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Apple

STUDENT MANAGED INVESTMENT FUND


Katherine Gonzalez
Zachary Schwager
Carlos Valcarcel
Special Thanks to: John Neumann

Company Overview
II. Product line-up
III. Geographical Sales
IV. Apple 10 yr Stock chart
V. Industry Overview
VI. Current Events
VII. Fundamental Analysis
VIII. DuPont Analysis
IX. Market Share
X. Pro Forma Income Statement
XI. Relative Valuation
XII. Absolute Valuation
XIII. Recommendations
I.

Agenda

Apple Inc. was founded by Steve Jobs and Steve Wozniak in


1976.

Apple Computer, Inc., is an American multinational corporation


with a focus on designing and manufacturing consumer
electronics and closely related software products

As of September 2007, the company operates 194 retail stores in


the United States, and more in the United Kingdom, Japan,
Canada, and Italy

For a variety of reasons, ranging from its philosophy of


comprehensive aesthetic design to their advertising campaigns,
Apple has engendered a distinct reputation in the consumer
electronics industry and has cultivated a customer base that is
unusually devoted to the company and its brand, particularly in
the United States.

Company Overview

Computers
Cellular phones
MP3 players
Software
Online Music Vendor
Distributes third party computer
Accessories
Apple TV an online television adapter

Product line-up

Mac Desktop
1%

5%

10%

Mac Portables

6%
17%

Ipod

26%
35%

iTunes - Other Music Related


products & Services
Iphone & Related products
and Serivces
Peripherals & other hardware
Software, service, and other
net sales

Revenue by Product

The Company manages it business on a


geographic basis. The operating segments
consist of Americas, Europe, Japan, and
Retail.

Geographical Sales

AAPL 10 Year Stock Chart

Apple Inc. competes in the Technology Industry, Their focus is:


Computers
Cellular Phones
Online music
Software
Computer accessories

The Technology Industry is highly competitive and characterized


by rapid technological advances in both hardware and software.

Because Apple participates in several components of the highly


dynamic Technology Industry, Apples strategy has been to be an
Innovator rather than a follower.

Apples Greatest competitor is the Microsoft Corporation.

Industry Overview

Financial Results
Apple reported highest ever 4th quarter revenue and earnings:
Revenue increase over 6.22 billion or 29%, driven by strong Mac and iPods sales
Robust growth from iTunes revenue
2007 Fiscal Year EPS: $3.93, up 73%

iPhone
Apple sold over 1.1 million iPhones over the last quarter,
Began selling iPhones in Europe November 9, 2007
Apple plans to sell 10 million iPhones in 2008

Apple will also unveil a new sub-portable MacBook


The ultra-portable laptop is expected to be 50% thinner than the existing MacBook
Will contain flash-based memory instead of a disc drive.

New Apple store highlights "geniuses," services


Apple stores pulled in $1.25 billion in revenue in the company's last fiscal quarter
42% jump from a year earlier and accounting for a fifth of total revenue.

