Premium Essay

A Quantitative Analysis of Apple's Present Value

In: Business and Management

Submitted By llango
Words 3439
Pages 14
A Quantitative Analysis Of Apple's Present Value
Apple (NASDAQ:AAPL) announces earnings next week, and so we feel it is an appropriate time to quantitatively value the equity. Justification for a Weighted Averages Model To value this stock, we have employed a FCFE Weighted Averages Model (further explained below). We believe this model is an appropriate valuation method for all equities. In relation to Apple, we feel it is especially useful since Apple's growth can be qualitatively segmented: excellent short-term growth in the upcoming year due to iPhone 6 and Mac sales; good growth in the next 5 years due to brand relevancy and superior technology/products; and stable growth thereafter due to continued innovation. We affirm that the iPhone 6 will continue to post record-breaking numbers, and that Mac sales will continue their upward trend. We also credit the iWatch as having good growth potential for the company, as can be detailed here. We then affirm that Apple's growth over the next five years should be good, maybe even double-digit good, although we still think Apple could experience negative earnings growth (as they did from 2013 to 2012) if the iPad continues to slump, the iWatch doesn't take off, and Mac and iPhone sales stagnate. Further, we believe in the longevity of Apple. Apple has sustained itself as a dominant player in the tech realm for over a decade now, and we don't see that trend reversing in the long-run. Despite concerns over R&D spending, we believe those concerns, at worst, evince themselves in stagnated long-term growth (i.e. a stable growth rate of 0%). Our Five-Year Forecasts (An Income Statement Look) We have crafted two five-year forecasts (optimistic and pessimistic) for Apple for determining what growth rate bounds we should employ in our Weighted Averages Model. To understand the parameters that influence these forecasts, let us…...

Similar Documents

Premium Essay

Present Value

...Part I: This part of the assignments tests your ability to calculate present value. A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%? The present value for a bank account that is worth $15, 000 in one year at an interest rate of 7% will be $14019.00. Using the Present Value Factors Table for a period of one year at a 7% rate value factor is .9346. $15, 000 x .9346= $14019.00 worth in value. The present value for a bank account that is worth $15, 000 in one year at an interest rate of 4% will be $14422.50. Using the Present Value Factors Table for a period of one year at a 4% rate value factor is .9615. $15, 000 x .9615= $14422.50 B. Suppose you have two bank accounts, one called Account A and another Account B. Account A will be worth $6,500.00 in one year. Account B will be worth $12,600.00 in two years. Both accounts earn 6% interest. What is the present value of each of these accounts? Account A would be worth $6, 132.10. Account A in one year at a 6% interest rate value factor is .9434. $6500 x .9434= $6132.10 Account B would be worth $11, 214.00. Account B in two years at a 6% interest rate value is .8900. $12, 600 x .8900= $11. 214.00 C. Suppose you just inherited a gold mine. This gold mine is believed to have three years worth of gold......

Words: 465 - Pages: 2

Premium Essay

Quantitative Analysis

...AIIAS BUAD635 Quantitative Analysis for Decision-Making Study Guide To accompany the prescribed text: Quantitative Analysis for Management by Render, Stair and Hanna, 11th edition, Prentice Hall, 2012 Unit # 1: Overview and Introduction to Quantitative Analysis Prescribed Text: Quantitative Analysis for Management by Render, Stair and Hanna, 11th edition, Prentice Hall, 2012 – Chapter 1 Objectives of unit 1: After completing this unit, students should be able to: 1. Describe the quantitative analysis approach for management 2. Demonstrate an understanding by applications of quantitative analysis in real world situations 3. Demonstrate the use of modeling in quantitative analysis 4. Use computers and spreadsheet models to perform quantitative analysis 5. Understand the limitations of quantitative analysis 6. Demonstrate/perform break-even analysis. Scope of coverage: Concepts Development 1. Overview of quantitative analysis 2. Defining quantitative analysis 3. The approach to quantitative analysis 4. A quantitative analysis model 5. Using spreadsheet for quantitative analysis 6. Limitation of quantitative analysis Introduction Quantitative analysis for decision-making is the application of a scientific approach to solve management problems. The purpose is to help managers make better decisions. Quantitative analysis......

