2015

Net Property, Plant & Equipment 2.12B 2.28B 2.45B 2.83B 3.01B

Property, Plant & Equipment - Gross 4.91B 5.24B 5.5B 6.22B 6.35B

Buildings 1.12B 1.16B 1.17B 1.26B 1.25B

Land & Improvements 237M 252M 268M 270M 273M

Computer Software and Equipment - - - - -

Other Property, Plant & Equipment 931M 968M 945M 1.07B 1.15B

Accumulated Depreciation 2.79B 2.97B 3.05B 3.39B 3.34B

Total Investments and Advances - - - - 8M

Other Long-Term Investments - - - - 8M

Long-Term Note Receivable 50M 45M - - -

Intangible Assets 692M 736M 513M 413M 412M

Net Goodwill 205M 201M 131M 131M 131M

Net Other Intangibles 487M 535M 382M 282M 281M

Other Assets 281M 283M 457M 1.09B 2.19B

Tangible Other Assets 281M 283M 457M 1.09B 2.19B

Total Assets 15.31B 15.77B 17.94B 18.93B 21.6B

Liabilities & Shareholders' Equity 2011 2012 2013 2014 2015

ST Debt & Current Portion LT Debt 387M 157M 178M 174M 181M

Short Term Debt 187M 108M 121M 167M 74M

Current Portion of Long Term Debt 200M 49M 57M 7M 107M

Accounts Payable 1.47B 1.59B 1.65B 1.93B 2.13B

Income Tax Payable 117M 67M 98M 432M 71M

Other Current Liabilities 1.99B 2.05B 2B 2.49B 3.95B

Dividends Payable 145M 165M 188M 209M 240M

Accrued Payroll 912M 1.01B 977M 1.11B 1.39B

Miscellaneous Current Liabilities 928M 883M 839M 1.17B 2.33B

Total Current Liabilities 3.96B 3.87B 3.93B 5.03B 6.33B

Long-Term Debt 276M 228M 1.21B 1.2B 1.08B

Long-Term Debt excl. Capitalized Leases 276M 228M 1.21B 1.2B 1.08B

Non-Convertible Debt 276M 228M 1.21B 1.2B 1.08B

Convertible Debt - - - - -

Capitalized Lease Obligations - - - - -

Provision for Risks & Charges - - 104M 100M 100M

Deferred Taxes 358M 400M 652M 884M 1.38B

Deferred Taxes - Credit 1.23B 1.3B 1.55B 1.78B 1.38B

Deferred Taxes - Debit 872M 896M 893M 893M -

Other Liabilities - - - - -

Other Liabilities (excl. Deferred Income) - - - - -

Deferred Income - - - - -

Total Liabilities 5.46B 5.39B 6.79B 8.1B 8.89B

Non-Equity Reserves - - - - -

Preferred Stock (Carrying Value) - - - - -

Redeemable Preferred Stock - - - - -

Non-Redeemable Preferred Stock - - - - -

Common Equity (Total) 9.84B 10.38B 11.16B 10.82B 12.71B

Common Stock Par/Carry Value 3M 3M 3M 3M 3M

Retained Earnings 5.8B 5.59B 5.7B 4.87B 4.69B

ESOP Debt Guarantee - - - - -

Cumulative Translation Adjustment/Unrealized For. Exch. Gain 168M (127M) (14M) 9M (11M)

Unrealized Gain/Loss Marketable Securities - - - - -

Revaluation Reserves - - - - -

Treasury Stock - - - - -

Total Shareholders' Equity 9.84B 10.38B 11.16B 10.82B 12.71B

Accumulated Minority Interest - - - - -

Total Equity 9.84B 10.38B 11.16B 10.82B 12.71B

Liabilities & Shareholders' Equity 15.31B 15.77B 17.94B 18.93B 21.6B


Operating Activities 2011 2012 2013 2014 2015

Net Income before Extraordinaries 2.13B 2.22B 2.49B 2.69B 3.27B

Depreciation, Depletion & Amortization 335M 373M 438M 518M 606M

Depreciation and Depletion 335M 373M 438M 518M 606M

Amortization of Intangible Assets - - - - -

Deferred Taxes & Investment Tax Credit (76M) (60M) 21M (11M) (113M)

Deferred Taxes (76M) (60M) 21M (11M) (113M)

Investment Tax Credit - - - - -

Other Funds 128M 162M 125M 291M 658M

Funds from Operations 2.52B 2.7B 3.07B 3.49B 4.42B

Extraordinaries - - - - -

Changes in Working Capital (708M) (799M) (42M) (488M) 256M

Receivables (273M) (323M) 142M (298M) (216M)

Accounts Payable 151M 470M 41M 525M -

Other Assets/Liabilities (35M) (141M) (28M) (210M) 1.09B

Net Operating Cash Flow 1.81B 1.9B 3.03B 3B 4.68B

Investing Activities 2011 2012 2013 2014 2015

Capital Expenditures (432M) (597M) (636M) (880M) (963M)

