please answer correctly
DuPont Analysis, Forecasting with the Parsimonious Method and Estimating Share Value of Cisco Systems Inc Using the DCF Model Cisco Systems, Inc. is a multinational information technology company headquartered in San Jose, California, that produces and sells networking hardware, telecommunications equipment and other high-technology services. Cisco Systems was founded in December 1984 by Leonard Bosack and Sandy Lerner, two Stanford University computer scientists, who pioneered the concept of a local area network (LAN). In 1990, Cisco Systems went public with a market capitalization of $224 million. By 2000 , Cisco had become the most valuable company in the world with a more than $500 billion market capitalization. The stock was initially listed on the NASDAQ in 1990, and then was added to the Dow Jones Industrial Average on June 8, 2009. Cisco is currently included in the S\&P 500 Index, the Russell 1000 Index, NASDAQ-100 Index and the Russell 1000 Growth Stock Index. 1 As Figure 1 shows, the stock price of Cisco Systems peaked in 1999-2000 before the burst of internet bubble. However, its stock price has been fluctuating in the range of $10$30 since 2001 . Following are the income statement and balance sheet for Cisco Systems for the year ended y 3 Consolidated Balance Sheets In millions, except par value Assets Current assets Cash and cash equivalents Investments Accounts receivable, net of allowance for doubtful accounts of $249 at July 30,2016 and $302 at July 25,2015 Inventories July 30, 2016 July 25, 2015 Financing receivables, net Other current assets Total current assets Property and equipment, net Financing reccivables, net Goodwill Purchased intangible assets, net Deferred tax assets Total assets \begin{tabular}{ll} $7,631 & $6,877 \\ 58,125 & 53,539 \\ 5,847 & 5,344 \\ 1,217 & 1,627 \\ 4,272 & 4,491 \\ 1,627 & 1,490 \\ 78,719 & 73,368 \\ 3,506 & 3,332 \\ 4,158 & 3,858 \\ 26,625 & 24,469 \\ 2,501 & 2,376 \\ 4,299 & 4,454 \\ 1,844 & 1,516 \\ $121,652 & $113,373 \\ & \\ & \\ & \\ $4,160 & $3,897 \\ 1,056 & 1,104 \\ 517 & 62 \\ 2,951 & 3,049 \\ 10,155 & 9,824 \\ 6,072 & 5,476 \\ 24,911 & 23,412 \\ 24,483 & 21,457 \\ 925 & 1,876 \\ \hline \end{tabular} 3 Accumulated other comprehensive income (loss) Total Cisco shareholders' equity Noncontrolling interests Total equity Total liabilities and equity \begin{tabular}{ll|} \hline63,586(326) & 61 \\ (1) & 99,698 \\ 63.585 & 59,707 \\ $121,652 & $113,373 \\ \hline \end{tabular} (d) Compute net operating profit after tax (NOPAT) for 2016, assuming a federal and state statutory tax rate of 37%. (Round your answer to the nearest whole number.) ( 9 points) (e) Forecast Cisco's sales, NOPAT, and NOA for years 2017 through 2020 and the terminal period using the following assumptions: ( 12 points) Assume a discount rate (WACC) of 10%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(37,113) million (NNO is negative which means that Cisco has net nonoperating investments). (f) Estimate the value of a share of Cisco common stock as of July 30, 2016 using the discounted cash flow (DCF) model and sales, NOPAT and NOA forecast in (e); (12 points) (g) If Cisco's top management were optimistic about CISCO's market growth opportunities and revised their sales growth rates up by 5%, please forecast Cisco's sales, NOPAT, and NOA for years 2017 through 2020 and the terminal period using the following assumptions: (8points) discounted cash flow (DCF) model and the forecast in (g); Note, still assume a discount rate (WACC) of 10%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(37,113) million. (8 points) (i) Cisco stock closed at $31.47 on September 8,2016 , the date the Form 10-K was filed with the SEC. How does your DCF valuation estimates compare with this closing price? What do you believe are some reasons for the difference? What investment decision is suggested from your results? ( 10 points) (j) Are there other equity valuation models? Please discuss the advantages and disadvantages of different equity valuation models. ( 