EBK FINANCIAL ANALYSIS WITH MICROSOFT E
8th Edition
ISBN: 9781337515528
Author: Mayes
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 1, Problem 4P
a.
Summary Introduction
To compute: Ratio of each year’s data with previous year’s data.
Introduction: All ratios shall be calculated by formula:
Ratio measures the change in data from a base value of 1.
b.
Summary Introduction
To compute: Growth of figures relative to last year.
Introduction: Since ratios are measuring change in base value of 1 from one year to next, growth rate can be calculated by subtracting 1 and multiplying the result by 100 to get growth in percentage terms.
c.
Summary Introduction
To compute: Arithmetic mean of growth for each item.
Introduction: Average function in excel will calculate the arithmetic mean of growth over the given period by dividing the sum of growth percentage by number of observations, that is, 4.
d.
Summary Introduction
To compute: Geometric mean of growth for each item.
Introduction: Geometric mean considers the impact of compounding, that is, change in base value due to impact of previous year’s growth.
e.
Summary Introduction
To state: Difference between arithmetic mean and geometric mean and possibility of geometric mean being greater than arithmetic mean.
Introduction: Arithmetic mean is derived by dividing the sum of observations by number of observations, on the other hand geometric mean is derived as the product of observations rooted by number of observations.
f.
Summary Introduction
To Compare:Results for geometric average and arithmetic average for given variables.
Introduction: Arithmetic mean is derived by dividing the sum of observations by number of observations, on the other hand geometric mean is derived as the product of observations rooted by number of observations.
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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions
Assumptions
Discount rate (WACC)
Common shares outstanding
7.60%
5,029.00 million
Net nonoperating obligations (NNO) $(8,747) million
NNO is negative, which means that Cisco has net nonoperating investments
CSCO
($ millions)
DCF Model
Reported
2019
Forecast Horizon
2020 Est.
2021 Est.
2022 Est.
2023 Est.
Terminal
Period
Increase in NOA
FCFF (NOPAT - Increase in NOA)
$
1241
1303
1368
10673
11207
11767
1437 $
12354
302 ✓
Present value of horizon FCFF
9918
9679
9445 ✔
0 ×
Cum. present value of horizon FCFF $
0 ×
Present value of terminal FCFF
0 ☑
Total firm value
0 ☑
NNO
-8747 ✓
Firm equity value
$
0 ☑
Shares outstanding (millions)
5029
Stock price per share
$
40.05
Don't used hand raiting and don't used Ai solution
Don't used hand raiting and don't used Ai solution
Chapter 1 Solutions
EBK FINANCIAL ANALYSIS WITH MICROSOFT E
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