Question

Assuming that NIKE has $3.4 billion in long term debt. Issue Amount $(Mil) Maturity Date Yield To Maturity NIKE 4.375% 750 1/15/2025 4.25% NIKE 5.7% 800 1/15/2035 6.45% NIKE 5.4% 800 1/15/2033 5.93% NIKE 3.875% 500 12/1/2040 3.47% NIKE 6.7% 550 12/1/2036 6.96% What is the weighted average cost of debt (average pre-tax

Answer 1

The weighted average cost of debt for NIKE is 5.49%.

Step-by-step explanation:

To calculate the weighted average cost of debt for NIKE, you need to consider the different long-term debt issues and their respective yields. The weighted average cost of debt is calculated by multiplying the yield to maturity of each debt issue by its proportionate weight in the total debt. Then, sum up the weighted yields to get the weighted average cost of debt.

In this case, the total long-term debt is $3.4 billion. Let's calculate the weighted average cost of debt:

1. NIKE 4.375%: $750 million * 4.25% = $31.875 million
2. NIKE 5.7%: $800 million * 6.45% = $51.6 million
3. NIKE 5.4%: $800 million * 5.93% = $47.44 million
4. NIKE 3.875%: $500 million * 3.47% = $17.35 million
5. NIKE 6.7%: $550 million * 6.96% = $38.22 million

The total weighted cost of debt is $186.485 million. To get the weighted average cost of debt, divide the total by the total long-term debt: $186.485 million / $3.4 billion = 0.0549 or 5.49%

Answer 2

The answer is "5.49%".

Step-by-step explanation:

please find the complete solution in the attached file.