EBK FINANCIAL MARKETS AND INSTITUTIONS
7th Edition
ISBN: 9781260166101
Author: SAUNDERS
Publisher: YUZU
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Chapter 19, Problem 8Q
Summary Introduction
To determine: The meaning of reinvestment risk and the manner in which it is part of interest rate risk and the impact on earnings of a decrease in the interest rate and an increase in interest rate.
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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 19 Solutions
EBK FINANCIAL MARKETS AND INSTITUTIONS
Ch. 19 - Prob. 1DYUCh. 19 - Prob. 2DYUCh. 19 - Prob. 3DYUCh. 19 - Prob. 4DYUCh. 19 - Prob. 5DYUCh. 19 - Prob. 6DYUCh. 19 - Prob. 7DYUCh. 19 - Prob. 8DYUCh. 19 - Prob. 9DYUCh. 19 - Prob. 10DYU
Ch. 19 - Prob. 11DYUCh. 19 - Prob. 12DYUCh. 19 - Prob. 13DYUCh. 19 - Prob. 14DYUCh. 19 - Prob. 15DYUCh. 19 - Prob. 16DYUCh. 19 - Prob. 17DYUCh. 19 - Prob. 18DYUCh. 19 - Prob. 19DYUCh. 19 - Prob. 20DYUCh. 19 - Prob. 1QCh. 19 - Prob. 2QCh. 19 - Prob. 3QCh. 19 - Prob. 4QCh. 19 - Prob. 5QCh. 19 - Prob. 6QCh. 19 - Prob. 7QCh. 19 - Prob. 8QCh. 19 - Prob. 9QCh. 19 - Prob. 10QCh. 19 - Prob. 11QCh. 19 - Prob. 12QCh. 19 - Prob. 13QCh. 19 - Prob. 14QCh. 19 - Prob. 15QCh. 19 - Prob. 16QCh. 19 - Prob. 17QCh. 19 - Prob. 18QCh. 19 - Prob. 19QCh. 19 - Prob. 20QCh. 19 - Prob. 21QCh. 19 - Prob. 22QCh. 19 - Prob. 23QCh. 19 - Prob. 24QCh. 19 - Prob. 25QCh. 19 - Prob. 26QCh. 19 - Why can insolvency risk be classified as a...Ch. 19 - Prob. 28QCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Prob. 5PCh. 19 - Prob. 6P
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