orecasting with the Parsimonious Method and Estimating Share Value Using the DCF 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 Years Ended December millions July 27 2019 July 28 2018 Revenue Product 46026 43317 Service 15221 14893 Total revenue 61247 58210 Cost of sales Product 17538 17024 Service 5163 5070 Total cost of sales 22701 22094 Gross margin 38546 36116 Operating expenses Research and development 7761 7472 Sales and marketing 11294 10906 General and administrative 2156 2530 Amortization of purchased intangible assets 177 261 Restructuring and other charges 380 422 Total operating expenses 21768 21591 Operating income 16778 14525 Interest income 1543 1779 Interest expense 1014 1113 Other income loss net 114 195 Interest and other income loss net 415 861 Income before provision for income taxes 17193 15386 Provision for income taxes 3481 15256 Net income 13712 130 Cisco Systems Inc Consolidated Balance Sheets In millions except par value July 27 2019 July 28 2018 Assets Current assets Cash and cash equivalents 13865 10542 Investments 25562 44385 Accounts receivable net of allowance for doubtful accounts 6479 6554 Inventories 1632 2178 Financing receivables net 6012 5840 Other current assets 2800 3469 Total current assets 56350 72968 Property and equipment net 3291 3547 Financing receivables net 5850 5761 Goodwill 39564 37413 Purchased intangible assets net 2597 3011 Deferred tax assets 4797 3798 Other assets 2945 1867 Total assets 115394 128365 Liabilities and equity Current liabilities Shortterm debt 12025 6181 Accounts payable 2430 2247 Income taxes payable 1356 1185 Accrued compensation 3801 3523 Deferred revenue 12588 13558 Other current liabilities 5220 5207 Total current liabilities 37420 31901 Longterm debt 17081 23991 Income taxes payable 10534 10130 Deferred revenue 9203 9670 Other longterm liabilities 1545 1692 Total liabilities 75783 77384 Equity Cisco shareholders equity Preferred stock no par value 5 shares authorized none issued and outstanding 0 0 Common stock and additional paidin capital 0001 par value 20000 shares authorized 4250 and 4614 shares issued and outstanding at July 27 2019 and July 28 2018 respectively 47512 50528 Accumulated deficit Retained earnings 6966 1455 Accumulated other comprehensive income loss 935 1002 Total Cisco shareholders equity 39611 50981 Total equity 39611 50981 Total liabilities and equity 115394 128365 Feceral and state statutory tax rate 22 a Compute net operating assets NOA for 2019 Hint Treat Financing receivable as operating assets NOA Answer 1 29290 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 NOPAT Answer 2 17517 c Use the parsimonious forecast method as shown in Analysis Insight box on page 134 to forecast Ciscos 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 ie dont type the NOPM number when making a calculation refer to the cell Assumptions Sales growth 20202023 5 Terminal growth 1 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 CSCO Reported Forecast Horizon Terminal millions 2019 2020 Est 2021 Est 2022 Est 2023 Est Period Sales Answer 3 61247 Answer 4 64309 Answer 5 67525 Answer 6 70901 Answer 7 74446 Answer 8 75191 NOPAT Forecasted sales x NOPM assumption Answer 9 13712 Answer 10 0 Answer 11 0 Answer 12 0 Answer 13 0 Answer 14 0 NOA Forecasted sales NOAT assumption Answer 15 29290 Answer 16 30755 Answer 17 32292 Answer 18 33907 Answer 19 35602 Answer 20 35958 d Estimate the value of a share of Cisco common stock using the discounted cash flow DCF model as of July 27 2019 using the following assumptions Assumptions Discount rate WACC 760 Common shares outstanding 502900 million Net nonoperating obligations NNO 8747 million NNO is negative which means that Cisco has net nonoperating investments CSCO Reported Forecast Horizon Terminal millions 2019 2020 Est 2021 Est 2022 Est 2023 Est Period DCF Model Increase in NOA Answer 21 1465 Answer 22 1538 Answer 23 1615 Answer 24 1695 Answer 25 356 FCFF NOPAT Increase in NOA Answer 26 76236 Answer 27 1538 Answer 28 1615 Answer 29 1695 Answer 30 356 Present value of horizon FCFF Answer 31 12277 Answer 32 0 Answer 33 0 Answer 34 0 Cum present value of horizon FCFF Answer 35 55830 Present value of terminal FCFF Answer 36 4606 Total firm valu