Current Events

Income/Cash Flow
Sales
Net Income
Cash Flow from Operations

80.00%

60.00%

40.00%

20.00%

0.00%

-20.00%

-40.00%

2000-2001

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2000-2006

7.07%

8.10%

33.38%

68.27%

38.65%

24.29%

17.03%

-1.61%

19.14%

18.83%

15.82%

9.67%

1.30%

10.77%

3.60%

44.20%

9.98%

8.68%

5.69%

11.70%

11.52%

9.93%

16.87%

8.91%

15.78%

6.69%

12.42%

19.23%

12.75%

+ 0.0

-5.04%

9.35%

13.57%

6.82%

11.25%

8.14%

6.56%

3.25%

-2.38%

4.58%

11.32%

7.51%

8.69%

5.10%

5.36%

AAPL

-32.82%

DELL

14.16%

HPQ

1.75%

MSFT
Industry Avg
SP500

2001-2002

Sales Growth

1400.00%
1200.00%
1000.00%
800.00%
600.00%
400.00%
200.00%

0.00%
-200.00%
-400.00%

2000-2001

2001-2002

AAPL

-104.71%

DELL

-20.72%

HPQ
MSFT
Industry Avg
SP500

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2000-2006

-275.68%

4.62%

291.18%

25.46%

29.30%

24.05%

399.25%

49.77%

75.77%

23.76%

14.28%

-12.14%

-4.68%

6.23%

-56.99%

-178.86%

279.27%

58.10%

-5.97%

60.01%

38.23%

10.41%

-34.53%

-4.83%

32.57%

-0.27%

59.21%

0.54%

15.00%

6.13%

-85.74%

-33.33%

269.05%

103.87%

46.94%

6.25%

20.00%

4.27%

-113.68%

-89.20%

1270.00%

507.69%

-4.36%

14.41%

17.10%

4.33%

Net Income Growth

250.00%

200.00%

150.00%

100.00%

50.00%

0.00%

-50.00%

-100.00%

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2000-2006

AAPL

-78.69%

-51.35%

221.11%

223.18%

171.41%

-12.43%

146.40%

30.08%

DELL

3.58%

-13.59%

4.96%

4.94%

63.51%

-29.16%

-11.68%

0.12%

HPQ

-60.10%

222.08%

-8.54%

5.95%

48.23%

22.95%

-7.45%

11.19%

MSFT

20.14%

24.84%

-24.54%

16.55%

11.30%

-16.49%

38.75%

7.89%

-5.34%

23.26%

0.51%

12.82%

10.96%

5.52%

16.00%

8.73%

3.70%

11.54%

-10.19%

7.21%

19.40%

-10.03%

22.16%

5.57%

Industry Avg
SP500

Cash Flow from Operations

Operating Performance
ROE
ROA
EBIT
Net Profit Margin
Asset Turnover

80.000

60.000

40.000

20.000

0.000

(20.000)

(40.000)

(60.000)

2000

2001

2002

2003

2004

2005

2006

2007

AAPL

21.800

(0.922)

1.622

1.635

5.721

21.241

22.846

28.520

DELL

37.693

25.745

38.735

47.319

50.474

57.665

69.435

62.285

HPQ

20.220

10.267

(4.593)

5.647

8.648

8.077

13.337

18.549

MSFT

25.588

13.688

11.984

13.485

11.333

20.708

30.644

43.602

29.100

(1.800)

(34.900)

7.700

14.000

20.100

17.100

16.600

15.300

7.000

3.100

9.800

15.800

16.700

17.600

15.700

Industry Avg
SP500

ROE

25.000

20.000

15.000

10.000

5.000

0.000

(5.000)

(10.000)

2000

2001

2002

2003

2004

2005

2006

2007

AAPL

13.139

(0.577)

1.055

1.037

3.579

13.575

13.850

16.432

DELL

16.756

11.051

13.533

15.574

16.210

15.880

12.929

11.017

HPQ

10.218

4.510

(2.233)

2.902

4.479

4.103

6.361

8.272

MSFT

20.491

10.937

9.290

10.490

9.053

15.528

18.910

22.712

16.800

(4.400)

(3.800)

2.800

8.200

12.600

10.400

12.100

10.000

1.700

1.000

3.100

7.600

8.300

8.400

7.80

Industry Avg
SP500

ROA

25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00

-5,000.00

2000

2001

2002

2003

2004

2005

2006

2007

AAPL

1,121.00

(25.00)

129.00

126.00

396.00

1,808.00

2,818.00

5,008.00

DELL

2,912.00

2,719.00

2,622.00

3,421.00

4,064.00

4,726.00

3,875.00

3,786.00

HPQ

4,653.00

2,318.00

2,235.00

3,690.00

4,705.00

5,018.00

7,354.00

9,175.00

MSFT

14,977.00

9,560.00

9,695.00

12,914.00

15,129.00

19,630.00

19,709.00

21,740.00

2,035.00

819.00

570.00

1,064.00

1,517.00

2,112.00

2,289.00

2,601.00

1,227.00

787.00

466.00

903.00

1,270.00

1,563.00

1,695.00

1,591.00

Industry Avg
SP500

EBIT

60.000
40.000
20.000
0.000
(20.000)
(40.000)
(60.000)
(80.000)
(100.000)
(120.000)

