Intrinsic value of Cisco Systems - CSCO

Previous Close

$45.82

  Intrinsic Value

$53.40

stock screener

  Rating & Target

hold

+17%

Previous close

$45.82

 
Intrinsic value

$53.40

 
Up/down potential

+17%

 
Rating

hold

We calculate the intrinsic value of CSCO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 215.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.40
  4.46
  4.51
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
Revenue, $m
  50,117
  52,352
  54,716
  57,212
  59,847
  62,628
  65,560
  68,649
  71,905
  75,333
  78,942
  82,740
  86,737
  90,941
  95,364
  100,014
  104,904
  110,044
  115,447
  121,126
  127,094
  133,365
  139,954
  146,877
  154,151
  161,792
  169,819
  178,251
  187,107
  196,410
Variable operating expenses, $m
  22,260
  23,109
  24,006
  24,954
  25,955
  27,011
  28,124
  29,297
  30,533
  31,835
  29,975
  31,417
  32,934
  34,531
  36,210
  37,976
  39,832
  41,784
  43,836
  45,992
  48,258
  50,639
  53,141
  55,770
  58,532
  61,433
  64,481
  67,683
  71,046
  74,578
Fixed operating expenses, $m
  15,229
  15,564
  15,906
  16,256
  16,614
  16,979
  17,353
  17,735
  18,125
  18,524
  18,931
  19,348
  19,773
  20,208
  20,653
  21,107
  21,572
  22,046
  22,531
  23,027
  23,533
  24,051
  24,580
  25,121
  25,674
  26,238
  26,816
  27,406
  28,009
  28,625
Total operating expenses, $m
  37,489
  38,673
  39,912
  41,210
  42,569
  43,990
  45,477
  47,032
  48,658
  50,359
  48,906
  50,765
  52,707
  54,739
  56,863
  59,083
  61,404
  63,830
  66,367
  69,019
  71,791
  74,690
  77,721
  80,891
  84,206
  87,671
  91,297
  95,089
  99,055
  103,203
Operating income, $m
  12,628
  13,680
  14,803
  16,002
  17,279
  18,638
  20,083
  21,618
  23,247
  24,974
  30,036
  31,976
  34,029
  36,202
  38,501
  40,931
  43,500
  46,213
  49,080
  52,107
  55,302
  58,674
  62,233
  65,986
  69,945
  74,120
  78,522
  83,162
  88,053
  93,207
EBITDA, $m
  17,174
  18,284
  19,469
  20,734
  22,080
  23,512
  25,034
  26,650
  28,364
  30,182
  32,108
  34,147
  36,305
  38,589
  41,003
  43,556
  46,252
  49,101
  52,110
  55,285
  58,637
  62,174
  65,905
  69,841
  73,991
  78,366
  82,979
  87,840
  92,963
  98,361
Interest expense (income), $m
  897
  1,821
  1,956
  2,096
  2,244
  2,401
  2,566
  2,741
  2,924
  3,118
  3,322
  3,537
  3,763
  4,002
  4,252
  4,516
  4,793
  5,085
  5,391
  5,714
  6,052
  6,409
  6,783
  7,176
  7,589
  8,023
  8,479
  8,959
  9,462
  9,991
  10,546
Earnings before tax, $m
  10,807
  11,724
  12,707
  13,757
  14,878
  16,072
  17,342
  18,693
  20,129
  21,652
  26,499
  28,212
  30,028
  31,950
  33,985
  36,138
  38,415
  40,822
  43,366
  46,054
  48,894
  51,892
  55,057
  58,397
  61,922
  65,641
  69,564
  73,701
  78,063
  82,661
Tax expense, $m
  2,918
  3,165
  3,431
  3,714
  4,017
  4,339
  4,682
  5,047
  5,435
  5,846
  7,155
  7,617
  8,107
  8,627
  9,176
  9,757
  10,372
  11,022
  11,709
  12,435
  13,201
  14,011
  14,865
  15,767
  16,719
  17,723
  18,782
  19,899
  21,077
  22,319
Net income, $m
  7,889
  8,558
  9,276
  10,043
  10,861
  11,732
  12,660
  13,646
  14,694
  15,806
  19,344
  20,595
  21,920
  23,324
  24,809
  26,381
  28,043
  29,800
  31,657
  33,620
  35,692
  37,881
  40,191
  42,630
  45,203
  47,918
  50,781
  53,801
  56,986
  60,343

