Bundle: Fundamentals Of Financial Management, Loose-leaf Version, 15th + Mindtapv2.0 Finance, 1 Term (6 Months) Printed Access Card
15th Edition
ISBN: 9780357307731
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Question
Chapter 1, Problem 4Q
Summary Introduction
To identify: Whether the actual stock price in the market can be under, over, or above its intrinsic value from the standpoint of the stockholders and CEO, who are about to exercise a million dollars in options and retire.
Introduction:
Intrinsic Value: An estimated value of the stock which can be determined by considering the exact risk and return. The intrinsic value can be estimated but cannot be measured precisely. The intrinsic value can be calculated by professional analyst on the basis of data provided by the company.
Market price: The market price is the current value of the stock in which it is traded in the market. It is available in the newspaper and websites.
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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
Bundle: Fundamentals Of Financial Management, Loose-leaf Version, 15th + Mindtapv2.0 Finance, 1 Term (6 Months) Printed Access Card
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