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. Cisco Systems Consolidated Statements of Income T8 Years Ended December ($ millions) Pl Revenue Product $39,005 $36,709 Service 12,899 12621 Total revenue 51,904 49330 Cost of sales Product 14,863 14427 Service 4375 4297 Total cost of sales 19,238 18,724 Gross margin 32,666 30,606 Operating expenses Research and development 6577 6,332 Sales and marketing 9571 9242 General and administrative 1827 2144 Amortization of purchased intangible assets. 1501 221 Restructuring and other charges 322 358 Total operating expenses 18,447 18297 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 2950 12929 Net income $11,621 110 Cisco Systems Inc. Consolidated Balance Sheets In millions, except par value Assets Current assets Cash and cash equivalents Investments Accounts receivable, net of allowance for doubtful accounts Inventories Financing receivables, net Other current assets Total current assets Property and equipment, net Financing receivables, net Goodwill Purchased intangible assets, net Deferred tax assets Other assets Total assets Liabilities and equity Current liabilities Short-term debt Accounts payable Income taxes payable Accrued compensation Deferred revenue Other current liabilities Total current liabilities Long-term debt Income taxes payable Deferred revenue Other long-term lizbilities Total liabilities [T\\ 2019 $11,750 21,663 5,491 1,383 5,095 2373 47,755 2,789 4,958 33,529 2,201 4,065 2,496 $97,793 $10,191 2,059 1,149 3,221 10,668 4,424 31,712 14,475 8,927 7.799 1,309 64,222 July 28, FAigt-] $8,934 37614 5.554 1,846 4,949 2,940 61,837 3.006 4,882 31,706 2,552 3.219 1,582 $108,784 $5,238 1,904 1,004 2,986 11,490 4,413 27,035 20,331 8,585 8,195 1,434 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 $108,784 Federal and state statutory tax rate 2246 a) Compute net operating assets (NOA) for 2019. Hint: Treat Financing receivable as operating assets. NOA 33,571 x bj Compute net operating profit after tax (NOPAT) for 2019. assuming a federal and state statutory tax rate of 22%. Assume that all items on the 2019 income statement will persist. NOPAT 11,091 x (c) Use the parsimonious forecast method, as shown in Analysis Insight box on page 14-5 and in Exhibit 14.2, to forecast Cisco's sales, NOPAT, and NOA for 2020 through 2023 and the terminal period using the following assumptions. Note: When completing the question in Excel, refer directly to the cells containing calculated assumptions for NOPM and NOAT, L.e., don't type the NOPM number when making a calculation, refer to the cell. Assumptions Sales growth 2020-2023 5% Terminal growth 19% Net operating profit margin (NOPM) 2019 rate Net operating asset turnover (NOAT) 2019 rate Hint: Use 2019 NOA, not average NOA, to compute the 2019 rate for NOAT. Esco Reported Forecast Horizon Terminal ($ millions) 2019 2020 Est 2021 Est. 2022 Est. 2023 Est. Period Sales 51,904 v $ 54,499.2 5 57,224.16 v $ 60,085.37 v 5 63,089.64 5 63,720.53 v NOPAT - Forecasted sales x NOPM assumption 11,346 v 11,935 x 12.532 x 13,159 * 13,817 % 13,955 M NOA - Forecasted sales / NOAT assumption 24,824 26,064 x 27.367 x 28,735 x 30.172 x 30,474 xd) 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 7.6%, common shares outstanding of 5,029 million, and net nonoperating obligations (NNO) of $(8,747) million (NNO is negative, which means that Cisco has net nonoperating investments). Assumptions Discount rate (WACO) 7.6046 Common shares outstanding 5,029 million Net nonoperating obligations (NNO) |$(8.747) million NNO is negative. which means that Cisco has net nonoperating investments Reported Forecast Horizon Terminal ($ millions] 2019 2020 2021 2022 2023 Period ROPI (NOPAT . [NOABeg x rwD) 10,048 * $ 10,551 * $ 11,079 * $ 11,633 x $ 11,662 % Present value of horizon ROPI 9.330 * 9.113 X 8 893 X 8.678 X Cum present value of horizon ROPI $ 36,022 x Present value of terminal ROPI 131,819 x NOA 24,824 v Total firm value 192.665 x Less NNO (8.747) Firm equity value 201,412 x Shares outstanding [millions] 5,029 Stock price per share 40.05