Nike Inc.Kimi Ford, portfolio manager at Northpoint Group, a mutual fund management company, is considering investing in Nike Inc. stock for the company she is responsible. Its decision criteria should be based on Nike's financial reports and statements from 2001. There were several issues at Nike due to which the company's stock prices were falling and a third party also gave their opinion on the matter to know if the investment was really worth it. The weighted average cost of capital (WACC) is a percentage of income that a company is required to pay towards the cost of debt and equity in the company's assets fund, usually annually. This means that the business must make at least that much money each year to be able to pay for the use of its assets and have disposable income on top of that in the form of profit. WACC is calculated by multiplying the relative weights of each component of the capital structure – the cost of debt and equity. This then shows the company if the investment in the assets is really worth it. Considering the cost of capital is important for a company's management to make financial decisions. The concept is very relevant for the following reasons:1. Capital budgeting decisions2. Design the financial structure of the company3. Decide on the financing method4. Top management performanceCalculation of WACCWACC = (cost of equity + cost of debt)This is weighted by the proportion of debt and equity in the capital structure.Calculation of cost of capital for Nike Inc.As we As we read and discovered, there were many miscalculations in Cohen's case. For example, the WACC is 8.4% according to Cohen using the CAPM model. Here are the cal checks......middle of paper......finding the discount rate of 9.8767%. Using the new discount, we calculated the new stock price of $56.81. The initial stock price was $63.50, which was undervalued by $21.41 per share, but due to the revised discount rate, we see that the stock price is undervalued. valued at $14.72 per share. The management of Nike Inc. has goals for the near future that can provide an uprising profit for the company. All the goals set by the company seem to lead the company to make abnormal profits as well as turn it around from its current state. Second, the company's shares are undervalued according to our analysis. Therefore, I ultimately recommend that Nike Inc. be added to NorthPoint's broader limit profile and invested as the current company has great growth potential at least in the coming months which would be profitable for the fund..