Capital Expenditures (Fixed Assets) (432M) (597M) (636M) (880M) (963M)

Capital Expenditures (Other Assets) - - - - -

Net Assets from Acquisitions - - - - -

Sale of Fixed Assets & Businesses 1M 2M 800M 3M 3M

Purchase/Sale of Investments (537M) 1.12B (1.2B) (328M) 935M

Purchase of Investments (7.62B) (2.71B) (3.7B) (5.39B) (4.94B)

Sale/Maturity of Investments 7.08B 3.83B 2.5B 5.06B 5.87B

Other Uses (53M) (37M) (28M) (2M) (150M)

Other Sources - 22M - - -

Net Investing Cash Flow (1.02B) 514M (1.07B) (1.21B) (175M)

Financing Activities 2011 2012 2013 2014 2015

Cash Dividends Paid - Total (555M) (619M) (703M) (799M) (899M)

Common Dividends (555M) (619M) (703M) (799M) (899M)

Preferred Dividends - - - - -

Change in Capital Stock (1.51B) (1.35B) (1.36B) (2.25B) (2.02B)

Repurchase of Common & Preferred Stk. (1.86B) (1.81B) (1.67B) (2.63B) (2.53B)

Sale of Common & Preferred Stock 345M 468M 313M 383M 514M

Proceeds from Stock Options - - - - -

Other Proceeds from Sale of Stock 345M 468M 313M 383M 514M

Issuance/Reduction of Debt, Net 33M (268M) 952M 15M (70M)

Change in Current Debt 41M (65M) 15M 75M (63M)

Change in Long-Term Debt (8M) (203M) 937M (60M) (7M)

Issuance of Long-Term Debt - - 986M - -

Reduction in Long-Term Debt (8M) (203M) (49M) (60M) (7M)

Other Funds 64M 115M 72M 115M 199M

Other Uses - - - (17M) (19M)

Other Sources 64M 115M 72M 132M 218M

Net Financing Cash Flow (1.97B) (2.12B) (1.04B) (2.91B) (2.79B)

Exchange Rate Effect 57M 67M 100M 1M (83M)

Miscellaneous Funds - - - - -

Net Change in Cash (1.12B) 362M 1.02B (1.12B) 1.63B

Free Cash Flow 1.38B 1.3B 2.39B 2.12B 3.72B


2011 2011 2012 2012 2013 2013 2014 2014 2015 2015

(USD) (% Sales) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales)

Income Statement (USD in Billions)

Sales/Revenue 20.89 100 24.12 100 25.33 100 27.79 100 30.7 100

Cost of Goods Sold (COGS) incl. D&A 11.47 54.9 13.62 56.5 14.41 56.9 15.34 55.2 16.75 54.6

Depreciation & Amortization Expense 0.35 1.7 0.40 1.6 0.45 1.8 0.52 1.9 0.61 2.0

Gross Income 9.42 45.1 10.5 43.5 10.92 43.1 12.45 44.8 13.95 45.4

SG&A Expense 6.68 32.0 7.41 30.7 7.77 30.7 8.77 31.6 9.89 32.2

Unusual Expense -0.084 -0.4 -0.017 -0.1 -0.148 -0.6 0.061 0.2 -0.615 -2.0

EBIT after Unusual Expense 2.82 13.5 3.11 12.9 3.30 13.0 3.62 13.0 4.68 15.2

Non Operating Income/Expense 0.029 0.1 -0.119 -0.5 -0.032 -0.1 -0.035 -0.1 -0.427 -1.4

Non-Operating Interest Income 0.024 0.1 0.03 0.1 0.026 0.1 0.005 0.0 0.006 0.0

Interest Expense 0.034 0.2 0.039 0.2 0.028 0.1 0.043 0.2 0.039 0.1

Pretax Income 2.84 13.6 2.98 12.4 3.26 12.9 3.55 12.8 4.22 13.7

Income Tax 0.711 3.4 0.76 3.2 0.808 3.2 0.851 3.1 0.932 3.0

Net Income 2.13 10.2 2.22 9.2 2.46 9.7 2.70 9.7 3.28 10.7

Fiscal year is June-May

2011 2011 2012 2012 2013 2013 2014 2014 2015 2015

Balance Sheet (USD in Billions) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales)

Assets

Cash & Short Term Investments 4.54 21.7 3.76 15.6 5.97 23.6 5.14 18.5 5.92 19.3

Total Accounts Receivable 3.14 15.0 3.28 13.6 3.12 12.3 3.43 12.3 3.36 10.9

Inventories 2.72 13.0 3.35 13.9 3.43 13.5 3.95 14.2 4.34 14.1

Other Current Assets 0.906 4.3 1.14 4.7 1.11 4.4 1.17 4.2 2.36 7.7

Total Current Assets 11.306 54.1 11.53 47.8 13.63 53.8 13.69 49.3 15.98 52.1

Net Property, Plant & Equipment 2.12 10.1 2.28 9.5 2.45 9.7 2.83 10.2 3.01 9.8

Property, Plant & Equipment - Gross 4.91 23.5 5.24 21.7 5.5 21.7 6.22 22.4 6.35 20.7