Words: 19689 - Pages: 79

Premium Essay

Apple's Strategy Analysis

...the country are highlighting Apple’s extremely successful premium niche strategy and praising Steve Job’s as an innovator. Since Steve Jobs’ unfortunate passing the future of Apple has been a source of debate. The real question is whether or not Apple’s growth is sustainable even if new innovative minds take Job’s place. This report will provide an analysis on possible strategies for innovation and whether Apple’s historical growth is sustainable in the future. The first strategy that Apple must embrace in order to bolster growth is to employ more innovative employees. Apple lost not only Steve Jobs but other innovators that had burned out under his draconian management style. (Murphy) Without new ideas and replacement of these employees Apple will lose its main competitive advantage, innovation of cutting edge technology. Once Apple employs top talent they will need to nurture their new employees encouraging them to take risks. Michael Murphy from Bloomberg is quoted as saying “Management should direct Apple’s considerable cash reserves to disruptive product research based on consumer insights.” This strategy will create an influx of new product ideas and could help discover Apple’s next “Ipad”. Unfortunately, while these strategies could promote growth in the future it is hardly sustainable at the present time. It’s been over 2 years since Apple has released a new innovative product and Apple TV is the only new product on the horizon. Apple’s growth will falter without a...

Words: 410 - Pages: 2

Premium Essay

Present Value/Future Value

...Present value is where the value on a set date of a future payment is discounted to reflect the time value of money and other factors. This can also apply to a series of future payments. Present value calculations are commonly utilized in business and economics to provide a way to compare cash flows at different times. Present value can be described as the current worth of a future sum of money or stream of cash flows given a specified rate of return. (http://www.getobjects.com) Future cash flows are discounted at the discount rate. The higher the discounted rate, the lower the present value of the future cash flows. Determining what the appropriate discount rate is, is important to correctly place value future cash flows. The Present Value of an Ordinary Annuity is the value of a stream of promised or expected future payments that have been discounted to a single equivalent value today. It is extremely useful for comparing two separate cash flows that differ in some way. Present Value of an Ordinary Annuity can also be looked at as the amount you have to invest today at a specific interest rate so that when you withdraw an equal amount each period, the original principal and all accumulated interest will be completely used at the end of the annuity. Present Value of an Ordinary Annuity= Payment [(1 - (1 / (1 + Discount Rate per period)number of periods)) / Discount Rate Per Period] Future value measures the nominal future sum of money that a given sum of money is......

Words: 483 - Pages: 2

Premium Essay

Present Value

...301 Principles of Finance Present Value Part I:  This part of the assignments tests your ability to calculate present value. A. Suppose your bank account will be worth $7,000.00 in one year.  The interest rate (discount rate) that the bank pays is 8%.  What is the present value of your bank account today?  What would the present value of the account be if the discount rate is only 3%? PV=FV/(1+r)t, PV=7,000/1.08 = $6,481.48 at 8% PV=7,000/1.03, = $6,796.12 at 3% B. Suppose you have two bank accounts, one called Account A and another Account B.  Account A will be worth $4,000.00 in one year.  Account B will be worth $9,600.00 in two years.  Both accounts earn 5% interest.  What is the present value of each of these accounts? Account A PV=FV/(1+r)t, PV=4,000/1.05 = $3,809.52 Account B PV=FV/(1+r)t, PV=9,600/1.1025 = $8,707.48 C. Suppose you just inherited an gold mine.  This gold mine is believed to have three years worth of gold deposit.  Here is how much income this gold mine is projected to bring you each year for the next three years: Year 1: $42,000,000 Year 2: $62,000,000 Year 3: $99,000,000 Compute the present value of this stream of income at a discount rate of  8%.  Remember, you are calculating the present value for a whole stream of income, i.e. the total value of receiving all three payments (how much you would pay right now to receive these three payments in the future). Your answer should be one number - the present value for this oil well at......

