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In: Accounting

Find Forecast Cisco's sales, NOPAT, and NOA for years 2017 through 2020 and the terminal period...

Find Forecast Cisco's sales, NOPAT, and NOA for years 2017 through 2020 and the terminal period using the following assumptions:

Sales for 2016- $ 49247

Nopat 2016 - $ 10382.8

NOA 2016- $ 26476.88

Sales growth 2017 2% , Sales growth 2018-2020 3% , Terminal growth 1% [Net operating profit margin 2016 rate rounded to three decimal places Net operating asset turnover 2016 rate rounded to three decimal places]

Assume a discount rate (WACC) of 10%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(37,113) million (NNO is negative which means that Cisco has net nonoperating investments). (f) Estimate the value of a share of Cisco common stock as of July 30, 2016 using the discounted cash flow (DCF) model and sales, NOPAT and NOA forecast in the sum above

Solutions

Expert Solution

Reported Forecast horizon
$ millions 2016 2017 2018 2019 2020 Terminal period
Sales $49,247.000 $50,231.940 $51,738.898 $53,291.065 $54,889.797 $55,438.695
NOPAT $10,382.800 $10,590.456 $10,908.169 $11,235.415 $11,572.477 $11,688.202
NOA $26,478.880 $27,006.418 $27,816.610 $28,651.109 $29,510.642
Estimated value of target common stock:
Increase in NOA

$529.538

 $810.192 $834.499 $859.533 $295.106
FCPF(NOPAT-increase in NOA) $10,060.918 $10,097.977 $10,400.916 $10,712.944 $11,393.096
DCF @10% 0.9091 0.8264 0.7513 0.6830
Present value of horizon FCFF $9,146.380 $8,344.968 $7,814.208 $7,316.940
Cumulative present value of horizon FCFF $31,992.496
Terminal FCFF [11393.096/(0.10-0.01)] $126,589.955
Present value of terminal FCF(126589.955*0.6830) $86,460.939
Total firm value $11,8453.435
NNO $37,113.000
Firm equity value $155,566.435
Shares outstanding in million $5029.000
Stock price per share $30.934

ekkarill92 answered 2 years ago
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