Forecasting and Estimating Share Value Using the DCF Model Following are the income statement and balance sheet for Intel Corporation INTEL CORPORATION Consolidated Statements of Income Year Ended (In millions) Dec 25, 2010 Dec 26, 2009 Dec 27, 2008 Net revenue $ 43,623 $ 35,127 $ 37,586 Cost of sales 15,132 15,566 16,742 Gross margin 28,491 19,561 20,844 Research and development 6,576 5,653 5,722 Marketing, general and administrative 6,309 7,931 5,452 Restructuring and asset impairment charges 231 710 Amortization of acquisition related intangibles 18 35 6 Operating expenses 12,903 13,850 11,890 Operating income 15,588 5,711 8,954 Gains (losses) on equity method investments, net 117 (147) (1,380) Gains (losses) on other equity investments, net 231 (23) (376) Interest and other, net 109 163 488 Income before taxes 16,045 5,704 7,686 Provisions for taxes 4,581 1,335 2,394 Net income $ 11,464 $ 4,369 $ 5,292 This should be considered as operating income INTEL CORPORATION Consolidated Balance Sheets As of Year Ended (In millions, except par value) Dec 25, 2010 Dec 26, 2009 Assets Current assets Cash and cash equivalents $ 5,498 $ 3,987 Short term investments 11,294 5,285 Trading assets 5,093 4,648 Accounts receivables, net 2,867 2,273 Inventories 3,757 2,935 Deferred tax assets 1,488 1,216 Other current assets 1,614 813 Total current assets 31,611 21,157 Property, plant and equipment, net 17,899 17,225 Marketable equity securities 1,008 773 Other long term investments 3,026 4,179 Goodwill 4,531 4,421 Other long term assets 5,111 5,340 Total assets $63,186 $53,095 Liabilities Current liabilities Short term debt $38 $172 Accounts payable 2,290 1,883 Accrued compensation and benefits 2,888 2,448 Accrued advertising 1,007 773 Deferred income on shipments to distributors 622 593 Other accrued liabilities 2,482 1,722 Total current liabilities 9,327 7,591 Long term income taxes payable 190 193 Long term debt 2,077 2,049 Long term deferred tax liabilities 926 555 Other long term liabilities 1,236 1,003 Total liabilities 13,756 11,391 Stockholders' equity Preferred stock, $0 001 par value Common stock, $0 001 par value, 10,000 shares authorized 5,581 issued and 5,511 outstanding and capital in excess of par value 16,178 14,993 Accumulated other comprehensive income (loss) 333 393 Retained earnings 32,919 26,318 Total stockholders' equity 49,430 41,704 Total liabilities and stockholders' equity $ 63,186 $ 53,095 These investments are operating assets as they relate to associated companies (a) Compute Intel's net operating assets (NOA) for year end 2010 2010 NOA $Answer (b) Compute net operating profit after tax (NOPAT) for 2010, assuming a federal and state statutory tax rate of 37 HINT Gains losses on equity method investments are considered operating income Round your answer to the nearest whole number 2010 NOPAT $Answer (c) Use the parsimonious forecast method, as shown in Analysis Insight box on page 13 4, to forecast Ciscos sales, NOPAT, and NOA for 2011 through 2014 and the terminal period using the following assumptions Sales growth 10 Net operating profit margin (NOPM) 26 Net operating asset turnover (NOAT) at fiscal year end 1 50 Forecast the terminal period value using the assumptions above and assuming a terminal period growth of 1 INTC Reported Forecast Horizon Terminal ($ millions) 2010 2011 Est 2012 Est 2013 Est 2014 Est Period Sales (rounded two decimal places) Answer Answer Answer Answer Answer Answer Sales (rounded nearest whole number) Answer Answer Answer Answer Answer Answer NOPAT (rounded nearest whole number) Answer Answer Answer Answer Answer Answer NOA (rounded nearest whole number) Answer Answer Answer Answer Answer Answer Use sales rounded to nearest whole number for this calculation (d) Estimate the value of a share of Intel common stock using the discounted cash flow (DCF) model as of December 25, 2010 assume a discount rate (WACC) of 11 , common shares outstanding of 5,511 million, and net nonoperating obligations (NNO) of $(20,778) million (NNO is negative which means that Intel has net nonoperating investments)

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Forecasting and Estimating Share Value Using the DCF Model Following are the income statement and balance sheet for Intel Corporation. INTEL CORPORATION Consolidated Statements of

Forecasting and Estimating Share Value Using the DCF Model Following are the income statement and balance sheet for Intel Corporation.

