Consolidated Statements of Income Years Ended December ($ millions) July 27, 2019 July 28, 2018 Revenue Product $39,005 $36,709 Service 12,899 12,621 Total revenue 51,904 49,330 Cost of sales Product 14,863 14,427 Service 4,375 4,297 Total cost of sales 19,238 18,724 Gross margin 32,666 30,606 Operating expenses Research and development 6,577 6,332 Sales and marketing 9,571 9,242 General and administrative 1,827 2,144 Amortization of purchased intangible assets 150 221 Restructuring and other charges 322 358 Total operating expenses 18,447 18,297 Operating income 14,219 12,309 Interest income 1,308 1,508 Interest expense (859) (943) Other income (loss), net (97) 165 Interest and other income (loss), net 352 730 Income before provision for income taxes 14,571 13,039 Provision for income taxes 2,950 12,929 Net income $11,621 $110 Cisco Systems Inc. Consolidated Balance Sheets In millions, except par value July 27, 2019 July 28, 2018 Assets Current assets Cash and cash equivalents $11,750 $8,934 Investments 21,663 37,614 Accounts receivable, net of allowance for doubtful accounts 5,491 5,554 Inventories 1,383 1,846 Financing receivables, net 5,095 4,949 Other current assets 2,373 2,940 Total current assets 47,755 61,837 Property and equipment, net 2,789 3,006 Financing receivables, net 4,958 4,882 Goodwill 33,529 31,706 Purchased intangible assets, net 2,201 2,552 Deferred tax assets 4,065 3,219 Other assets 2,496 1,582 Total assets $97,793 $108,784 Liabilities and equity Current liabilities Short-term debt $10,191 $5,238 Accounts payable 2,059 1,904 Income taxes payable 1,149 1,004 Accrued compensation 3,221 2,986 Deferred revenue 10,668 11,490 Other current liabilities 4,424 4,413 Total current liabilities 31,712 27,035 Long-term debt 14,475 20,331 Income taxes payable 8,927 8,585 Deferred revenue 7,799 8,195 Other long-term liabilities 1,309 1,434 Total liabilities 64,222 65,580 Equity: Cisco shareholders’ equity Preferred stock, no par value: 5 shares authorized; none issued and outstanding -- -- Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 4,250 and 4,614 shares issued and outstanding at July 27, 2019, and July 28, 2018, respectively 40,266 42,820 (Accumulated deficit) Retained earnings (5,903) 1,233 Accumulated other comprehensive income (loss) (792) (849) Total Cisco shareholders' equity 33,571 43,204 Total equity 33,571 43,204 Total liabilities and equity $97,793 $108,784 (a) Compute net operating assets (NOA) for 2019. Hint: Treat Financing receivable as operating assets. NOA = $Answer (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.(Round your answer to the nearest whole number.) 2019 NOPAT = $Answer (c) Use the parsimonious forecast method, as shown in Analysis Insight box on page 13-4, to forecast Cisco’s sales, NOPAT, and NOA for 2020 through 2023 and the terminal period using the following assumptions. Sales growth 2020–2023 5% Terminal growth 1% Net operating profit margin 2019 rate rounded to three decimal places Net operating asset turnover 2019 rate rounded to three decimal places CSCO Reported Forecast Horizon Terminal ($ millions) 2019 2020 Est. 2021 Est. 2022 Est. 2023 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 Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019; assume a discount rate (WACC) of 7.6%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(8,747) million (NNO is negative, which means that Cisco has net nonoperating investments) Instructions: Use your rounded answers for subsequent calculations. Round all answers to the nearest whole number, except for discount factors and stock price per share. Round discount factors to 5 decimal places. Round stock price per share to two decimal places. Use a negative sign with your NNO answer. CSCO Reported Forecast Horizon Terminal ($ millions) 2019 2020 Est. 2021 Est. 2022 Est. 2023 Est. Period DCF Model Increase in NOA Answer Answer Answer Answer Answer FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer Discount factor Answer Answer Answer Answer Present value of horizon FCFF Answer Answer Answer Answer Cum present value of horizon FCFF Answer Present value of terminal FCFF Answer Total firm value Answer NNO Answer