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  82,430
  86,106
  89,993
  94,099
  98,433
  103,006
  107,828
  112,910
  118,264
  123,902
  129,838
  136,086
  142,659
  149,575
  156,848
  164,497
  172,539
  180,993
  189,880
  199,220
  209,035
  219,350
  230,188
  241,575
  253,538
  266,106
  279,308
  293,176
  307,742
  323,043
Adjusted assets (=assets-cash), $m
  82,430
  86,106
  89,993
  94,099
  98,433
  103,006
  107,828
  112,910
  118,264
  123,902
  129,838
  136,086
  142,659
  149,575
  156,848
  164,497
  172,539
  180,993
  189,880
  199,220
  209,035
  219,350
  230,188
  241,575
  253,538
  266,106
  279,308
  293,176
  307,742
  323,043
Revenue / Adjusted assets
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
Average production assets, $m
  19,596
  20,470
  21,394
  22,370
  23,400
  24,487
  25,634
  26,842
  28,115
  29,455
  30,866
  32,351
  33,914
  35,558
  37,287
  39,105
  41,017
  43,027
  45,140
  47,360
  49,694
  52,146
  54,722
  57,429
  60,273
  63,261
  66,399
  69,696
  73,159
  76,796
Working capital, $m
  -6,666
  -6,963
  -7,277
  -7,609
  -7,960
  -8,329
  -8,719
  -9,130
  -9,563
  -10,019
  -10,499
  -11,004
  -11,536
  -12,095
  -12,683
  -13,302
  -13,952
  -14,636
  -15,354
  -16,110
  -16,903
  -17,738
  -18,614
  -19,535
  -20,502
  -21,518
  -22,586
  -23,707
  -24,885
  -26,123
Total debt, $m
  36,223
  38,819
  41,563
  44,462
  47,522
  50,750
  54,155
  57,743
  61,522
  65,503
  69,694
  74,104
  78,745
  83,628
  88,763
  94,163
  99,840
  105,809
  112,083
  118,677
  125,607
  132,889
  140,541
  148,580
  157,026
  165,899
  175,219
  185,010
  195,294
  206,096
Total liabilities, $m
  58,195
  60,791
  63,535
  66,434
  69,494
  72,722
  76,127
  79,715
  83,494
  87,475
  91,666
  96,076
  100,717
  105,600
  110,735
  116,135
  121,812
  127,781
  134,055
  140,649
  147,579
  154,861
  162,513
  170,552
  178,998
  187,871
  197,191
  206,982
  217,266
  228,068
Total equity, $m
  24,234
  25,315
  26,458
  27,665
  28,939
  30,284
  31,701
  33,196
  34,770
  36,427
  38,172
  40,009
  41,942
  43,975
  46,113
  48,362
  50,726
  53,212
  55,825
  58,571
  61,456
  64,489
  67,675
  71,023
  74,540
  78,235
  82,116
  86,194
  90,476
  94,975
Total liabilities and equity, $m
  82,429
  86,106
  89,993
  94,099
  98,433
  103,006
  107,828
  112,911
  118,264
  123,902
  129,838
  136,085
  142,659
  149,575
  156,848
  164,497
  172,538
  180,993
  189,880
  199,220
  209,035
  219,350
  230,188
  241,575
  253,538
  266,106
  279,307
  293,176
  307,742
  323,043
Debt-to-equity ratio
  1.490
  1.530
  1.570
  1.610
  1.640
  1.680
  1.710
  1.740
  1.770
  1.800
  1.830
  1.850
  1.880
  1.900
  1.920
  1.950
  1.970
  1.990
  2.010
  2.030
  2.040
  2.060
  2.080
  2.090
  2.110
  2.120
  2.130
  2.150
  2.160
  2.170
Adjusted equity ratio
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7,889
  8,558
  9,276
  10,043
  10,861
  11,732
  12,660
  13,646
  14,694
  15,806
  19,344
  20,595
  21,920
  23,324
  24,809
  26,381
  28,043
  29,800
  31,657
  33,620
  35,692
  37,881
  40,191
  42,630
  45,203
  47,918
  50,781
  53,801
  56,986
  60,343
Depreciation, amort., depletion, $m
  4,546
  4,604
  4,666
  4,732
  4,801
  4,874
  4,951
  5,032
  5,117
  5,207
  2,072
  2,171
  2,276
  2,386
  2,502
  2,625
  2,753
  2,888
  3,030
  3,179
  3,335
  3,500
  3,673
  3,854
  4,045
  4,246
  4,456
  4,678
  4,910
  5,154
Funds from operations, $m
  12,435
  13,163
  13,942
  14,775
  15,662
  16,606
  17,611
  18,678
  19,811
  21,013
  21,416
  22,766
  24,196
  25,710
  27,311
  29,005
  30,796
  32,688
  34,687
  36,798
  39,027
  41,381
  43,864
  46,484
  49,248
  52,164
  55,238
  58,479
  61,896
  65,497
Change in working capital, $m
  -281
  -297
  -314
  -332
  -351
  -370
  -390
  -411
  -433
  -456
  -480
  -505
  -532
  -559
  -588
  -618
  -650
  -684
  -719
  -755
  -794
  -834
  -876
  -921
  -967
  -1,016
  -1,068
  -1,121
  -1,178
  -1,237
Cash from operations, $m
  12,716
  13,460
  14,257
  15,107
  16,012
  16,976
  18,001
  19,089
  20,244
  21,469
  21,896
  23,271
  24,728
  26,269
