In late 2002, analysts were forecasting fiscal 2003 and 2004 earnings per share for Cisco Systems of
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In late 2002, analysts were forecasting fiscal 2003 and 2004 earnings per share for Cisco Systems of $0.54 and $0.61, respectively. Cisco's shares traded at $15 at the time. Assuming the long-term growth rate will be at 4 percent, the average rate of growth for gross national product. Value Cisco using the model in equation 14.7 in this chapter. Apply the formula to earnings rather than operating income and use a required return for equity of 9 percent.
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Applying the twostage growth formula The forward PE is 199 This valuation is less than the market ...View the full answer
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