Estimating Cisco's Future Cash Flows
(2 pages of text)
Case (Gen Exp)
In March 2016, an investor wanted to evaluate the strategy and stability of Cisco Systems, Inc. by using historical income statements to predict future cash flows. He knew that he might be able to use time series analysis to evaluate the company’s performance in the near future, but he was unsure how to proceed if the historical data would not be predictive of the future performance. In particular, the investor wondered, how would he determine the likelihood that the company’s next quarter would yield similar net income to the previous quarter?
This case is suitable for an undergraduate or MBA management science or finance course. After completion of this case, students should be able to:
- be familiar with the concept of time series;
- understand regression analysis;
- be familiar with normally distributed random variables;
- understand non-negative random numbers; and
- be familiar with the concept of simulation.
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