(140.000)
(160.000)
AAPL

9.846

-0.690

1.132

1.096

3.213

9.533

10.298

14.563

DELL

6.494

4.509

5.750

6.240

6.514

6.427

5.149

4.845

HPQ

7.250

3.065

(2.33)

2.901

4.170

3.608

5.462

6.760

MSFT

42.039

25.035

20.387

24.816

21.376

31.896

28.524

27.511

35.000

(133.40)

(21.20)

3.000

10.200

16.700

15.200

11.700

0.000

(33.00)

(11.50)

(1.60)

7.600

7.100

9.100

0.089

Industry Avg
S&P 500

Net Profit Margin

3.000

2.500

2.000

1.500

1.000

0.500

0.000

2000

2001

2002

2003

2004

2005

2006

2007

AAPL

1.335

0.836

0.932

0.947

1.114

1.424

1.345

1.128

DELL

2.580

2.451

2.354

2.496

2.488

2.471

2.511

2.274

HPQ

1.409

1.472

0.957

1.000

1.074

1.137

1.164

1.224

MSFT

0.487

0.437

0.456

0.423

0.424

0.487

0.663

0.826

Industry Avg

1.000

0.800

0.800

0.800

0.800

0.800

0.800

0.800

S&P 500

1.200

1.100

1.000

1.000

1.100

1.100

1.100

1.100

Asset Turnover

Short Term Liquidity


Current Ratio
Quick Ratio
Receivables Turnover

5.0000
4.5000
4.0000
3.5000
3.0000
2.5000
2.0000
1.5000
1.0000
0.5000
0.0000

2000

2001

2002

2003

2004

2005

2006

2007

AAPL

2.8076

3.3880

3.2497

2.4977

2.6613

2.9538

2.25

2.36

DELL

1.4512

1.2261

1.0296

1.0370

0.9905

1.1295

1.00

1.30

HPQ

1.6105

1.5027

1.4595

1.5458

1.2685

1.2016

1.30

1.20

MSFT

3.1069

4.2371

3.8117

4.2202

4.6860

2.8587

2.10

1.60

Industry Avg

2.9000

2.7000

2.5000

2.5000

2.7000

2.8000

2.70

2.70

S&P 500

2.2000

2.3000

2.2000

2.3000

2.3000

2.3000

2.20

2.20

Current Ratio

5.000
4.500
4.000

3.500
3.000
2.500
2.000
1.500
1.000
0.500
0.000

2000

2001

2002

2003

2004

2005

2006

2007

AAPL

2.790

3.381

3.223

2.474

2.623

2.907

2.21

2.32

DELL

1.37

1.18

0.99

1.00

0.99

1.13

1.00

1.20

HPQ

1.20

1.11

1.24

1.29

1.27

1.20

1.10

1.00

MSFT

3.10

4.23

3.76

4.17

4.69

2.86

1.90

1.50

Industry Avg

2.80

2.50

2.40

2.40

2.60

2.70

2.60

2.50

S&P 500

1.80

1.80

1.80

1.90

1.90

1.90

1.80

1.80

Quick Ratio

80.000
70.000
60.000

50.000
40.000
30.000
20.000
10.000
0.000

2000

2001

2002

2003

2004

2005

2006

2007

AAPL

9.771

7.559

11.139

9.327

10.752

16.694

17.993

16.619

DELL

10.590

11.483

12.098

13.955

13.946

12.775

10.688

8.976

HPQ

6.454

6.440

5.343

6.392

7.047

7.494

7.650

7.585

MSFT

8.677

7.560

7.436

7.271

7.845

7.398

7.154

6.818

7.900

7.700

7.300

8.100

8.600

8.600

8.700

8.900

15.300

15.900

20.700

26.000

73.100

76.100

55.400

21.000

Industry Avg
S&P 500

Receivables Turnover

Debt to Equity
AAPL
DELL
HPQ
MSFT
Industry Avg
S&P 500
Financial Leverage
AAPL
DELL
HPQ
MSFT
Industry Avg
S&P 500
TIE
AAPL
DELL
HPQ
MSFT
Industry Avg
S&P 500

