Apple Inc. (AAPL) Prev Close: Info above. 1. Use the following three methods to
ID: 2718239 • Letter: A
Question
Apple Inc. (AAPL)
Prev Close:
Info above.
1. Use the following three methods to determine if you will purchase this stock at current market price. Assume market interest rate ( r) as 12%, constant dividend growth rate (g) as 10%, EPS will increase 10% next year, and industry average P/E ratio as 20 times
(1) True value method (Gordon dividend valuation model )
(2) Annual rate of return method (Gordon dividend valuation model)
(3) P/E multiples approach
2) If you purchased this stock at 52 week range low, sold it at current market price, and you also received dividend during this holding period; calculate holding period rate of return.
Can Anybody Help me Thanks!
Prev Close:
118.88 Open: 119.14 Bid: 118.02 x 100 Ask: 118.10 x 1000 1y Target Est: 148.64 Beta: 0.99547 Next Earnings Date: N/AExplanation / Answer
True value method =>[D0 (1 + g) ] / (Ke - g)
D0 => Dividend today
.g= growth
Ke = rate of return
119.14 = [D0 (1+10%)] /(12-10)
D0=> 2.15 (1.80%)
Rate of return
119.14= [ 2.08 (1 +10%) ] / (ke -10%)
119.14 (ke-0.10) = 2.288
ke=> 11.92%
Annual Rate of retrun => 11.92%
PE Multiple > Share price / eps
=> 119.14 / (9.22+10%)
11.75
PE Mulitple => 11.75 Times
Holding period return =>( P1-P0 +D) / P0
P1=> ending value
P0 => beggining value
=> [(119.14-92 + 2.08) / 92]*100
Holding Perio Return =>31.77%
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