Accumulated Depreciation 2.79 13.4 2.97 12.3 3.05 12.0 3.39 12.2 3.34 10.9

Total Investments and Advances 0 0.0 0 0.0 0 0.0 0 0.0 0.008 0.0

Long-Term Note Receivable 0.05 0.2 0.045 0.2 0 0.0 0 0.0 0 0.0

Intangible Assets 0.692 3.3 0.736 3.1 0.513 2.0 0.413 1.5 0.412 1.3

Other Assets 0.281 1.3 0.283 1.2 0.457 1.8 1.09 3.9 2.19 7.1

Total Assets 14.449 69.2 14.874 61.7 17.05 67.3 18.023 64.9 21.6 70.4

Liabilities & Shareholders' Equity

Overdrafts 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0

ST Debt & Current Portion LT Debt 0.387 1.9 0.157 0.7 0.178 0.7 0.174 0.6 0.181 0.6

Accounts Payable 1.47 7.0 1.59 6.6 1.65 6.5 1.93 6.9 2.13 6.9

Income Tax Payable 0.117 0.6 0.067 0.3 0.098 0.4 0.432 1.6 0.071 0.2

Other Current Liabilities 1.99 9.5 2.05 8.5 2 7.9 2.49 9.0 3.95 12.9

Total Current Liabilities 3.96 19.0 3.86 16.0 3.93 15.5 5.03 18.1 6.33 20.6

Long-Term Debt 0.276 1.3 0.228 0.9 1.21 4.8 1.2 4.3 1.08 3.5

Provision for Risks & Charges 0 0.0 0 0.0 0.104 0.4 0.1 0.4 0.1 0.3

Deferred Taxes 0.358 1.7 0.4 1.7 0.652 2.6 0.884 3.2 1.38 4.5

Total Liabilities 4.60 22.0 4.49 18.6 5.89 23.3 7.21 25.9 8.89 29.0

Total Shareholders' Equity 9.84 47.1 10.38 43.0 11.16 44.1 10.82 38.9 12.71 41.4

Liabilities & Shareholders' Equity 14.44 69.1 14.87 61.7 17.05 67.3 18.03 64.9 21.60 70.4

Fiscal year is June-May

2011 2011 2012 2012 2013 2013 2014 2014 2015 2015

(USD) (% Sales) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales) 2016 2017 2018 2019 2020

Income Statement (USD in Billions)

Sales/Revenue 20.89 100 24.12 100 25.33 100 27.79 100 30.7 100 Sales growth rate 10% 33.77 37.15 40.86 44.95 49.44

Cost of Goods Sold (COGS) incl. D&A 11.47 54.9 13.62 56.5 14.41 56.9 15.34 55.2 16.75 54.6 % sales 55.50% 18.74 20.62 22.68 24.95 27.44

Depreciation & Amortization Expense 0.35 1.7 0.40 1.6 0.45 1.8 0.52 1.9 0.61 2.0 % sales 2.00% 0.68 0.74 0.82 0.90 0.99

Gross Income 9.42 45.1 10.5 43.5 10.92 43.1 12.45 44.8 13.95 45.4 15.03 16.53 18.18 20.00 22.00

SG&A Expense 6.68 32.0 7.41 30.7 7.77 30.7 8.77 31.6 9.89 32.2 % sales 31.50% 10.64 11.70 12.87 14.16 15.57

Unusual Expense -0.084 -0.4 -0.017 -0.1 -0.148 -0.6 0.061 0.2 -0.615 -2.0 0% 0 0 0 0 0

EBIT after Unusual Expense 2.82 13.5 3.11 12.9 3.30 13.0 3.62 13.0 4.68 15.2 4.39 4.83 5.31 5.84 6.43

Non Operating Income/Expense 0.029 0.1 -0.119 -0.5 -0.032 -0.1 -0.035 -0.1 -0.427 -1.4 0% 0 0 0 0 0

Non-Operating Interest Income 0.024 0.1 0.03 0.1 0.026 0.1 0.005 0.0 0.006 0.0 cash&ST inv*IR 2.72% 0.23 0.32 0.41 0.51 0.62

Interest Expense 0.034 0.2 0.039 0.2 0.028 0.1 0.043 0.2 0.039 0.1 LT Debt*IR 2.72% 0.03 0.03 0.03 0.03 0.03

Pretax Income 2.84 13.6 2.98 12.4 3.26 12.9 3.55 12.8 4.22 13.7 4.59 5.11 5.69 6.32 7.02

Income Tax 0.711 3.4 0.76 3.2 0.808 3.2 0.851 3.1 0.932 3.0 % Pretax income 24% 1.10 1.23 1.37 1.52 1.68

