Nike & Marriott

1|ps for NIkL and MAkkIC11

1. NIkL:
1he cost of debt ls 7.17° whlch ls Lhe yleld Lo maLurlLy (annuallzed).
1he cost of equ|ty as per CAÞM comes ouL Lo 9.8° uslng Lhe followlng assumpLlons:
8lsk free raLe 3.74°
Lq rls premlum 3.9°
8eLa 0.69

As per DDM
CosL of equlLy ls 6.7°


MAkkIC11:
1h|ngs to remember |n th|s case:
1. ConcepL of levered beLa and unlevered beLa.
2. ln case of dlvlslons, waLch ouL for comparable companles' ASSL1 beLas and Lhen apply lL Lo Lhe
dlvlslon afLer leverlng lL aL lLs LargeL caplLal sLrucLure.
3. 1he asseL beLa of Lhe flrm ls Lhe welghLed asseL beLa of lLs dlvlslons whlch was helpful for flndlng
Lhe beLa of conLracL servlces where comparable companles were noL avallable.
β
L
= β
u
(1÷ ((1-l)0/E)) - β
deol
(1-l) (0/E)
lf you assume β
deol
Lo be 0
β
L
= β
u
(1÷ ((1-l)0/E))