2000
7.305
7.892
34.323
0.000
16.300
73.300

2001
8.087
10.505
39.823
0.000
31.100
66.600

2002
7.717
11.301
23.090
0.000
25.400
73.000

2003
7.199
9.190
21.120
0.000
25.400
86.100

2004
2005
0.000
0.000
8.136
9.149
18.390 15.439
0.000
0.000
20.400 45.700
60.800 138.300

2000
1.656
2.100
2.200
1.261
1.700
2.400

2001
1.536
2.700
2.300
1.244
1.900
1.100

2002
1.538
3.100
2.000
1.296
1.700
2.500

2003
1.614
3.000
1.900
1.259
1.900
3.000

2004
1.586
3.200
1.900
1.261
1.800
1.900

2000
51.700
N/A
21.1
N/A
64.6
1037.4

2001
5.700
57.9
N/A
N/A
33.4
48.7

2002
27.500
90.4
10.5
N/A
20.7
43.9

2003
15.750
201.2
14.5
N/A
255.9
57.3

2004
62.800
290.3
17
N/A
122.8
68.1

Long-term Solvency

2006
0.000
21.546
18.617
21.617
21.100
68.100

2007
0.000
11.681
23.315
0.000
28.200
81.800

2005
1.550
4.100
2.000
1.472
2.300
4.500

2006
1.723
7.700
2.200
1.735
2.100
3.100

2007
1.744
4.600
2.300
2.031
2.900
9.800

2005
N/A
315.1
12.2
N/A
359.3
222.8

2006
N/A
133.60
20.70
N/A
349.90
316.10

2007
N/A
84.10
25.20
N/A
461.20
753.50

ROE (%)
Asset Turnover
Net Profit Margin
Financial Leverage

2000
21.800

2001
(0.922)

2002
1.622

2003
1.635

2004
5.721

2005
21.241

2006
22.846

2007
28.520

1.335
9.846

0.836
-0.690

0.932
1.132

0.947
1.096

1.114
3.213

1.424
9.533

1.345
10.298

1.128
14.563

1.659

1.598

1.537

1.576

1.599

1.565

1.649

1.736

Decompose ROE into its components (Asset Turnover, Net Profit


Margin, Financial Leverage) in order to analyze what might be
trying to change ROE. Net Profit Margin Has significantly been
increasing and affecting ROE.

DuPont Analysis

Aggregate Industry Revenue


Sales

2000

2001

2002

2003

Apple

7,983.00

5,363.00

5,742.00

6,207.00

2004

2005

2006YTD 2007 E(2008)

8,279.00 13,931.00 19,315.00 16,891.00

30,045.0

Dell

25,265.00 31,888.00 31,168.00 35,404.00 41,444.00 49,121.00 55,788.00 43,968.00

64,380.0

HPQ

48,870.00 45,226.00 56,588.00 73,061.00 79,905.00 86,696.00 91,658.00 75,993.00

113,476.0

MSFT

22,956.00 25,296.00 28,365.00 32,187.00 36,835.00 39,788.00 44,282.00 41,531.00

62,382.0

IBM

85,089.00 83,067.00 81,186.00 89,131.00 96,293.00 91,134.00 91,423.00 69,920.00

102,077.0

MOT

32,107.00 26,468.00 23,422.00 23,155.00 29,663.00 35,262.00 42,879.00 26,976.00

40,163.0

GOOG
QCOM
JAVAD
RIMM

19.10
3,196.80

86.40
2,679.80

439.50
2,915.00

1,465.90
3,847.00

3,189.20
4,880.00

6,138.60 10,604.90 11,767.40


5,673.00
7,526.00
6,852.00

16,694.0
10,171.0

15,721.00 18,250.00 12,496.00 11,434.00 11,185.00 11,070.00 13,068.00 10,337.00


221.30
294.10
306.70
594.60
1,350.40
2,065.80
3,037.00
3,384.60

14,568.0
7,961.0

Total
241,428.20 238,618.30 242,628.20 276,486.50 313,023.60 340,879.40 379,580.90 307,620.00 461,917.00
Market Share
Sales
Apple