Net Income 2.13 10.2 2.22 9.2 2.46 9.7 2.70 9.7 3.28 10.7 3.49 3.89 4.32 4.81 5.34

Fiscal year is June-May Assumptions

2016-2020

2011 2011 2012 2012 2013 2013 2014 2014 2015 2015

Balance Sheet (USD in Billions) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales) (USD) (% Sales) 2016 2017 2018 2019 2020

Assets

Cash & Short Term Investments 4.54 21.7 3.76 15.6 5.97 23.6 5.14 18.5 5.92 19.3 8.57 11.58 14.95 18.70 22.88

Total Accounts Receivable 3.14 15.0 3.28 13.6 3.12 12.3 3.43 12.3 3.36 10.9 % sales 10% 3.38 3.71 4.09 4.49 4.94

Inventories 2.72 13.0 3.35 13.9 3.43 13.5 3.95 14.2 4.34 14.1 % sales 14% 4.73 5.20 5.72 6.29 6.92

Other Current Assets 0.906 4.3 1.14 4.7 1.11 4.4 1.17 4.2 2.36 7.7 % sales 7.70% 2.60 2.86 3.15 3.46 3.81

Total Current Assets 11.306 54.1 11.53 47.8 13.63 53.8 13.69 49.3 15.98 52.1 19.27 23.36 27.90 32.95 38.55

Net Property, Plant & Equipment 2.12 10.1 2.27 9.4 2.45 9.7 2.83 10.2 3.01 9.8 % sales 10% 3.38 3.71 4.09 4.49 4.94

Property, Plant & Equipment - Gross 4.91 23.5 5.24 21.7 5.5 21.7 6.22 22.4 6.35 20.7 7.39 8.47 9.66 10.97 12.41

Accumulated Depreciation 2.79 13.4 2.97 12.3 3.05 12.0 3.39 12.2 3.34 10.9 4.02 4.76 5.58 6.47 7.46

Total Investments and Advances 0 0.0 0 0.0 0 0.0 0 0.0 0.008 0.0 0% 0 0 0 0 0

Long-Term Note Receivable 0.05 0.2 0.045 0.2 0 0.0 0 0.0 0 0.0 0% 0 0 0 0 0

Intangible Assets 0.692 3.3 0.736 3.1 0.513 2.0 0.413 1.5 0.412 1.3 % sales 1.30% 0.44 0.48 0.53 0.58 0.64

Other Assets 0.281 1.3 0.283 1.2 0.457 1.8 1.09 3.9 2.19 7.1 % sales 7.10% 2.40 2.64 2.90 3.19 3.51

Total Assets 14.449 69.2 14.864 61.6 17.05 67.3 18.023 64.9 21.6 70.4 25.49 30.20 35.42 41.22 47.65

Liabilities & Shareholders' Equity

Overdrafts 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0 0 0 0

ST Debt & Current Portion LT Debt 0.387 1.9 0.157 0.7 0.178 0.7 0.174 0.6 0.181 0.6 % sales 0.60% 0.20 0.22 0.25 0.27 0.30

Accounts Payable 1.47 7.0 1.59 6.6 1.65 6.5 1.93 6.9 2.13 6.9 % sales 6.8% 2.30 2.53 2.78 3.06 3.36

Income Tax Payable 0.117 0.6 0.067 0.3 0.098 0.4 0.432 1.6 0.071 0.2 % sales 0.40% 0.14 0.15 0.16 0.18 0.20

Other Current Liabilities 1.99 9.5 2.05 8.5 2 7.9 2.49 9.0 3.95 12.9 % sales 12% 4.05 4.46 4.90 5.39 5.93

Total Current Liabilities 3.96 19.0 3.86 16.0 3.93 15.5 5.03 18.1 6.33 20.6 6.69 7.36 8.09 8.90 9.79

Long-Term Debt 0.276 1.3 0.228 0.9 1.21 4.8 1.2 4.3 1.08 3.5 const 1.08 1.08 1.08 1.08 1.08 1.08

Provision for Risks & Charges 0 0.0 0 0.0 0.104 0.4 0.1 0.4 0.1 0.3 0% 0 0 0 0 0

Deferred Taxes 0.358 1.7 0.4 1.7 0.652 2.6 0.884 3.2 1.38 4.5 % sales 4.50% 1.52 1.67 1.84 2.02 2.22

Total Liabilities 4.60 22.0 4.49 18.6 5.89 23.3 7.21 25.9 8.89 29.0 9.29 10.11 11.01 12.00 13.09

Total Shareholders' Equity 9.84 47.1 10.38 43.0 11.16 44.1 10.82 38.9 12.71 41.4 16.20 20.09 24.41 29.22 34.55

Liabilities & Shareholders' Equity 14.44 69.1 14.87 61.7 17.05 67.3 18.03 64.9 21.60 70.4 25.49 30.20 35.42 41.22 47.65

