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Forecasting with the Parsimonious Method and Estimating Share Value Using the DCF Model Following are the...

Forecasting with the Parsimonious Method and Estimating Share Value Using the DCF Model
Following are the income statement and balance sheet for Cisco Sytems for the year ended July 30, 2016.

Cisco Sytems
Consolidated Statements of Income
Years Ended December ($ millions) July 30,
2016
July 25,
2015
Revenue
Product $37,254 $37,750
Service 11,993 11,411
Total revenue 49,247 49,161
Cost of sales
Product 14,161 15,377
Service 4,126 4,103
Total cost of sales 18,287 19,480
Gross margin 30,960 29,681
Operating expenses
Research and development 6,296 6,207
Sales and marketing 9,619 9,821
General and administrative 1,814 2,040
Amortization of purchased intangible assets 303 359
Restructuring and other charges 268 484
Total operating expenses 18,300 18,911
Operating income 12,660 10,770
Interest income 1,005 769
Interest expense (676) (566)
Other income (loss), net (69) 228
Interest and other income (loss), net 260 431
Income before provision for income taxes 12,920 11,201
Provision for income taxes 2,181 2,220
Net income $10,739 $8,981
Cisco Sytems Inc.
Consolidated Balance Sheets
In millions, except par value July 30, 2016 July 25, 2015
Assets
Current assets
Cash and cash equivalents $7,631 $6,877
Investments 58,125 53,539
Accounts receivable, net of allowance for doubtful accounts of $249 at July 30, 2016 and $302 at July 25, 2015 5,847 5,344
Inventories 1,217 1,627
Financing receivables, net 4,272 4,491
Other current assets 1,627 1,490
Total current assets 78,719 73,368
Property and equipment, net 3,506 3,332
Financing receivables, net 4,158 3,858
Goodwill 26,625 24,469
Purchased intangible assets, net 2,501 2,376
Deferred tax assets 4,299 4,454
Other assets 1,844 1,516
Total assets $121,652 $113,373
Liabilities
Current liabilities
Short-term debt $4,160 $3,897
Accounts payable 1,056 1,104
Income taxes payable 517 62
Accrued compensation 2,951 3,049
Deferred revenue 10,155 9,824
Other current liabilities 6,072 5,476
Total current liabilities 24,911 23,412
Long-term debt 24,483 21,457
Income taxes payable 925 1,876
Deferred revenue 6,317 5,359
Other long-term liabilities 1,431 1,562
Total liabilities 58,067 53,666
Cisco shareholders' equity
Preferred stock, no par value: 5 shaes authorized; none issued and outstanding
-- --
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 5,029 and 5,085 shares issued and outstanding at July 30, 2016 and July 25, 2015, respectively 44,516 43,592
Retained earnings 19,396 16,045
Accumulated other comprehensive income (loss) (326) 61
Total Cisco shareholders' equity 63,586 59,698
Noncontrolling interests (1) 9
Total equity 63,585 59,707
Total liabilities and equity $121,652 $113,373



(a) Compute net operating assets (NOA) for 2016.
NOA = $Answer



(b) Compute net operating profit after tax (NOPAT) for 2016, assuming a federal and state statutory tax rate of 37%.(Round your answer to the nearest whole number.)
2016 NOPAT = $Answer

Solutions

Expert Solution

Net Operating Asset
Formula = Current Assets - Current Liabilities = Net Current Assets + Non Current Assets - Non Current Liabilities
Amount (In Millions) Amount (In Millions)
Total Current Assets                          78,719
(-) Total Current Liabilities                          24,911
Net Current Assets                          53,808
(+) Non Current Assets
Property and Equipment                            3,506
Financing receivables                            4,158
Goodwill                          26,625
Purchased intangible assets                            2,501
Deferred tax assets                            4,299
Other assets                            1,844                          42,933
(-) Non Current Assets
Long-term debt                          24,483
Income taxes payable                               925
Deferred revenue                            6,317
Other long-term liabilities                            1,431                          33,156
NET OPERATING ASSETS                          63,585
NOPAT
Formula = Net Operating Profit - Tax on Operating Profit
Net Operating Profit / (1- Tax%)
Amount (In Millions)
Total Revenue                          49,247
Cost of sales                          18,287
Gross Margin                          30,960
Operating Expenses                          18,300
Operating Profit                          12,660
Tax at 37%                            4,684
NOPAT                            7,976

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