2000
3.307%

2001
2.248%

2002
2.367%

2003
2.245%

Market Share

2004
2.645%

2005
4.087%

2006YTD 2007
5.089%
5.491%

2008
6.5%

A comparison with Apples main competitors to


establish its market-share in the industry

Industry Revenues --------------------->


Market Share

379,580.90

307,620.00

2006
5.09%

2007
7.80%

461,917.00
2008
6.50%

Desktop

3,319.0

17.18%

4,020.0

16.75%

Portables

4,056.0

21.00%

6,294.0

26.22%

Ipod

7,676.0

39.74%

8,305.0

34.60%

Other Music Related products & Services

1,885.0

9.76%

2,496.0

10.40%

123.0

0.51%

Iphone & Related products and Serivces

Peripherals & other hardware

1,100.0

5.70%

1,260.0

5.25%

Software, service, and other net sales

1,279.0

6.62%

1,508.0

6.28%

19,315.0

100.00%

24,006.0

100.00%

Total Net Revenue

30,045.0

13,717.00

15,852.00

21,559.95

8,154.00
33.97%

8,485.05

Gross Profit Margin

5,598.00
28.98%

Total COGS as % of Rev

71.02%

66.03%

SGA, Operating Expenses

3,145.0

3,745.0

Op Exp as % of Revenue

16.28%

15.60%

$2,453.00

$4,409.00

Total COGS
GROSS PROFIT

OPERATING INCOME

Pro Forma Income Statement

71.76%
4,482.71
14.92%
4,002.33

Unusual Item

OPERATING Inc After Unusual Item

$2,453.00

$4,409.00

4,002.33

394.0

647

657.5624

0.0

0.0

0.0

394.0

647.0

657.6

Gain on sales of prop/equip

0.0

0.0

Other Income (Expense) Net

29.0

48.0

48.0

$2,818.00

$5,008.00

4,611.90

$829.00

$1,512.00

1,385.87

EAT

$1,989.00

$3,496.00

3,226.02

NET INCOME

$1,989.00

$3,496.00

3,226.02

Diluted Shares

877.5

889.3

905.3

EPS

$2.27

$3.93

3.56

29.42%

30.19%

30.05%

OTHER INCOME (EXPENSE)


Interest Income
Interest Expense
Net Interest Income (Expense)

EBT
Income Taxes

Realized Tax Rates:

Pro Forma Income Statement cont .

Relative Valuation

2004
69.30
33.5
2.0687

2005
45.50
25.5
1.7843

2006
35.90
15.8
2.2722

2007
43.40
24.3
1.7860

P/E
2008
41
19.8
2.0707

2003

2004
69.30
19.5
3.5538

2005
45.50
28
1.6250

2006
35.90
29.3
1.2253

2007
43.40
21.7
2.0000

P/E
2008
41
17.3
2.3699

2003

2004

2005

2006

2007

P/E
2008

69.30

45.50

35.90

43.40

41

36.9

22.9

22.9

20.7

17

1.8780

1.9869

1.5677

2.0966

2.4118

2003

2004
69.30

2005
45.50

2006
35.90

2007
43.40

P/E
2008
41

131.7
0.2126

74.3

81.1
0.8545

45.7
0.9956

36.7
0.9782

65.1
0.6667

29.4
1.3946

2002
28.00
56.4
0.4965

2003

2004
69.30
39.1
1.7724

2005
45.50
38.1
1.1942

2006
35.90
26.7
1.3446

2007
43.40
34.4
1.2616

P/E
2008
41
22.7
1.8062

PE Comparable
AAPL
DELL

2000
12.80
47.8
0.2678

2001
101.00
23.5
4.2979

2002
28.00
51
0.5490

2003

PE Comparable
AAPL
HPQ

2000
12.80
32.9
0.3891

2001
101.00
13.8
7.3188

2002
28.00
22.8
1.2281

PE Comparable

2000

2001

2002

AAPL

12.80

101.00

28.00

MSFT

35.5

36.9

45.4

0.3606

2.7371

0.6167

2000
12.80

2001
101.00

2002
28.00

Industry Avg.