Trial Asset 16.92 18.61 20.47 22.52 24.77

Trial liabs.& equity 25.49 30.20 35.42 41.22 47.65

Trial plug -8.57 -11.58 -14.95 -18.70 -22.88

Min. cash balance 3 3 3 3 3

Plug -5.57 -8.58 -11.95 -15.70 -19.88

Fiscal year is June-May Assumptions

2016-2020

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Valuation Ratios

Basic Shares Outstanding (in Billions) 1.9 1.84 1.79 1.77 1.72 1.72 1.72 1.72 1.72 1.72

EPS (Basic) 1.12$ 1.21$ 1.26$ 1.53$ 1.90$ 2.03$ 2.26$ 2.51$ 2.79$ 3.10$

Profitability Ratios

Return on Equity (ROE) 0.2167 0.2138 0.2201 0.2491 0.2583 0.2155 0.1935 0.1771 0.1645 0.1544

Return on Sales (ROS) 0.1021 0.0920 0.0970 0.0970 0.1069 0.1034 0.1046 0.1058 0.1069 0.1079

Growth Rates

EPS Growth Rate 0.0804 0.0413 0.2143 0.2418 0.0683 0.1134 0.1123 0.1113 0.1104

Sales Growth Rate 0.1546 0.0502 0.0971 0.1047 0.1000 0.1000 0.1000 0.1000 0.1000

Net Income Growth Rate 0.0408 0.1068 0.0973 0.2182 0.0634 0.1134 0.1123 0.1113 0.1104

Liquidity Ratios

Current Ratio 2.8522 2.9840 3.4717 2.7238 2.5237 2.8825 3.1761 3.4488 3.7023 3.9379

Quick Ratio 2.1660 2.1170 2.5981 1.9379 1.8383 2.1754 2.4690 2.7418 2.9952 3.2308

Operating Efficiency Ratios

Total Asset Turnover Ratio 1.4458 1.6227 1.4856 1.5419 1.4213 1.3250 1.2302 1.1536 1.0904 1.0377

Leverage Ratios

Total Debt to Equity 0.0674 0.0371 0.1244 0.1270 0.0992 0.0792 0.0649 0.0543 0.0462 0.0398

Coverage Ratios

Times Interest Earned (TIE) 83.06 79.67 117.79 84.16 119.87 149.45 164.39 180.83 198.91 218.80

Shares outstanding, May 29th 2015 1.72 2011 2012 2013 2014 2015

Share Price, May 29th 2015 50.84$ Cash & Short Term Investments 4.54 3.76 5.97 5.14 5.92 Date NKE S&P 500 NKE S&P 500

Equity value, E 87.44 12/1/2015 62.34$ 2,043.94$ -0.054186081 -0.01769

Net debt, D, May 29th 2015 -4.659 ST Debt & Current Portion LT Debt 0.387 0.157 0.178 0.174 0.181 11/2/2015 65.81$ 2,080.41$ 0.009494609 0.000505

Tax rate, Tc 24% Long-Term Debt 0.276 0.228 1.21 1.2 1.08 10/1/2015 65.19$ 2,079.36$ 0.06348584 0.079719

Cost of Debt, rD -0.00847 9/1/2015 61.18$ 1,920.03$ 0.09820878 -0.0268

Covariance (NKE, S&P 500) 0.00069 Net Debt -3.877 -3.375 -4.582 -3.766 -4.659 8/3/2015 55.46$ 1,972.18$ -0.030579144 -0.06462

Variance (S&P 500) 0.001141 Non-Operating Interest Income 0.024 0.03 0.026 0.005 0.006 7/1/2015 57.18$ 2,103.84$ 0.064526999 0.01955

Beta 0.604786 Interest Expense 0.034 0.039 0.028 0.043 0.039 6/1/2015 53.60$ 2,063.11$ 0.060584146 -0.02124

Expected market return, E(rM) 0.098397 Net Interest 0.01 0.009 0.002 0.038 0.033 5/1/2015 50.45$ 2,107.39$ 0.030956291 0.010437

Risk free rate, Rf 2.70% Implied cost of debt, rD -0.00248 -0.000502702 -0.009104 -0.007833828 4/1/2015 48.92$ 2,085.51$ -0.01496239 0.008485

% of equity 1.06 3/2/2015 49.65$ 2,067.89$ 0.032517385 -0.01755

% of debt (0.06) Dividends 0.555 0.619 0.703 0.799 0.899 2/2/2015 48.06$ 2,104.50$ 0.054341266 0.053439

Net Income Available to Common 2.13 2.22 2.25 2.69 3.27 1/2/2015 45.52$ 1,994.99$ -0.041407247 -0.03153

WACC based on Gordon per-share dividends Dividend Payout Ratio 0.260563 0.278829 0.312444444 0.29702602 0.274923547 12/1/2014 47.45$ 2,058.90$ -0.029264202 -0.0042

Current dividend/share 0.522674 ROE 0.216667 0.213776 0.220071685 0.24907579 0.258300551 11/3/2014 48.86$ 2,067.56$ 0.06576804 0.024237