Words: 950 - Pages: 4

Premium Essay

Net Present Value Analysis

...You have been asked to support analysis of acquisition decisions involving net present value analysis. 1. You are analyzing the net present value of a project over a 16 year period. Based on the rates in the textbook, what is the actual discount rate you would use given that your analysis must consider the effects of inflation/deflation? In analyzing the pet present value of a project over a 16 year period, the inflation rate must be included in the computation of the discount rate to be used. This means that the nominal rate be adjusted for the inflation rate to arrive at the real interest rate which is then used as the discount rate. 2. What is the present value of $25,000 that you will receive at the end of two years? Given that there was no information provided for the discount rate, I assumed a discount rate of 10%, hence Present value of $25,000 to be received 2 years from now = $25,000/[(1+10%)^2] = $20,661.16 3. What is the present value of $2,000 a month over the next 3 years? 4. What is the net present value of a lease that requires you to pay $10,000 at the beginning of each year for the next five years and includes a provision for a rebate of $5,000 at eh end of Year 5? 5. What is the net present value of an item that has a purchase price of $20,000, requires $1,000 maintenance at the end of each year except year 4, and is expected to have a salvage valueof $1,000 at the end of the 5 year useful life?...

Words: 284 - Pages: 2

Premium Essay

Quantitative Values

...Quantitative Values Project: Homeowner Master Bathroom Remodel To incorporate quantitative values of expected value and probability into the risk management plan for my master bathroom remodel project will be a challenge. The homeowner is taking on the task of trying to do much of the remodel work himself. Hence the risk is related to human failure. Since the homeowner does not have extensive experience in some of the remodeling tasks, there is no history that can be used to calculate failure rates so that probabilities can be determined. The use of a Human Error Probabilities (HEP) model will be needed to determine the probabilities of the remodel tasks that are most at risk. The tasks that have been identified most at risk are the plumbing, electrical and window installation. I will use the Delphi approach to develop HEP estimates for the most at risk tasks. The first step is to select a panel consisting of four subject matter experts (SME), a risk analysis and a group facilitator. Two of the four SMEs will have professional experience in bathroom remodeling and the other two will be homeowners that have taken on bathroom remodel projects but do not necessarily do it for a living. This is to help minimize biasing the data since the analysis is going to be used to determine whether the homeowner does the work himself or contracts it out. After the facilitator introduces each member of the panel and introductions have been made, the risk analysis will present one of the......

Words: 1068 - Pages: 5

Premium Essay

Apple's Core Value Enlighten Apple's Employee Engagement

...Apple’s Core Value Enlighten Apple’s Employee Engagement Apple’s core values are the qualities, customs, standards, and principles that the company believes will help it and its employees succeed. These values are the basis for what Apple does and how Apple does it. These values govern Apple’s business conduct. Innovation/Vision: Apple built on innovation, providing products that were new and needed. Apple accepts the risks inherent in following their vision, and work to develop leadership products that command the profit margins Apple strive for. Positive Social Contribution: Apple build products that extend human capability, freeing people from drudgery and helping them achieve more than they could alone. But beyond that, Apple expects to make the world a better place to live. As a corporate citizen, we wish to be an economic, intellectual, and social asset in communities where we operate. Individual Performance: each Apple’s employee can and must make a difference. Individuals determine the character and strength of Apple. Apple is known for strictly enforcing accountability. Each project has a “DRI (Directly Responsible Individual)”. As an example, when iOS senior vice president Scott Forstall refused to sign Apple’s official apology for numerous errors in the redesigned Maps App, he was forced to resign. Individual Reward: Apple recognize each person’s contribution to Apple’s success, and Apple share the financial rewards that flow from high performance. Apple...

