Forecasting with the Parsimonious Method and Estimating Share Value Using the ROPI Model

Following are income statements and balance sheets for Cisco Systems.

Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places.

$($a$)$ Compute net operating assets $($NOA$)$ for $2019.$

Hint: Treat Financing receivable as operating assets.

$($b$)$ Compute net operating profit after tax $($NOPAT$)$ for $2019,$ assuming a federal and state statutory tax rate of $22\%.$ Assume that all items on the $2019$ income statement will persist.

$($c$)$ Use the parsimonious forecast method, as shown in Analysis Insight box on page $14-5$ and in Exhibit $14\mathrm{.}2,$ to forecast Cisco$$s sales, NOPAT, and NOA for $2020$ through $2023$ and the terminal period using the following assumptions.

Note: When completing the question in Excel, refer directly to the cells containing calculated assumptions for NOPM and NOAT, i$.$e$.,$ don't type the NOPM number when making a calculation, refer to the cell.

Hint: Use $2019$ NOA, not average NOA, to compute the $2019$ rate for NOAT.

$($d$)$ Estimate the value of a share of Cisco common stock using the residual operating income $($ROPI$)$ model as of July $27,2019$; assume a discount rate $($WACC$)$ of $7\mathrm{.}6\%,$ common shares outstanding of $5,029$ million, and net nonoperating obligations $($NNO$)$ of $$(8,747)$ million $($NNO is negative, which means that Cisco has net nonoperating investments$).$

NNO is negative, which means that Cisco has net nonoperating investments Cisco Systems Inc.

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$31391$

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$11061$

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