a What is Ciscos enterprise value b Assuming Ciscos debt has

a. What is Cisco\'s enterprise value?

b. Assuming Cisco\'s debt has a beta of zero, estimate the beta of Cisco\'s underlying business enterprise.

In mid-2015, Cisco Systems had a market caitalization of $130 billion. It had A-rated debt of $25 billion as well as cash and short-term investments of $60 billion, and its estimated equity beta at the time was 1.11

Solution

Enterprise value = Equity + debt - cash and equivalents 130+25-60 95 Billion Net debt = $25 billion - $60 billion = -$35 billion ciscos beta = 130/95 x 1.11 + -35/95 x 0 1.37 x 1.11           1.52