FINANCIAL MANAGEMENT: THEORY AND PRACT
15th Edition
ISBN: 9781305632455
Author: BRIGHAM E. F.
Publisher: CENGAGE L
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Chapter 3, Problem 3MC
Summary Introduction
Case summary:
Instead of the expected profit, there was a large loss. As a result, the company is worried about the future of its executives, owners, and shareholders. Person J was brought in as an assistant to the chairman of company, who had the job of restoring the firm to a sound financial position. Person C needs to prepare an assessment of where the company is now, what it wants to do to restore its financial health.
To discuss: The inventory turnover, DSO, fixed assets turn over, and total asset turnover and the manner in which company C’s utilization of assets stack up against that of other firms in its industry.
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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 3 Solutions
FINANCIAL MANAGEMENT: THEORY AND PRACT
Ch. 3 - Define each of the following terms:
Liquidity...Ch. 3 - Financial ratio analysis is conducted by managers,...Ch. 3 - Over the past year, M. D. Ryngaert Co. has...Ch. 3 - Profit margins and turnover ratios vary from one...Ch. 3 - How might (a) seasonal factors and (b) different...Ch. 3 - Why is it sometimes misleading to compare a...Ch. 3 - Greene Sisters has a DSO of 20 days. The company’s...Ch. 3 - Vigo Vacations has $200 million in total assets,...Ch. 3 - Winston Watchs stock price is 75 per share....Ch. 3 - Reno Revolvers has an EPS of $1.50, a free cash...
Ch. 3 - Needham Pharmaceuticals has a profit margin of 3%...Ch. 3 - Gardial Son has an ROA of 12%, a 5% profit...Ch. 3 - Ace Industries has current assets equal to 3...Ch. 3 - Assume you are given the following relationships...Ch. 3 - Prob. 9PCh. 3 - Prob. 10PCh. 3 - Complete the balance sheet and sales information...Ch. 3 - The Kretovich Company had a quick ratio of 1.4, a...Ch. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 1MCCh. 3 - Prob. 2MCCh. 3 - Prob. 3MCCh. 3 - Prob. 5MCCh. 3 - Prob. 6MCCh. 3 - Prob. 8MCCh. 3 - Prob. 9MCCh. 3 - Prob. 10MC
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