Consolidated Statements of Income Years Ended December ($ millions) July 27, 2019 July 28, 2018 Revenue Product $39,005 $36,709 Service 12,899 12,621 Total revenue 51,904 49,330 Cost of sales Product 14,863 14,427 Service 4,375 4,297 Total cost of sales 19,238 18,724 Gross margin 32,666 30,606 Operating expenses Research and development 6,577 6,332 Sales and marketing 9,571 9,242 General and administrative 1,827 2,144 Amortization of purchased intangible assets 150 221 Restructuring and other charges 322 358 Total operating expenses 18,447 18,297 Operating income 14,219 12,309 Interest income 1,308 1,508 Interest expense (859) (943) Other income (loss), net (97) 165 Interest and other income (loss), net 352 730 Income before provision for income taxes 14,571 13,039 Provision for income taxes 2,950 12,929 Net income $11,621 $110 Cisco Systems Inc. Consolidated Balance Sheets In millions, except par value July 27, 2019 July 28, 2018 Assets Current assets Cash and cash equivalents $11,750 $8,934 Investments 21,663 37,614 Accounts receivable, net of allowance for doubtful accounts 5,491 5,554 Inventories 1,383 1,846 Financing receivables, net 5,095 4,949 Other current assets 2,373 2,940 Total current assets 47,755 61,837 Property and equipment, net 2,789 3,006 Financing receivables, net 4,958 4,882 Goodwill 33,529 31,706 Purchased intangible assets, net 2,201 2,552 Deferred tax assets 4,065 3,219 Other assets 2,496 1,582 Total assets $97,793 $108,784 Liabilities and equity Current liabilities Short-term debt $10,191 $5,238 Accounts payable 2,059 1,904 Income taxes payable 1,149 1,004 Accrued compensation 3,221 2,986 Deferred revenue 10,668 11,490 Other current liabilities 4,424 4,413 Total current liabilities 31,712 27,035 Long-term debt 14,475 20,331 Income taxes payable 8,927 8,585 Deferred revenue 7,799 8,195 Other long-term liabilities 1,309 1,434 Total liabilities 64,222 65,580 Equity: Cisco shareholders’ equity Preferred stock, no par value: 5 shares authorized; none issued and outstanding -- -- Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 4,250 and 4,614 shares issued and outstanding at July 27, 2019, and July 28, 2018, respectively 40,266 42,820 (Accumulated deficit) Retained earnings (5,903) 1,233 Accumulated other comprehensive income (loss) (792) (849) Total Cisco shareholders' equity 33,571 43,204 Total equity 33,571 43,204 Total liabilities and equity $97,793 $108,784 (a) Compute net operating assets (NOA) for 2019. Hint: Treat Financing receivable as operating assets. NOA = $Answer (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.(Round your answer to the nearest whole number.) 2019 NOPAT = $Answer (c) Use the parsimonious forecast method, as shown in Analysis Insight box on page 13-4, to forecast Cisco’s sales, NOPAT, and NOA for 2020 through 2023 and the terminal period using the following assumptions. Sales growth 2020–2023 5% Terminal growth 1% Net operating profit margin 2019 rate rounded to three decimal places Net operating asset turnover 2019 rate rounded to three decimal places CSCO Reported Forecast Horizon Terminal ($ millions) 2019 2020 Est. 2021 Est. 2022 Est. 2023 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 Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019; assume a discount rate (WACC) of 7.6%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(8,747) million (NNO is negative, which means that Cisco has net nonoperating investments) Instructions: Use your rounded answers for subsequent calculations. Round all answers to the nearest whole number, except for discount factors and stock price per share. Round discount factors to 5 decimal places. Round stock price per share to two decimal places. Use a negative sign with your NNO answer. CSCO Reported Forecast Horizon Terminal ($ millions) 2019 2020 Est. 2021 Est. 2022 Est. 2023 Est. Period DCF Model Increase in NOA Answer Answer Answer Answer Answer FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer Discount factor Answer Answer Answer Answer Present value of horizon FCFF Answer Answer Answer Answer Cum present value of horizon FCFF Answer Present value of terminal FCFF Answer Total firm value Answer NNO Answer

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter5: The Income Statement And The Statement Of Cash Flows

Section: Chapter Questions

Problem 8E: Cost of Goods Sold, Income Statement. and Statement of Comprehensive Income Gaskin Company derives...

