Determine the price of aapl common stock

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Suppose that Apple Inc. (AAPL) is selling for $280.00. Analysts believe that the growth rate for AAPL will be 25% per year for the next three years, 15% per year for the following two years, and thereafter the growth rate will be 8% indefinitely. AAPL's most recent cash dividend per share was $3.00. The dividend will grow by the same rate as the company. Stockholders require a return of 10 percent on AAPL's common stock.

Required:

Question a) Based on the above assumptions, determine the price of AAPL's common stock.

Question b) Explain whether an investor should buy the stock.

Reference no: EM132578362

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