  27,900
  29,624
  31,446
  33,372
  35,406
  37,553
  39,821
  42,215
  44,740
  47,405
  50,216
  53,180
  56,305
  59,600
  63,074
  66,734
Maintenance CAPEX, $m
  -1,260
  -1,315
  -1,374
  -1,436
  -1,501
  -1,570
  -1,643
  -1,720
  -1,801
  -1,887
  -1,977
  -2,072
  -2,171
  -2,276
  -2,386
  -2,502
  -2,625
  -2,753
  -2,888
  -3,030
  -3,179
  -3,335
  -3,500
  -3,673
  -3,854
  -4,045
  -4,246
  -4,456
  -4,678
  -4,910
New CAPEX, $m
  -824
  -874
  -924
  -976
  -1,030
  -1,087
  -1,146
  -1,208
  -1,273
  -1,340
  -1,411
  -1,485
  -1,563
  -1,644
  -1,729
  -1,818
  -1,912
  -2,010
  -2,113
  -2,220
  -2,333
  -2,452
  -2,576
  -2,707
  -2,844
  -2,988
  -3,139
  -3,297
  -3,463
  -3,637
Cash from investing activities, $m
  -2,084
  -2,189
  -2,298
  -2,412
  -2,531
  -2,657
  -2,789
  -2,928
  -3,074
  -3,227
  -3,388
  -3,557
  -3,734
  -3,920
  -4,115
  -4,320
  -4,537
  -4,763
  -5,001
  -5,250
  -5,512
  -5,787
  -6,076
  -6,380
  -6,698
  -7,033
  -7,385
  -7,753
  -8,141
  -8,547
Free cash flow, $m
  10,632
  11,271
  11,959
  12,695
  13,481
  14,318
  15,211
  16,161
  17,170
  18,242
  18,508
  19,715
  20,994
  22,349
  23,784
  25,303
  26,910
  28,609
  30,405
  32,304
  34,309
  36,427
  38,664
  41,025
  43,517
  46,147
  48,921
  51,847
  54,933
  58,187
Issuance/(repayment) of debt, $m
  2,506
  2,596
  2,744
  2,899
  3,060
  3,228
  3,404
  3,588
  3,780
  3,981
  4,191
  4,411
  4,641
  4,882
  5,135
  5,400
  5,678
  5,969
  6,274
  6,594
  6,930
  7,282
  7,652
  8,039
  8,446
  8,873
  9,321
  9,791
  10,284
  10,802
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2,506
  2,596
  2,744
  2,899
  3,060
  3,228
  3,404
  3,588
  3,780
  3,981
  4,191
  4,411
  4,641
  4,882
  5,135
  5,400
  5,678
  5,969
  6,274
  6,594
  6,930
  7,282
  7,652
  8,039
  8,446
  8,873
  9,321
  9,791
  10,284
  10,802
Total cash flow (excl. dividends), $m
  13,138
  13,866
  14,703
  15,594
  16,541
  17,547
  18,615
  19,748
  20,950
  22,223
  22,698
  24,125
  25,635
  27,231
  28,919
  30,703
  32,587
  34,578
  36,679
  38,898
  41,239
  43,710
  46,316
  49,065
  51,963
  55,020
  58,242
  61,638
  65,217
  68,989
Retained Cash Flow (-), $m
  -1,006
  -1,081
  -1,143
  -1,207
  -1,274
  -1,344
  -1,418
  -1,494
  -1,574
  -1,658
  -1,745
  -1,837
  -1,933
  -2,033
  -2,138
  -2,249
  -2,364
  -2,486
  -2,613
  -2,746
  -2,886
  -3,032
  -3,186
  -3,348
  -3,517
  -3,695
  -3,881
  -4,077
  -4,283
  -4,498
Prev. year cash balance distribution, $m
  42,909
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  55,041
  12,785
  13,560
  14,386
  15,266
  16,203
  17,198
  18,254
  19,376
  20,565
  20,953
  22,289
  23,702
  25,198
  26,781
  28,454
  30,223
  32,092
  34,066
  36,152
  38,353
  40,677
  43,129
  45,717
  48,446
  51,325
  54,360
  57,561
  60,935
  64,491
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  52,772
  11,705
  11,801
  11,846
  11,833
  11,759
  11,618
  11,409
  11,130
  10,781
  9,950
  9,511
  9,012
  8,459
  7,862
  7,231
  6,576
  5,910
  5,245
  4,594
  3,967
  3,375
  2,827
  2,328
  1,885
  1,497
  1,167
  891
  665
  486
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Cisco Systems, Inc. designs and sells a range of products, provides services and delivers integrated solutions to develop and connect networks around the world. The Company operates through three geographic segments: Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific, Japan and China (APJC). The Company groups its products and technologies into various categories, such as Switching; Next-Generation Network (NGN) Routing; Collaboration; Data Center; Wireless; Service Provider Video; Security, and Other Products. In addition to its product offerings, the Company provides a range of service offerings, including technical support services and advanced services. The Company delivers its technology and services to its customers as solutions for their priorities, including cloud, video, mobility, security, collaboration and analytics. The Company serves customers, including businesses of all sizes, public institutions, governments and service providers.

