Investments
11th Edition
ISBN: 9781259277177
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Question
Chapter 23, Problem 10PS
Summary Introduction
To evaluate: Whether the interest rate is higher in United States or in Euro zone when the spot price of the euro is $1.10 and 1 year future price is $1.15.
Introduction:
Future spot exchange rate: When the spot rate is multiplied by the ratio of interest rates and adjusted till expiration time, we get the value of forward rate. The formula used will be as follows:
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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
Chapter 23 Solutions
Investments
Ch. 23 - Prob. 1PSCh. 23 - Prob. 2PSCh. 23 - Prob. 3PSCh. 23 - Prob. 4PSCh. 23 - Prob. 5PSCh. 23 - Prob. 6PSCh. 23 - Prob. 7PSCh. 23 - Prob. 8PSCh. 23 - Prob. 9PSCh. 23 - Prob. 10PS
Ch. 23 - Prob. 11PSCh. 23 - Prob. 12PSCh. 23 - Prob. 13PSCh. 23 - Prob. 14PSCh. 23 - Prob. 15PSCh. 23 - Prob. 16PSCh. 23 - Prob. 17PSCh. 23 - Prob. 18PSCh. 23 - Prob. 19PSCh. 23 - Prob. 20PSCh. 23 - Prob. 21PSCh. 23 - Prob. 22PSCh. 23 - Prob. 23PSCh. 23 - Prob. 24PSCh. 23 - Prob. 25PSCh. 23 - Prob. 26PSCh. 23 - Prob. 1CPCh. 23 - Prob. 2CPCh. 23 - Prob. 3CPCh. 23 - Prob. 4CPCh. 23 - Prob. 5CPCh. 23 - Prob. 6CPCh. 23 - Prob. 7CPCh. 23 - Prob. 8CP
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