Words: 443 - Pages: 2

Premium Essay

Quantitative Analysis

...BIMS Data Collection Jesse Gillen, Melroy Hyman, Joseph Boots, Michael Richards, Megan Hudspeth QNT/351 February 10th, 2015 Mohammad Sharifzadeh, Ph.D BIMS Research Analysis Introduction This report and the two studies conducted within it are to determine the reason for the increased turnover rate at Ballard Integrated Management Systems, Inc.. This report contains how the studies were conducted, the information that was gathered, interpretations of the data and recommendations for management. Study I Overview Ballard Integrated Management Systems, Inc. (BIMS) is experiencing an increased turnover rate with no clear answer why this is happening. The purpose of this study is to investigate why the turnover rate at BIMS has increased. The question that the research is attempting to answer is: What are the factors that may be contributing to the increased turnover rate in each region? Hypothesis Our hypothesis is that each region is going to show a spike of negative feedback to a specific problem. For example, employees working in the hospitality division may show more displeasure for their supervisor than the employees working in the food service division. This spike may indicate the reason for the increased turnover rate. BIMS One of the problems BIMS faces at its Douglas Medical Center site is a 4 percent increase in employee turnover. The root cause of the increased turnover rate has not yet been determined, and the exit interviews have been......

Words: 6911 - Pages: 28

Premium Essay

Net Present Value Analysis

...Evident within the analysis of financial management is the goal of maximising shareholder wealth. Pertaining to this goal is the methodology of capital budgeting, referred to as Net Present Value analysis(NPV). This concept evaluates a capital investment project measuring the difference between its cost and the present value of its expected cash flows (Parrino et al. 2014, p.339). More simply, the NPV tell us the amount by which the benefits from a capital expenditure exceed its costs (Parrino et al. 2014, p.339). Along with any valuation method for a capital project are associated advantages and disadvantages essential to determining its relevance when compared with other methods of analysis. The advantages of NPV include, but are not limited to: the inclusion and importance of the 'time value of money (Accounting-Management 2014),' consideration of cash flows before, during and after a business venture, consistency with financial management goals and the high priority of profitability and risk involved in capital investment (Accounting-Management 2014). The inclusion of the time value of money is the most notable advantage of NPV supported by the notion, 'a dollar today is worth more than a dollar in the future (Investopedia 2014).' Present currency holds more value due to three reasons, accruing interest on investments, future money is subject to inflation and finally there is always the risk of not receiving promised money (Investopedia 2014). An organisation is......

Words: 681 - Pages: 3

Free Essay

Quantitative Analysis

...Ass Analytical chemistry What is Qualitative Analysis? Qualitative analysis is the aspect of analytical chemistry dealing with the identification of elements or compounds in an unknown substance. Very simply put, it answers the question "What is in this sample?" and usually does so with yes/no question. What is Quantitative Analysis? Quantitative chemical analysis is the aspect of analytical chemistry dealing with determining the quantity of a particular chemical is in a substance. In short, it attempts to answer questions involving "How much?" Accuracy: Accuracy refers to the agreement between experimental data and a known value. You can think of it in terms of a bull’s eye in which the target is hit close to the center, yet the marks in the target aren't necessarily close to each other. Accuracy is defined as, "The ability of a measurement to match the actual value of the quantity being measured". If in reality it is 34.0 F outside and a temperature sensor reads 34.0 F, then than sensor is accurate. Precision Precision refers to how well experimental values agree with each other. If you hit a bull’s-eye precisely, then you are able to hit the same spot on the target each time, even though that spot may be distant from the center. Precision is defined as, "(1) The ability of a measurement to be consistently reproduced" and "(2) The number of significant digits to which a value has been reliably measured". If on several tests the temperature......

Words: 623 - Pages: 3

Free Essay

Analysis Quantitative

...  CLASS    2015     QUANTITATIVE  METHODS                         PERSONAL  ASSIGNMENT     DATA  ANALYSIS       BY      LORENZO  CORONATI                         Prof.  Maurizio  Poli     Via  Bocconi  8     Office  room:  517  (5th  floor)     E-­‐Mail:  maurizio.poli@sdabocconi.it                               1     1. PRELIMINARY  ANALYSIS       The   main   scope   of   the   work   and   the   data   analysis   consist   in   developing   a   multiple   linear   regression   model   capable   of   demonstrate   the   function   between   ITC   cost   and   the   selected   independent  variables.  All  data  in  this  work  have  been  extrapolated  from  Dataset  Eurostat   Datawherehouse.     The   statistical   units   that   have   been   studied   are   the   15   countries   of   the   European   Community  as  described  in  table  1.   It   has   been   utilized   for   the   analysis   a   software   called ...