FINANCIAL RATIOS  of  Cisco Systems (CSCO)

Valuation Ratios
P/E Ratio 23.8
Price to Sales 4.8
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 16.5
Price to Free Cash Flow 17.7
Growth Rates
Sales Growth Rate -2.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.9%
Cap. Spend. - 3 Yr. Gr. Rate -5.4%
Financial Strength
Quick Ratio 9
Current Ratio 0.1
LT Debt to Equity 38.9%
Total Debt to Equity 51%
Interest Coverage 15
Management Effectiveness
Return On Assets 8.2%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 10%
Ret/ On T. Cap. - 3 Yr. Avg. 11.1%
Return On Equity 14.8%
Return On Equity - 3 Yr. Avg. 15.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 63%
Gross Margin - 3 Yr. Avg. 62.1%
EBITDA Margin 32.2%
EBITDA Margin - 3 Yr. Avg. 31.3%
Operating Margin 24.9%
Oper. Margin - 3 Yr. Avg. 24.2%
Pre-Tax Margin 25.6%
Pre-Tax Margin - 3 Yr. Avg. 24.9%
Net Profit Margin 20%
Net Profit Margin - 3 Yr. Avg. 20%
Effective Tax Rate 21.8%
Eff/ Tax Rate - 3 Yr. Avg. 19.5%
Payout Ratio 57.4%

CSCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSCO stock intrinsic value calculation we used $48005 million for the last fiscal year's total revenue generated by Cisco Systems. The default revenue input number comes from 0001 income statement of Cisco Systems. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CSCO stock valuation model: a) initial revenue growth rate of 4.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CSCO is calculated based on our internal credit rating of Cisco Systems, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Cisco Systems.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CSCO stock the variable cost ratio is equal to 44.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14901 million in the base year in the intrinsic value calculation for CSCO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Cisco Systems.

Corporate tax rate of 27% is the nominal tax rate for Cisco Systems. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CSCO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CSCO are equal to 39.1%.

Life of production assets of 14.9 years is the average useful life of capital assets used in Cisco Systems operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CSCO is equal to -13.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $66137 million for Cisco Systems - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 4702.88 million for Cisco Systems is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Cisco Systems at the current share price and the inputted number of shares is $215.5 billion.

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