ReadMeNike, Inc.: Cost of Capital ModelReadMe InstructionsBuilt For:Kimi FordBuilt By:Phone:Email:Purpose(s):Re-Calculate CAPM & WACCAnalyze Working Capital and Free Cash FlowsCalculate NPV, Equity Value, Equity Value per Share* Warning this model contains circular references that will not work if the cells associated are modifiedVersion Info:1aAdd ReadMe Page1bAdded Parameters Page1cAdded Income Statement Page1dAdded Balance Sheet Page1eAddedCash Flow Page1fAdded Sensitivity Analysis PageNotes:All values are in $USD Millions except per share dataCell Color Key:Input Assumption CellsGray, Lighter 80%, Grey borderCalculation CellsGray, Lighter 60%, Grey border, White TextTotal Calculation CellsRed, Darker 25%, Black border, White TextSection TitlesRed, No Border, White Text

ParametersNike, Inc.: Cost of Capital ModelDiscounted Cash Flow Parameters2002200320042005200620072008200920102011 Revenue growth7.0%6.5%6.5%6.5%6.0%6.0%6.0%6.0%6.0%6.0% COGS/Sales60.0%60.0%59.5%59.5%59.0%59.0%58.5%58.5%58.0%58.0% S&A/Sales28.0%27.5%27.0%26.5%26.0%25.5%25.0%25.0%25.0%25.0% Tax rate38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0% Current assets/Sales38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0%38.0% Current liabilities/Sales11.5%11.5%11.5%11.5%11.5%11.5%11.5%11.5%11.5%11.5%Cost of Capital AssumptionsTerminal Value Growth Rate3.00%Current Share Price42.09Current Shares Outstanding271.50Current Yields on U.S. Treasuries3 Month3.59%6 Month3.59%1 Year3.59%5 Year4.88%10 Year5.39%20 Year5.74%Historical Equity Risk PremiumGeometric Mean5.90%Arithmetic Mean7.50%Current Yeild on Publicly Traded Nike DebtCoupon6.75%Semiannual Coupon3.375pmtAnnual Period20Semiannual Period40nperCurrent Price$ 95.60pvNew Debt Yield7.17%Nike Historic Betas19960.9819970.8419980.8419990.6320000.83YTD 6/30/010.69

Income StatementNike, Inc.: Cost of Capital ModelHistorical StatementsForecasted StatementsIncome Statement19951996199719981999200020012002200320042005200620072008200920102011 Revenues4,760.86,470.69,186.59,553.18,776.98,995.19,488.810,153.010,813.011,515.812,264.313,000.213,780.214,607.015,483.416,412.417,397.2 Cost of goods sold2,865.33,906.75,503.06,065.55,493.55,403.85,784.96,091.86,487.86,851.97,297.37,670.18,130.38,545.19,057.89,519.210,090.4 Gross profit1,895.62,563.93,683.53,487.63,283.43,591.33,703.94,061.24,325.24,663.94,967.15,330.15,649.96,061.96,425.66,893.27,306.8 Selling and administrative1,209.81,588.62,303.72,623.82,426.62,606.42,689.72,842.82,973.63,109.33,250.03,380.03,514.03,651.83,870.94,103.14,349.3 Operating income685.8975.31,379.8863.8856.8984.91,014.21,218.41,351.61,554.61,717.01,950.02,135.92,410.22,554.82,790.12,957.5 Interest expense24.239.552.360.044.145.058.7 Other expense, net11.736.732.320.921.523.234.1 Restructuring charge, net - - -129.945.1(2.5) - Income before income taxes649.9899.11,295.2653.0746.1919.2921.4 Income taxes250.2345.9499.4253.4294.7340.1331.7 Net income399.7553.2795.8399.6451.4579.1589.7 Diluted earnings per common share1.361.882.681.351.572.072.16 Average shares outstanding (diluted)294.0293.6297.0296.0287.5279.8273.3 Growth (%) Revenue35.942.04.0(8.1)2.55.5 Operating income42.241.5(37.4)(0.8)15.03.0 Net income38.443.9(49.8)13.028.31.8 Margins (%) Gross margin39.640.136.537.439.939.0 Operating margin15.115.09.09.810.910.7 Net margin8.58.74.25.16.46.2 Effective tax rate (%)*38.538.638.839.537.036.0*The U.S. statutory tax rate was 35%. The state tax varied yearly from 2.5% to 3.5%.

