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The statement of cash flows extracted from Nike Inc. 2015 annual report is provided in the next page. Note the additional information & assumptions:

Nikes applicable tax rate is 35%.

Nikes interest income figures for fiscal years 2015, 2014 and 2013 are $5, $6 and $12

million, respectively.

Nikes cost of capital is 10%.

Nikes free cash flow is expected to grow at 6% per annum from the fiscal year 2016 to 2020 and at 4% per annum from the fiscal year 2021 onwards.

Nikes net interest payment (interest paid interest received) before tax is assumed to be $28 million for all three years

Required

1. Calculate the free cash flows for fiscal years 2013, 2014 and 2015.

2. Calculate the enterprise value of Nike Inc. as of May. 31, 2015 using the discounted cash flow valuation method.

Consolidated Statements of Cash Flows - USD (Smillions) 2015 2014 2013 Cash provided by operations: Net income S 3,273 S2,693 S 2,472 Income charges (credits) not affecting cash: Depreciation Deferred income taxes Stock-based compensation (Note 11) Amortization and other Net foreign currency adjustments Net gain on divestitures Changes in working capital and other assets and liabilities: (Increase) decrease in accounts receivable Increase) in inventories (Increase) in prepaid expenses and other current assets Increase in a/cs payable, accrued liabilities, income taxes payable Cash provided by operations 438 606 191 424 (124 (216) 142 (505) 1,237 4,680 525 3,013 3,032 Cash used by investing activities: Purchases of short-term investments Maturities of short-term investments Sales of short-term investments Investments in reverse repurchase agreements Additions to property, plant and equipment Disposals of property, plant and equipment Proceeds from divestitures (Increase) in other assets, net of other liabilities Cash used by investing activities Cash used by financing activities: Net proceeds from long-term debt issuance Long-term debt payments, including current portion (Decrease) increase in notes payable Payments on capital lease obligations Proceeds from exercise of stock options and other stock issuances Excess tax benefits from share-based payment arrangements Repurchase of common stock Dividendscommon and preferred Cash used by financing activities Effect of exchange rate changes on cash and equivalents Net increase (decrease) in cash and equivalents Cash and equivalents, beginning of year CASH AND EQUIVALENTS, END OF YEAR (4,936) 5,386 (4,133) 1,663 1,330 3,655 3,932 1,126 (150) 963) 880) 14 786 (175) (1,207) (940) 986 (49) 383 (2,534)2,628) ,674) (799) (2,790) (2,914) ,045) (899) (703) (83) 1,632 2,220 3,852 (1,117) 3,337 2,220 1,083 2,254 3,337 Cash paid during the year for: Interest, net of capitalized interest Income taxes Non-cash additions to property, plant and equipment Dividends declared and not paid 1,262 206 S 240 856 167 S 209 702 s 188

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