Growth rate 0.165615 g 0.160211 0.154169 0.151311509 0.1750938 0.187287647 10/1/2014 45.75$ 2,018.05$ 0.041395896 0.022936

Cost of equity, rE 0.18 9/2/2014 43.89$ 1,972.29$ 0.127145548 -0.01564

WACC 0.19 8/1/2014 38.65$ 2,003.37$ 0.021258189 0.036964

7/1/2014 37.84$ 1,930.67$ -0.005430554 -0.01519

WACC based on classic CAPM 6/2/2014 38.04$ 1,960.23$ 0.008286965 0.018879

Cost of equity, rE 0.07018 5/1/2014 37.73$ 1,923.57$ 0.056013319 0.020812

WACC 0.07 4/1/2014 35.67$ 1,883.95$ -0.01239713 0.006182

3/3/2014 36.12$ 1,872.34$ -0.058376225 0.006908

WACC based on tax-adjusted CAPM 2/3/2014 38.29$ 1,859.45$ 0.075210202 0.042213

Cost of equity, rE 7% 1/2/2014 35.52$ 1,782.59$ -0.076477899 -0.03623

WACC 0.07 12/2/2013 38.34$ 1,848.36$ -0.003209731 0.023289

11/1/2013 38.46$ 1,805.81$ 0.043647987 0.027663

Estimated WACC 0.07 10/1/2013 36.82$ 1,756.54$ 0.042054718 0.04363

9/3/2013 35.30$ 1,681.55$ 0.14524226 0.029316

8/1/2013 30.53$ 1,632.97$ 0.001728785 -0.0318

7/1/2013 30.48$ 1,685.73$ -0.012006487 0.048278

6/3/2013 30.85$ 1,606.28$ 0.032235173 -0.01511

Year 2015 2016 2017 2018 2019 2020 5/1/2013 29.87$ 1,630.74$ -0.027635427 0.02055

Free cash flow calculation 4/1/2013 30.70$ 1,597.57$ 0.074906518 0.017924

Profit after tax 3.49 3.89 4.32 4.81 5.34 3/1/2013 28.49$ 1,569.19$ 0.080240444 0.035355

Add back depreciation 0.68 0.74 0.82 0.90 0.99 2/1/2013 26.29$ 1,514.68$ 0.011429013 0.011

Subtract increase in current asset -0.65 -1.07 -1.18 -1.30 -1.42 1/2/2013 25.99$ 1,498.11$ 0.046387832 0.049198

Add back increase in current liability 0.35 0.67 0.74 0.81 0.89 12/3/2012 24.82$ 1,426.19$ 0.061330569 0.007043

Subtract increase in fixed asset at cost -0.37 -0.34 -0.37 -0.41 -0.45 11/1/2012 23.34$ 1,416.18$ 0.064620702 0.002843

Add back after-tax interest on debt 0.022326 0.022326 0.022326 0.022326 0.022326 10/1/2012 21.88$ 1,412.16$ -0.037902518 -0.01999

Subtract after-tax interest on cash & MS -0.177131 -0.239477 -0.309048 -0.386587 -0.47291 9/4/2012 22.72$ 1,440.67$ -0.025486354 0.023947

Free cash flow 3.35 3.67 4.04 4.44 4.89 8/1/2012 23.31$ 1,406.58$ 0.045714057 0.019571

7/2/2012 22.27$ 1,379.32$ 0.061522271 0.012519

Valuing the firm 6/1/2012 20.94$ 1,362.16$ -0.208962879 0.038793

Weighted average cost of capital 0.07 5/1/2012 25.81$ 1,310.33$ -0.030220919 -0.0647

Long-term free cash flow growth rate 3.0% 4/2/2012 26.60$ 1,397.91$ 0.031140494 -0.00753

3/1/2012 25.78$ 1,408.47$ 0.008148208 0.030851

Year 2015 2016 2017 2018 2019 2020 2/1/2012 25.57$ 1,365.68$ 0.037095432 0.039787

FCF 3.35 3.67 4.04 4.44 4.89 1/3/2012 24.64$ 1,312.41$ 0.076099746 0.04266

Terminal value 116.74 12/1/2011 22.84$ 1,257.60$ 0.005723577 0.008497

Total 3.35 3.67 4.04 4.44 121.63 11/1/2011 22.71$ 1,246.96$ -0.001765935 -0.00507

10/3/2011 22.75$ 1,253.30$ 0.11935402 0.102307

Enterprise value 98.40 9/1/2011 20.19$ 1,131.42$ -0.009659605 -0.07447

Add in initial (year 2015) cash & MS 5.92 8/1/2011 20.38$ 1,218.89$ -0.039597941 -0.05847

Asset value in year 2015 104.32 7/1/2011 21.21$ 1,292.28$ 0.001887528 -0.02171

Subtract out value of firm's debt today -1.261 6/1/2011 21.17$ 1,320.64$ 0.067208572 -0.01843