See similar textbooks

Related questions

Question

100%

Consolidated Statements of Income
Years Ended December ($ millions)	July 27, 2019	July 28, 2018
Revenue
Product	$39,005	$36,709
Service	12,899	12,621
Total revenue	51,904	49,330
Cost of sales
Product	14,863	14,427
Service	4,375	4,297
Total cost of sales	19,238	18,724
Gross margin	32,666	30,606
Operating expenses
Research and development	6,577	6,332
Sales and marketing	9,571	9,242
General and administrative	1,827	2,144
Amortization of purchased intangible assets	150	221
Restructuring and other charges	322	358
Total operating expenses	18,447	18,297
Operating income	14,219	12,309
Interest income	1,308	1,508
Interest expense	(859)	(943)
Other income (loss), net	(97)	165
Interest and other income (loss), net	352	730
Income before provision for income taxes	14,571	13,039
Provision for income taxes	2,950	12,929
Net income	$11,621	$110

Cisco Systems Inc. Consolidated Balance Sheets
In millions, except par value	July 27, 2019	July 28, 2018
Assets
Current assets
Cash and cash equivalents	$11,750	$8,934
Investments	21,663	37,614
Accounts receivable, net of allowance for doubtful accounts	5,491	5,554
Inventories	1,383	1,846
Financing receivables, net	5,095	4,949
Other current assets	2,373	2,940
Total current assets	47,755	61,837
Property and equipment, net	2,789	3,006
Financing receivables, net	4,958	4,882
Goodwill	33,529	31,706
Purchased intangible assets, net	2,201	2,552
Deferred tax assets	4,065	3,219
Other assets	2,496	1,582
Total assets	$97,793	$108,784
Liabilities and equity
Current liabilities
Short-term debt	$10,191	$5,238
Accounts payable	2,059	1,904
Income taxes payable	1,149	1,004
Accrued compensation	3,221	2,986
Deferred revenue	10,668	11,490
Other current liabilities	4,424	4,413
Total current liabilities	31,712	27,035
Long-term debt	14,475	20,331
Income taxes payable	8,927	8,585
Deferred revenue	7,799	8,195
Other long-term liabilities	1,309	1,434
Total liabilities	64,222	65,580
Equity:
Cisco shareholders’ equity
Preferred stock, no par value: 5 shares authorized; none issued and outstanding	--	--
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized;
4,250 and 4,614 shares issued and outstanding at July 27, 2019, and July 28, 2018, respectively	40,266	42,820
(Accumulated deficit) Retained earnings	(5,903)	1,233
Accumulated other comprehensive income (loss)	(792)	(849)
Total Cisco shareholders' equity	33,571	43,204
Total equity	33,571	43,204
Total liabilities and equity	$97,793	$108,784

(a) Compute net operating assets (NOA) for 2019.
Hint: Treat Financing receivable as operating assets.
NOA = $Answer

(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.(Round your answer to the nearest whole number.)
2019 NOPAT = $Answer

(c) Use the parsimonious forecast method, as shown in Analysis Insight box on page 13-4, to forecast Cisco’s sales, NOPAT, and NOA for 2020 through 2023 and the terminal period using the following assumptions.

Sales growth 2020–2023	5%
Terminal growth	1%
Net operating profit margin	2019 rate rounded to three decimal places
Net operating asset turnover	2019 rate rounded to three decimal places

CSCO	Reported	Forecast Horizon	Terminal
($ millions)	2019	2020 Est.	2021 Est.	2022 Est.	2023 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 Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019; assume a discount rate (WACC) of 7.6%, 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)

Instructions:

Use your rounded answers for subsequent calculations.
Round all answers to the nearest whole number, except for discount factors and stock price per share.
Round discount factors to 5 decimal places.
Round stock price per share to two decimal places.
Use a negative sign with your NNO answer.

CSCO	Reported	Forecast Horizon	Terminal
($ millions)	2019	2020 Est.	2021 Est.	2022 Est.	2023 Est.	Period
DCF Model
Increase in NOA		Answer	Answer	Answer	Answer	Answer
FCFF (NOPAT - Increase in NOA)		Answer	Answer	Answer	Answer	Answer
Discount factor		Answer	Answer	Answer	Answer
Present value of horizon FCFF		Answer	Answer	Answer	Answer
Cum present value of horizon FCFF	Answer
Present value of terminal FCFF	Answer
Total firm value	Answer
NNO	Answer
Firm equity value	Answer
Shares outstanding (millions)	Answer
Stock price per share	Answer

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.