INTRODUCTIONNorthPoint Large-Cap Fund, part of the NorthPoint Group, invests primarily in Fortune 500 companies with an emphasis on value investing. Generally, he invests in old economy stocks and has performed very well over the past year 2000 (20.7% return even as the S&P 500 fell 10.1%). Kimi Ford, portfolio manager at NorthPoint Group, plans to buy shares for the fund a week before he begins his research. Nike Inc. decided to hold an analyst meeting to present its 2001 financial results. However, this meeting had a different purpose than that of simply providing information about their financial results, the meeting also had the purpose of communicating a new strategy to revitalize the company by developing more mid-priced athletic shoe products. During the meeting, company representatives said that Nike's revenue since 1997 was about $9 billion, and net profit fell in 2000 by $220 million. Nike executives believed that with this new strategy, the company would have revenue growth targets of 8 to 10 percent and an earnings growth target of more than 15 percent. With this information provided by the company, Ford then decided to review some reports regarding the meeting provided by Lehman Brothers which recommended a Strong Buy while UBS Warburg and CSFB recommended a Hold. Unable to draw conclusive conclusions from these reports, Ford decided to ask his assistant Joanna Cohen to estimate and weight Nike's cost of capital in order to make a better decision and obtain more accurate conclusions. analysis of the situation, I will state some important financial factors to consider and what has already been covered by Joanna: Since the application...... middle of paper ......9 (MRP) = 10.5% It is now possible to calculate Nike Inc.'s WACC using both debt and equity weights and costs: WACC: Debt Weight x Debt Cost + Equity Weight x Cost of Equity 0.4682% + 9.4083% = 9.88% With WACC which are the required rate of return for cash flows similar to those of the entire company. Investing on Nike Inc. projects will generate positive WACC returns because the WACC found is positive. CONCLUSIONS Knowing that WACC is, in my opinion, the most appropriate model for making a final decision, I find that stocks at a current price with If the WACC is greater than 42.09% (current stock price) , Ford should invest in Nike Inc. and buy it now. Even though the stock price is falling, the determination of Nike management in this new strategy seems very high and with a high probability of success..