Goes with the analyst expectations and use

Reference no: EM131090468

1. If John desires a 15% annual return, and if he assumes that Apple's dividends will grow by its historical rate (i.e. the average growth in the last 2 years) each year for the next 5 years, and then by the analyst expected growth rate for the whole market (i.e. S&P500) each year after that forever, what would be the value of an Apple share? The stock closed at $109.85 on April 15, 2016. What would be his investment decision in that case? Buy, hold, or sell?

2. If John goes with the analyst expectations and use the 13.64% required return by the analysts (as computed above) and if he assumes that Apple's dividends will grow by 11.63% per year for the first five years (as analysts expect for the next 5 years) and then by 11.44% per year (as analysts expect for the industry as a whole) after the fifth year forever, what would be the value of an Apple share? What would be his investment decision in that case? Buy, hold, or sell?

3. If instead of comparing value to price, let's assume that John wants to compare his required return (i.e. 15%) to the expected return in this investment. The average Apple investor's required return can be found by entering the most recent share price (i.e. $109.85) and the expected dividends into the equation. Again, John is assuming that Apple's dividends will grow by 11.63% per year for the first five years (as analysts expect for the next 5 years) and then by 11.44% per year (as analysts expect for the industry as a whole) after the fifth year forever. In the end, should John invest in this stock? If there is another investor with a 10% required return, would this be a good investment?

Reference no: EM131090468

Questions Cloud

Will dna replication process always create identical strands : Will DNA replication process always create identical strands

Spot exchange value of one currency in terms of the other : Assume that the U.S. dollar and the Japanese yen are the only two currencies in the world. a. A bilateral nominal exchange rate S is the spot (now) exchange value of one currency in terms of the other and S can be written as dollars per 1 yen or yen ..

How do effective job design contribute to employee retention : Thinking about your past employment opportunities, have you ever wondered what qualifications and skills were necessary for a job? Now, consider as a manager why it would be important to know of all of the necessary qualifications of a new positio..

Method requires that you set up cross-rate multiplication : Cross-rates allow you to calculate a third exchange rate from two that are known and that have a common currency. The method requires that you set up the cross-rate multiplication so that the common currency is canceled out. For example, if a U.S. do..

Goes with the analyst expectations and use : If John desires a 15% annual return, and if he assumes that Apple's dividends will grow by its historical rate (i.e. the average growth in the last 2 years) each year for the next 5 years, and then by the analyst expected growth rate for the whole..

Marketing manager for a healthcare organization : Imagine that you are the marketing manager for a healthcare organization. You and your team would like to create a marketing message to target the organization's primary market. It is your job to convince the governing board to give your team the ..

Estimate the optimal pricing strategy : Estimate the optimal (profit-maximizing) pricing strategy assuming a linear demand curve.

Evaluate the lessons learned in this course : Evaluate the lessons learned in this course and discuss the single most important or surprising lessons as well as what made it so. Discuss how you would describe this course in 140 characters or less to someone considering taking it.

Discuss the overall production and staging of the event : Your observation report must discuss the overall production and staging of the event - Brief evaluation about stage design and props, logistics, audio-visual equipment and overall execution.

User Account

All Pages