INTEL CORPORATION Consolidated Statements of Income
Year Ended (In millions)	Dec. 25, 2010	Dec. 26, 2009	Dec. 27, 2008
Net revenue	$ 43,623	$ 35,127	$ 37,586
Cost of sales	15,132	15,566	16,742
Gross margin	28,491	19,561	20,844
Research and development	6,576	5,653	5,722
Marketing, general and administrative	6,309	7,931	5,452
Restructuring and asset impairment charges	--	231	710
Amortization of acquisition-related intangibles	18	35	6
Operating expenses	12,903	13,850	11,890
Operating income	15,588	5,711	8,954
Gains (losses) on equity method investments, net*	117	(147)	(1,380)
Gains (losses) on other equity investments, net	231	(23)	(376)
Interest and other, net	109	163	488
Income before taxes	16,045	5,704	7,686
Provisions for taxes	4,581	1,335	2,394
Net income	$ 11,464	$ 4,369	$ 5,292

*This should be considered as operating income.

INTEL CORPORATION Consolidated Balance Sheets
As of Year-Ended (In millions, except par value)	Dec. 25, 2010	Dec. 26, 2009
Assets
Current assets
Cash and cash equivalents	$ 5,498	$ 3,987
Short-term investments	11,294	5,285
Trading assets	5,093	4,648
Accounts receivables, net	2,867	2,273
Inventories	3,757	2,935
Deferred tax assets	1,488	1,216
Other current assets	1,614	813
Total current assets	31,611	21,157
Property, plant and equipment, net	17,899	17,225
Marketable equity securities	1,008	773
Other long-term investments**	3,026	4,179
Goodwill	4,531	4,421
Other long-term assets	5,111	5,340
Total assets	$63,186	$53,095
Liabilities
Current liabilities
Short-term debt	$38	$172
Accounts payable	2,290	1,883
Accrued compensation and benefits	2,888	2,448
Accrued advertising	1,007	773
Deferred income on shipments to distributors	622	593
Other accrued liabilities	2,482	1,722
Total current liabilities	9,327	7,591
Long-term income taxes payable	190	193
Long-term debt	2,077	2,049
Long-term deferred tax liabilities	926	555
Other long-term liabilities	1,236	1,003
Total liabilities	13,756	11,391
Stockholders' equity:
Preferred stock, $0.001 par value	--	--
Common stock, $0.001 par value, 10,000 shares authorized; 5,581 issued and 5,511 outstanding and capital in excess of par value	16,178	14,993
Accumulated other comprehensive income (loss)	333	393
Retained earnings	32,919	26,318
Total stockholders' equity	49,430	41,704
Total liabilities and stockholders' equity	$ 63,186	$ 53,095

** These investments are operating assets as they relate to associated companies. (a) Compute Intel's net operating assets (NOA) for year-end 2010. 2010 NOA = $Answer (b) Compute net operating profit after tax (NOPAT) for 2010, assuming a federal and state statutory tax rate of 37%.

HINT: Gains/losses on equity method investments are considered operating income. Round your answer to the nearest whole number. 2010 NOPAT = $Answer (c) Use the parsimonious forecast method, as shown in Analysis Insight box on page 13-4, to forecast Ciscos sales, NOPAT, and NOA for 2011 through 2014 and the terminal period using the following assumptions.

Sales growth	10%
Net operating profit margin (NOPM)	26%
Net operating asset turnover (NOAT) at fiscal year-end	1.50

Forecast the terminal period value using the assumptions above and assuming a terminal period growth of: 1%.

INTC	Reported	Forecast Horizon				Terminal
($ millions)	2010	2011 Est.	2012 Est.	2013 Est.	2014 Est.	Period
Sales (rounded two decimal places)	Answer	Answer	Answer	Answer	Answer	Answer
Sales (rounded nearest whole number)	Answer	Answer	Answer	Answer	Answer	Answer
NOPAT (rounded nearest whole number)*	Answer	Answer	Answer	Answer	Answer	Answer
NOA (rounded nearest whole number)*	Answer	Answer	Answer	Answer	Answer	Answer

* Use sales rounded to nearest whole number for this calculation.

(d) Estimate the value of a share of Intel common stock using the discounted cash flow (DCF) model as of December 25, 2010; assume a discount rate (WACC) of 11%, common shares outstanding of 5,511 million, and net nonoperating obligations (NNO) of $(20,778) million (NNO is negative which means that Intel has net nonoperating investments).