Estimate stock price using the discounted abnormal earnings

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Reference no: EM132692156

The Company to be given the valuation is Apple, Inc.

Question 1: Cost of equity calculation using CAPM Valuation using abnormal earnings valuation method. Explain your terminal value assumption

Question 2: Estimate stock price using the discounted abnormal earnings valuation method (use the spreadsheet template from class) and compare them with the actual stock price. Is the current stock price over- or under-valued?

Question 3: Sensitivity analysis: How is your valuation affected by different assumptions for your cost of equity, and/or terminal value assumption? What combination of cost of equity and terminal growth rate gives you the closest estimate to the actual stock price? Do you think the cost of equity and the terminal growth rate implied by the actual stock price are reasonable?

Reference no: EM132692156

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