Equity value 103.05 5/2/2011 19.79$ 1,345.20$ 0.025545502 -0.01359

Share value (1.72B shares outstanding) 59.92$ 4/1/2011 19.29$ 1,363.61$ 0.083835938 0.028097

Current market price 50.84$ 3/1/2011 17.74$ 1,325.83$ -0.158679561 -0.00105

2/1/2011 20.79$ 1,327.22$ 0.076417575 0.031457

1/3/2011 19.26$ 1,286.12$

Free cash flow year ending May. 2015 3.72

Growth rate of FCF, year 2016-2020 0.077

Long-term FCF growth rate 3%

Weighted average cost of capital, WACC 0.07

Year 2015 2016 2017 2018 2019 2020

FCF 4.00644 4.314936 4.647186 5.005019 5.390406

Terminal value 128.7017

Total 4.00644 4.314936 4.647186 5.005019 134.0921

Enterprise value 109.23

Add back initial cash & MS 5.92

Subtract out 2015 financial liabilities -1.261

Equity value 113.89

Share value (1.72B shares outstanding) 66.21$

Current market price 50.84$

59.92$ 0% 1% 2% 3% 4% 5% 6% 7% 8%

4% 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$

5% 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$

6% 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$

7% 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$

8% 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$

9% 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$

10% 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$ 59.92$

Long-term growth

WACC

All the numbers are in the unit of billion except for those with $ and all

the ratios and rates

Price Return

Data table: Share value as function of WACC and Long-Term Growth (Pro Forma Approach)

WACC Calculation

Full Pro Forma Approach

Simplified DCF Approach

$-

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

1/3/2011 1/3/2012 1/3/2013 1/3/2014 1/3/2015

NK

E p

er

shar

e

Share Price Trend

NKE S&P 500

Crys tal Ball Repor t - Full

Simulation started on 4/27/2016 at 12:38 AM

Simulation stopped on 4/27/2016 at 12:39 AM

Units Frequency Units Probability Units Probability Units Probability Units Probability Units Probability Units Probability Units Probability Units Probability Name Correlation

Run preferences: ##### 5 9% 0.00 13% 0.01 9% 0.01 7% 0.00 ###### 0.00 5% 0.00 ###### 0.00 22% 0.00 COGS as % sales -31.5%

Number of trials run 10,000 7 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 SG&A expense as % sales -30.2%

Extreme speed 14 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 Sales growth rate 26.7%

Monte Carlo 10 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 Accounts receivable as % sales -3.9%

Random seed 27 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 Other current l iabilities as % sales 3.8%

Precision control on 26 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 Tax rate -1.9%

Confidence level 95.00% 46 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 Inventories as % sales -1.5%

50 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 Net PP&E as % sales -0.6%

Run statistics: 73 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00

Total running time (sec) 56.79 100 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00

Trials/second (average) 176 109 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00

Random numbers per sec 1,409 154 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00

##### 195 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00

Crystal Ball data: 206 0.02 0.01 0.01 0.00 0.01 0.01 0.01 0.01

Assumptions 8 259 0.02 0.01 0.01 0.00 0.01 0.01 0.01 0.01

Correlations 0 274 0.02 0.01 0.01 0.00 0.01 0.01 0.01 0.01

Correlation matrices 0 262 10% 0.02 13% 0.01 9% 0.01 8% 0.00 0.01 7% 0.01 0.01 22% 0.01

Decision variables 0 327 0.02 0.01 0.01 0.00 0.01 0.01 0.01 0.01

Forecasts 1 332 0.02 0.01 0.01 0.00 0.01 0.01 0.01 0.01

356 0.02 0.01 0.01 0.00 0.01 0.01 0.01 0.01Forecas ts 397 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

383 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

424 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01W orksheet: [Ge_Baozheng_NKE_StageI.x lsx ]VALUE 456 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

##### 421 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01Forecas t: Share value (1.72B shares outs tanding) Cell: B57 430 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

418 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Summary: 427 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Certainty level is 90.62% 387 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Certainty range is from $48.00 to $65.00 348 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Entire range is from $43.28 to $79.02 386 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Base case is $59.92 330 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

After 10,000 trials, the std. error of the mean is $0.05 308 11% 0.02 14% 0.01 10% 0.01 9% 0.01 0.01 8% 0.01 0.01 23% 0.01

263 0.02 0.01 0.01 0.01 ###### 0.01 0.01 ###### 0.01 0.01

262 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

228 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

##### 204 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01

170 0.02 0.01 0.01 0.01 0.02 0.02 0.02 0.02

149 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

## 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

## 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

## 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

75 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

75 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

53 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

49 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

36 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

24 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

25 12% 0.01 14% 0.01 10% 0.01 10% 0.01 0.02 10% 0.02 0.02 24% 0.02

19 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

##### 13 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Statistics: Forecast values 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Trials 10,000 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Base Case $59.92 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Mean $58.08 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Median $57.91 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Mode --- 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Standard Deviation $4.80 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Variance $23.06 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02

