(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019; assume a discount rate (WACC) of 7.6%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(8,747) million (NNO is negative, which means that Cisco has net nonoperating investments) Instructions: • Use your rounded answers for subsequent calculations. • Round all answers to the nearest whole number, except for discount factors and stock price per share. • Round discount factors to 5 decimal places. Round stock price per share to two decimal places. • Use a negative sign with your NNO answer. CSCO Reported Forecast Horizon Terminal ($ millions) 2019 2020 Est. 2021 Est. 2022 Est. 2023 Est. Period DCF Model Increase in NOA $ 1,241 x $ 1,000 x $ 0 x $ 0 x $ 11,662 x FCFF (NOPAT - Increase in NOA) 9,682 x 0 x 0 x 11,662 x Discount factor 0.92937 V 0.86372 v 0.80272 v 0.74602 v Present value of horizon FCFF 8,999 x 9,113 * 8,893 * 8,678 x Cum present value of horizon FCFF $ 37,487 * Present value of terminal FCFF 154,772 * Total firm value 192,665 v NNO (8,747) V Firm equity value 2$ 201,412 v Shares outstanding (millions) 5,029 v Stock price per share 40.05 V
(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019; assume a discount rate (WACC) of 7.6%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(8,747) million (NNO is negative, which means that Cisco has net nonoperating investments) Instructions: • Use your rounded answers for subsequent calculations. • Round all answers to the nearest whole number, except for discount factors and stock price per share. • Round discount factors to 5 decimal places. Round stock price per share to two decimal places. • Use a negative sign with your NNO answer. CSCO Reported Forecast Horizon Terminal ($ millions) 2019 2020 Est. 2021 Est. 2022 Est. 2023 Est. Period DCF Model Increase in NOA $ 1,241 x $ 1,000 x $ 0 x $ 0 x $ 11,662 x FCFF (NOPAT - Increase in NOA) 9,682 x 0 x 0 x 11,662 x Discount factor 0.92937 V 0.86372 v 0.80272 v 0.74602 v Present value of horizon FCFF 8,999 x 9,113 * 8,893 * 8,678 x Cum present value of horizon FCFF $ 37,487 * Present value of terminal FCFF 154,772 * Total firm value 192,665 v NNO (8,747) V Firm equity value 2$ 201,412 v Shares outstanding (millions) 5,029 v Stock price per share 40.05 V
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Author:Amos Gilat
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Transcribed Image Text:(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019; assume a discount rate (WACC) of 7.6%, common shares outstanding of 5,029 million, and net nonoperating
obligations (NNO) of $(8,747) million (NNO is negative, which means that Cisco has net nonoperating investments)
Instructions:
• Use your rounded answers for subsequent calculations.
• Round all answers to the nearest whole number, except for discount factors and stock price per share.
• Round discount factors to 5 decimal places.
Round stock price per share to two decimal places.
• Use a negative sign with your NNO answer.
CSCO
Reported
Forecast Horizon
Terminal
($ millions)
2019
2020 Est.
2021 Est.
2022 Est.
2023 Est.
Period
DCF Model
Increase in NOA
$
1,241 x $
1,000 x $
0 x $
0 x $
11,662 x
FCFF (NOPAT - Increase in NOA)
9,682 x
0 x
0 x
11,662 x
Discount factor
0.92937 V
0.86372 v
0.80272 v
0.74602 v
Present value of horizon FCFF
8,999 x
9,113 *
8,893 *
8,678 x
Cum present value of horizon FCFF $
37,487 *
Present value of terminal FCFF
154,772 *
Total firm value
192,665 v
NNO
(8,747) V
Firm equity value
2$
201,412 v
Shares outstanding (millions)
5,029 v
Stock price per share
40.05 V
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