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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (57783)	2/21/2002 10:32:11 AM
From: Stock Farmer	Read Replies (1) \| Respond to of 77400

Fair response re "why 15". Measures the confidence in your estimate. Let's zero in on the meat tho... If the company is generating profits, then we expect the profits to show up as increased equity. If they don't show up as increased equity then ask yourself which figure is wrong: equity, or your estimate of contribution to equity. Me, my bet's that the error is yours. So the fact remains that Cisco's equity only rose by 1.0 Billion in the last six months from all sources. Including shareholder contributions. So it's unwise of you to create an estimate that gives you a higher number. There is no question to this. As for the last five years (1996-2001), well the TOTAL contribution of the company's equity from its own actions was exactly 5.137 Billions according to the company's filings with the SEC. The rest has accrued through equity financing (stock options and other avenues). Which we now know we have to discount. It isn't an accident this number is published in the SEC filings for us. Most people don't even know where to look for it. Anyway, however you managed to come up with 3.67 Billions in one year is clearly in error and overstates past results by a factor of about 3.5 So clearly you forgot to factor out something very important. As for using past 5 year average, I think this is going to give you a low number (the company has grown). And presto, my 2 B$/year number is indeed higher by a factor of two. Finally, when I plug in 3.67 for year 1, my end number works out to 115 Billions in present value divided by 12.8 Billion shares to give 8.98 Billions. Not 12.98 Billions. So even if we agreed on the input number, (which we don't), we still wouldn't agree on the out put number. Oh darn... this could get complicated.

To: RetiredNow who wrote (57783)	2/21/2002 11:06:26 AM
From: Stock Farmer	Read Replies (1) \| Respond to of 77400

The gizzards of my GIGO function. I found two mistakes so far. Maybe you can spot others before we drive each other nuts using the same assumptions getting to different numbers ;) So we can at least come to agreement on one thing. First of all, share count (my first mistake). I get shares in 2020 of 12.48 Billion, growing 7.3 Billion by 3% per anum. Do you agree? Second, cash flow each year. Starting with one dollar in year 2001 I get $1.30 in 2002, 1.469 in year two and so on. But I also have 1.10 in year 2003 is worth the same as 1.00 in year 2002. We want the product of these effects summed over the years 2002 to 2020. Working this out is a good job for excel. Columns below, explained. Year (self explanatory) Growth (YoY) Cash (last year's cash x Growth) PV Factor (converts future dollars to current dollars at 10%) PV Cash (present value of year's cash) 10% Year Growth Cash PV Discount PV Cash % $ 2001 1.000 2002 13 1.130 1.000 1.130 2003 30 1.469 1.100 1.335 2004 25 1.836 1.210 1.518 2005 20 2.204 1.331 1.656 2006 15 2.534 1.464 1.731 2007 15 2.914 1.611 1.809 2008 15 3.351 1.772 1.892 2009 15 3.854 1.949 1.978 2010 15 4.432 2.144 2.068 2011 10 4.875 2.358 2.068 2012 10 5.363 2.594 2.068 2013 10 5.899 2.853 2.068 2014 10 6.489 3.138 2.068 2015 10 7.138 3.452 2.068 2016 5 7.495 3.797 1.974 2017 5 7.869 4.177 1.884 2018 5 8.263 4.595 1.798 2019 5 8.676 5.054 1.717 2020 5 9.110 5.560 1.638 Total 34.464 Here's present value of future cumulative profit per share for a range of year 2001 values 2001 Profit 2020 Profit Total Per Share B$ B$ B$ 12.43 B 0.50 4.6 17.2 $1.39 1.00 9.1 34.5 $2.77 1.50 13.7 51.7 $4.16 2.00 18.2 68.9 $5.55 2.50 22.8 86.2 $6.93 3.00 27.3 103.4 $8.32 3.67 33.4 126.5 $10.18 4.00 36.4 137.9 $11.09 4.50 41.0 155.1 $12.48 5.00 45.5 172.3 $13.87