Skewness 0.1908 0.01 0.01 0.01 0.02 0.02 0.02 0.02 0.02

Kurtosis 2.86 0.01 0.01 0.01 0.02 0.02 0.02 0.02 0.02

Coeff. of Variation 0.0827 0.01 0.01 0.01 0.02 0.02 0.02 0.02 0.02

Minimum $43.28 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

Maximum $79.02 13% 0.01 14% 0.01 10% 0.01 11% 0.02 0.01 11% 0.01 0.01 25% 0.01

Range Width $35.75 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

Mean Std. Error $0.05 0.01 0.01 0.01 0.02 ###### 0.01 0.01 ###### 0.01 0.01

0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01Forecas t: Share value (1.72B shares outs tanding) (cont'd) Cell: B57 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

Percentiles: Forecast values 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

0% $43.28 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

10% $51.95 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

20% $53.88 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

30% $55.40 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

40% $56.72 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

50% $57.91 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

60% $59.17 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

70% $60.56 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01

80% $62.13 0.00 0.01 0.01 0.02 0.01 0.01 0.01 0.01

90% $64.42 14% 0.00 15% 0.01 11% 0.01 12% 0.02 0.01 13% 0.01 0.01 25% 0.01

100% $79.02 0.00 0.01 0.01 0.02 0.01 0.01 0.01 0.01

0.00 0.01 0.01 0.02 0.01 0.01 0.01 0.01

End of Forecasts 0.00 0.01 0.01 0.02 0.01 0.01 0.01 0.01Assum ptions 0.00 0.01 0.01 0.02 0.01 0.01 0.01 0.01

0.00 0.01 0.01 0.01 0.01 0.01 0.01 0.01

0.00 0.01 0.01 0.01 0.01 0.01 0.01 0.01W orksheet: [Ge_Baozheng_NKE_StageI.x lsx ]BSproform a 0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00

0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00Assum ption: Accounts receivable as % sales Cell: W 8 0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00

0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00

0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00

0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00

Triangular distribution with parameters: 0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00

Minimum 9% 0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00

Likeliest 10% 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00

Maximum 15% 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00

0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00

0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00

15% 0.00 15% 0.01 11% 0.01 13% 0.00 ###### 0.00 15% 0.00 ###### 0.00 26% 0.00

Assum ption: Inventor ies as % sales Cell: W 9

Uniform distribution with parameters:

Minimum 13%

Maximum 15%

Assum ption: Inventor ies as % sales (cont'd) Cell: W 9

Assum ption: Net PP& E as % sales Cell: W 13

Uniform distribution with parameters:

Minimum 9%

Maximum 11%

Assum ption: Other cur rent liabilit ies as % sales Cell: W 28

Triangular distribution with parameters:

Minimum 7%

Likeliest 12%

Maximum 13%

W orksheet: [Ge_Baozheng_NKE_StageI.x lsx ]ISproform a

Assum ption: COGS as % sales Cell: W 8


Minimum 54.00%

Likeliest 55.50%

Maximum 57.00%

Assum ption: COGS as % sales (cont'd) Cell: W 8

Assum ption: Sales grow th rate Cell: W 7


Minimum 5%

Likeliest 10%

Maximum 15%

Assum ption: SG& A expense as % sales Cell: W 12


Minimum 30.00%

Likeliest 31.50%

Maximum 33.00%

Assum ption: Tax rate Cell: W 19


Minimum 22%

Likeliest 24%

Maximum 26%

Assum ption: Tax rate (cont'd) Cell: W 19

End of AssumptionsSens it ivity Char ts

End of Sensitivity Charts

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0

50

100

150

200

250

300

350

400

450

500

44.90031119 51.22801712 57.55572305 63.88342899 71.26575258

Fre

qu

en

cy

Share value (1.72B shares outstanding)

0.09 0.119090909 0.15

Pro

bab

ility

Accounts receivable as % sales

0.126 0.139575758 0.154

Pro

bab

ility

Inventories as % sales

0.09 0.09969697 0.11

Pro

bab

ility

Net PP&E as % sales

0.07 0.100060606 0.132

Pro

bab

ility

Other current liabilities as % sales

0.54 0.55 0.56 0.57

Pro

ba

bili

ty

COGS as % sales

0.05 0.098484848 0.15

Pro

bab

ility

Sales growth rate

0.3 0.31 0.32 0.33

Pro

bab

ility

SG&A expense as % sales

0.216 0.239272727 0.264

Pro

ba

bili

ty

Tax rate

-0.314948289

-0.301840524

0.266560553

-0.038875231

0.037621272

-0.018860589

-0.015004414

-0.006289129

-1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1

COGS as % sales

SG&A expense as % sales

Sales growth rate

Accounts receivable as % sales

Other current liabilities as % sales

Tax rate

Inventories as % sales

Net PP&E as % sales

Sensitivity: Share value (1.72B shares outstanding)

Documents

Financial Modeling and Valuation about Nike, Inc