Words: 1287 - Pages: 6

Premium Essay

Present Value

...Present Value Exercise Part 1: Present Value Problems 1. FV = 2,500 x (1 + .14)^6 = 2,500 x (1.14)^6 = 2,500 x 2.19 = $5,475 2. PV = 10,000/(1 + .12)^5 = 10,000/(1.12)^5 = 10,000/1.76 = $5,681.82 3. PV = 52,500/(1 + .06)^4 = 52,500/(1.06)^4 = 52,500/1.26 = $41,667 4. PV = 13,000/(1 + 0.10)^3 = 13,000/(1.10)^3 = 13,000/1.331 = $9,767.09 Part 2: Contribution Margin Problems 1. 54,000/10 - 6 = 54,000/4 = 13,500 2. (10 – 6)/10 = 4/10 = 0.4 3. 54,000/0.4 = $135,000 4. 60,000 = 10x – 54,000 – 6x = 4x = x = 114,000/4 = x = 28,500 Part 3: Research Report • Personal savings is current disposable personal income less personal expenditures. Voluntary savings is money deposited in post offices, banks, LIC , Chit finds, shares, mutual funds and other such institution. The rates of interests vary depending on the institutions. It is fixed according to the time period of the deposited amount. And contractual savings is savings in the form of regular payments for long-term investment. • European Union is 28 member states who make decision at the European level to help raise citizens’ living standard, launched European currency and building Europe-wide free market for goods, services, people and capital. The current members: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Ireland, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,......

Words: 316 - Pages: 2

Premium Essay

Bus 630 Week 6 Dq 2 Net Present Value Analysis

...BUS 630 Week 6 DQ 2 Net Present Value Analysis To Buy This material Click below link http://www.uoptutors.com/BUS-630/BUS-630-Week-6-DQ-2-Net-Present-Value-Analysis Complete the following exercise, using this Excel template, and respond to at least two of your fellow students’ postings.. In eight years, Kent Duncan will retire. He is exploring the possibility of opening a self-service car wash. The car wash could be managed in the free time he has available from his regular occupation, and it could be closed easily when he retires. After careful study, Mr. Duncan has determined the following: * A building in which a car wash could be installed is available under an eight-year lease at a cost of $1,700 per month. * Purchase and installation costs of equipment would total $200,000. In eight years the equipment could be sold for about 10% of its original cost. * An investment of an additional $2,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. After. eight years, this working capital would be released for investment elsewhere. * Both a wash and a vacuum service would be offered with a wash costing $2.00 and the vacuum costing $1.00 per use. * The only variable costs associated with the operation would be 20 cents per wash for water and 10 cents per use of the vacuum for electricity. * In addition to rent, monthly costs of operation would be: cleaning, $450; insurance, $75; and maintenance, $500. ...

Words: 396 - Pages: 2

Premium Essay

Present Value

...Tutorial: Present Values and Debt Pricing This material involves a review of topics covered during your FIN 214 course. You may also find more information on it in Chapter 6 of the AC 305/306 textbook (the first half of the book may be accessed through the “Read, Study, & Practice” module of WileyPlus). When you are considering any type of long-term investment – whether you are making the investment in a project, or making an investment in a long-term asset, or attempting to get long-term financing for your own projects or investments – it is not OK to consider the cash flows in terms of current dollars. The existence of inflation means that a dollar today will buy more than that same dollar next year. The year-to-year effect may be small when inflation is low, as it is now, but when your investment horizon is measured in decades instead of months, that inflation effect can get very large. If you are not sure what I mean by “large” – just ask your parents (or aunts, uncles, friends who are 15-20 years older than you) how much they paid for a gallon of gas when they were in college. For me, I graduated from college in 1996, and in that year, I usually paid about $1.30 for the gallon of gas that now costs me $3.50. I paid about $1.00 per pound for a whole chicken. Now that same chicken costs $1.35 per pound. That’s a 30% increase for the chicken, over the last 16 years…and for the gas? It’s a 169% increase over the same period. You can see from this......

Words: 1989 - Pages: 8

Read More | Infinity Challenge Special | HDCam Baby Driver (2017)