15 points) DuPont Analysis, Forecasting with the Parsimonious Method and Estimating Share Value of Cisco Systems Inc Using the DCF Model Cisco Systems, Inc. is a multinational information technology company headquartered in San Jose, California, that produces and sells networking hardware, telecommunications equipment and other high-technology services. Cisco Systems was founded in December 1984 by Leonard Bosack and Sandy Lerner, two Stanford University computer scientists, who pioneered the concept of a local area network (LAN). In 1990, Cisco Systems went public with a market capitalization of $224 million. By 2000 , Cisco had become the most valuable company in the world with a more than $500 billion market capitalization. The stock was initially listed on the NASDAQ in 1990, and then was added to the Dow Jones Industrial Average on June 8, 2009. Cisco is currently included in the S\&P 500 Index, the Russell 1000 Index, NASDAQ-100 Index and the Russell 1000 Growth Stock Index. 1 As Figure 1 shows, the stock price of Cisco Systems peaked in 1999-2000 before the burst of internet bubble. However, its stock price has been fluctuating in the range of $10$30 since 2001 . Following are the income statement and balance sheet for Cisco Systems for the year ended y 3 Consolidated Balance Sheets In millions, except par value Assets Current assets Cash and cash equivalents Investments Accounts receivable, net of allowance for doubtful accounts of $249 at July 30,2016 and $302 at July 25,2015 Inventories July 30, 2016 July 25, 2015 Financing receivables, net Other current assets Total current assets Property and equipment, net Financing reccivables, net Goodwill Purchased intangible assets, net Deferred tax assets Total assets \begin{tabular}{ll} $7,631 & $6,877 \\ 58,125 & 53,539 \\ 5,847 & 5,344 \\ 1,217 & 1,627 \\ 4,272 & 4,491 \\ 1,627 & 1,490 \\ 78,719 & 73,368 \\ 3,506 & 3,332 \\ 4,158 & 3,858 \\ 26,625 & 24,469 \\ 2,501 & 2,376 \\ 4,299 & 4,454 \\ 1,844 & 1,516 \\ $121,652 & $113,373 \\ & \\ & \\ & \\ $4,160 & $3,897 \\ 1,056 & 1,104 \\ 517 & 62 \\ 2,951 & 3,049 \\ 10,155 & 9,824 \\ 6,072 & 5,476 \\ 24,911 & 23,412 \\ 24,483 & 21,457 \\ 925 & 1,876 \\ \hline \end{tabular} 3 Accumulated other comprehensive income (loss) Total Cisco shareholders' equity Noncontrolling interests Total equity Total liabilities and equity \begin{tabular}{ll|} \hline63,586(326) & 61 \\ (1) & 99,698 \\ 63.585 & 59,707 \\ $121,652 & $113,373 \\ \hline \end{tabular} (d) Compute net operating profit after tax (NOPAT) for 2016, assuming a federal and state statutory tax rate of 37%. (Round your answer to the nearest whole number.) ( 9 points) (e) Forecast Cisco's sales, NOPAT, and NOA for years 2017 through 2020 and the terminal period using the following assumptions: ( 12 points) Assume a discount rate (WACC) of 10%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(37,113) million (NNO is negative which means that Cisco has net nonoperating investments). (f) Estimate the value of a share of Cisco common stock as of July 30, 2016 using the discounted cash flow (DCF) model and sales, NOPAT and NOA forecast in (e); (12 points) (g) If Cisco's top management were optimistic about CISCO's market growth opportunities and revised their sales growth rates up by 5%, please forecast Cisco's sales, NOPAT, and NOA for years 2017 through 2020 and the terminal period using the following assumptions: (8points) discounted cash flow (DCF) model and the forecast in (g); Note, still assume a discount rate (WACC) of 10%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(37,113) million. (8 points) (i) Cisco stock closed at $31.47 on September 8,2016 , the date the Form 10-K was filed with the SEC. How does your DCF valuation estimates compare with this closing price? What do you believe are some reasons for the difference? What investment decision is suggested from your results? ( 10 points) (j) Are there other equity valuation models? Please discuss the advantages and disadvantages of different equity valuation models. ( 15 points)
