Question

Following are Cisco Systems’ sales, net operating profit after tax (NOPAT), and net operating assets (NOA) for its year ended July 31, 2016 ($ millions).

Sales				$49,247
Net operating profit after tax (NOPAT)				10,575
Net operating assets (NOA)				26,472

Use the parsimonious method to forecast Cisco’s sales, NOPAT, and NOA for years 2017 through 2020 using the following assumptions.

Sales growth per year						1.0%	for 2017 and
						2.0%	thereafter
Net operating profit margin (NOPM)						21.5%
Net operating asset turnover (NOAT), based on NOA at July 31, 2016						1.86

Rounding instructions:

Round total revenue "unrounded" to two decimal places.

Round total revenue "rounded", NOPAT and NOA answers to the nearest whole number.

For NOPAT and NOA computations, use total revenue "rounded".

$ millions			2017 Est	2018 Est.	2019 Est.	2020 Est.
Total revenue (unrounded)			$Answer	$Answer	$Answer	$Answer
Total revenue (rounded)			Answer	Answer	Answer	Answer
NOPAT			Answer	Answer	Answer	Answer Incorrect Mark 0.00 out of 1.00
NOA			Answer	Answer	Answer	Answer

Answer 1

Note :

• Net operating profit margin = (Net operating profit after tax) / sales
• Net operating asset turnover = Sales / Net operating assets
• Next Year sales = Current Year sales * (100 % + growth rate %)

		2018 Est	2019 Est	2020 Est
Total revenue (unrounded)	($49,247 * 101 % ) = $49,739.47	($49,739.47 * 102 %) = $50,734.26	($50,734.26 * 102 % ) = $51,748.94	($51,748.94 * 102 %) = $52,783.92
Total revenue (rounded)	$49,739	$50,734	$51,749	$52,784
NOPAT (total revenue * 21.5%)	($49,739 * 21.5%) = $10,694	($50,734 * 21.5%) = $10,908	($51,749 * 21.5%) = $11,126	($52,784 * 21.5%) = $11,349
NOA (total revenue / 1.86)	($49,739 / 1.86) = $26,741	($50,734 / 1.86) = $27,276	($51,749 / 1.86) = $27,822	($52,784 / 1.86) = $28,378