Balance SheetNike, Inc.: Cost of Capital ModelBalance Sheet20002001AssetsCurrent Assets: Cash and equivalents254.3304.0 Accounts receivable1,569.41,621.4 Inventories1,446.01,424.1 Deferred income taxes111.5113.3 Prepaid expenses215.2162.5Total current assets3,596.43,625.3Property, plant and equipment, net1,583.41,618.8Identifiable intangible assets and goodwill, net410.9397.3Deferred income taxes and other assets266.2178.2Total assets5,856.95,819.6Liabilities and shareholders' equityCurrent Liabilities: Current portion of long-term debt50.15.4 Notes payable924.2855.3 Accounts payable543.8432.0 Accrued liabilities621.9472.1 Income taxes payable-21.9Total current liabilities2,140.01,786.7Long-term debt470.3435.9Deferred income taxes and other liabilities110.3102.2Redeemable preferred stock0.30.3Shareholders' equity: Common stock, par2.82.8 Capital in excess of stated value369.0459.4 Unearned stock compensation(11.7)(9.9) Accumulated other comprehensive income(111.1)(152.1) Retained earnings2,887.03,194.3Total shareholders' equity3,136.03,494.5Total liabilities and shareholders' equity5,856.95,819.6

Cash FlowNike, Inc.: Cost of Capital ModelDiscounted Cash Flow2002200320042005200620072008200920102011Operating Income1,2181,3521,5551,7171,9502,1362,4102,5552,7902,958Taxes4635145916527418129169711,0601,124NOPAT7558389641,0651,2091,3241,4941,5841,7301,834Change in NWC9(175)(186)(198)(195)(207)(219)(232)(246)(261)Free Cash Flow7646637788661,0141,1181,2751,3521,4841,573Terminal Value- 0- 0- 0- 0- 0- 0- 0- 0- 017,998Total Cash Flows7646637788661,0141,1181,2751,3521,48419,571WACC & CAPMCurrent CAPM10.50%CAPM9.81%TotalWeightCostCommon Equity11,50389.87%9.81%Total Equity11,50389.87%9.81%Current LT-Debt5.40.04%Notes Payable855.36.68%Long Term Debt435.93.41%After TaxTotal Debt1,29710.13%4.44%Current WACC8.40%New WACC9.27%Net Present Value2002200320042005200620072008200920102011Cash Flow7646637788661,0141,1181,2751,3521,48419,571PV Factor100.0%91.5%83.8%76.7%70.2%64.2%58.8%53.8%49.2%45.0%PV of Cash Flow7646076516647117187497277308,815Cumulative PV7641,3712,0222,6863,3984,1154,8645,5916,32115,136NPV15,136Equity Value13,839Equity Value p/Share$ 50.97

Sensitivity AnalysisNike, Inc.: Cost of Capital ModelAssumptions used for Sensitivity AnalysisCAPM9.81%WACC9.27%Sensitivity Analysis for Equity Value Per ShareCurrent Share Price$ 42.09CAPM EV/SWACCEV/SColor Code$ 50.97$ 50.97Above Current Price5.0%$ 69.515.0%$ 69.22Below Current Price5.5%$ 67.255.5%$ 66.726.0%$ 65.076.0%$ 64.326.5%$ 62.976.5%$ 62.037.0%$ 60.967.0%$ 59.837.5%$ 59.027.5%$ 57.738.0%$ 57.168.0%$ 55.718.5%$ 55.368.5%$ 53.789.0%$ 53.649.0%$ 51.939.5%$ 51.989.5%$ 50.1610.0%$ 50.3810.0%$ 48.4610.5%$ 48.8410.5%$ 46.8211.0%$ 47.3511.0%$ 45.2611.5%$ 45.9211.5%$ 43.7612.0%$ 44.5512.0%$ 42.3212.5%$ 43.2212.5%$ 40.9313.0%$ 41.9413.0%$ 39.6013.5%$ 40.7113.5%$ 38.3314.0%$ 39.5214.0%$ 37.1014.5%$ 38.3714.5%$ 35.9215.0%$ 37.2715.0%$ 34.79