132.8
0.0964

178.3
0.5665

PE Comparable
AAPL
SP500

2000
12.80
106.9
0.1197

2001
101.00
86
1.1744

PE Comparable
AAPL

38.8

40.2

44.5

Relative Valuation

Average
AAPL/DELL
AAPL/HPQ
AAPL/MSFT
AAPL/Ind Avg.
AAPL/SP500

AAPL
AAPL
AAPL
AAPL
AAPL

/
/
/
/
/

Dell Price
HPQ Price
MSFT Price
Industry Price
SP500 Price

Industry Avg. /
Benchmark

Median
1.860829
2.477153
1.60624
0.624349
1.051916

E(price 2008)
using EPS1
125.89
100.08
113.66
69.78
96.51

87.07

1.786008
1.625
1.878049
0.666667
1.194226

E(price 2008)
using EPS2
176.11
140.00
159.00
97.61
135.00

87.07

Relative Valuation

EPS (2008)1: $3.56


EPS (2008)2: $4.98
Current Price: $194.30

Average Price Estimate


Using EPS1:

$ 101.18

Using EPS2:

$ 141.54

Absolute Valuation
FCFF Model

Costs of Capital
CAPM

Another K

10 yr T-Strip:
Beta:
Risk Premium
CAPM=

4.26%
1.442
6.50%
4.26% + 1.442(6.5%)

k1 =

13.63%

HPQ Bond Outstanding:

5.16%

Costs of Capital
YTM:
Equity Premium:
k2 =

5.16%
3%
8.16%

Absolute Valuation - Cost Of Capital

FCFFStarting from CFO


Operating Activities
Net Income
Depreciation/Depletion
Depreciation
Depletion
Amortization
Amortization of Intangibles
Amortization of Acquisition Costs
Deferred Taxes
Non-Cash Items
Accounting Change
Discontinued Operations
Extraordinary Item
Unusual Items
Purchased R&D
Equity in Net Earnings (Loss)
Other Non-Cash Items
Changes in Working Capital
Accounts Receivable
Inventories
Prepaid Expenses
Other Assets
Accounts Payable
Accrued Expenses
Payable/Accrued
Taxes Payable
Other Liabilities
Other Changes, Net
Other Assets & Liabilities, Net
Other Operating, Net
Net Cash from Operating Activities
Plus: Interest Expense X (1-Tax Rate)
Less Investment In Fixed Capital
Free Cash Flow to the Firm

2007

2006

2005

2004

2003

3,496.0
317.0
317.0

1,989.0
225.0
225.0

1,328.0
179.0
179.0

266.0
150.0
150.0

69.0
113.0
113.0

78.0
254.0

53.0
174.0

50.0
486.0

19.0
131.0

(11.0)
(1.0)
(1.0)

12.0

11.0

437.0

85.0

(16.0)
0.0

242.0

163.0

49.0

46.0

16.0

1,325.0

(221.0)

492.0

368.0

119.0

(385.0)
(76.0)

(357.0)
(105.0)

(121.0)
(64.0)

(8.0)
(45.0)

(1,459.0)
1,494.0

(2,666.0)
1,611.0

(185.0)
328.0

(201.0)
297.0

(201.0)
(11.0)
(34.0)
(30.0)
243.0

1,751.0

1,296.0

534.0

325.0

152.0

2,220.0
0.0
657.0
1,563.0

2,535.0
0.0
260.0
2,275.0

934.0
2.2
176.0
760.2

289.0
5.9
174.0
120.9

Absolute Valuation
Geometric Avg

5,470.0
0.0
986.0
4,484.0
147%

E(FCFF) = FCFF2007 * (1+g)t


E(FCFF)

2008
5,829.20

PV(2007)

2008

2009
7,577.96

2009

2010
9,851.35

2010

2011

2012

12,806.75

2011

16,648.78

2012

2013
21,643.41

2013

Sum

K1:

5,129.85

5,868.72

6,714.01

7,681.06

8,787.39

10,053.07

44,234.11

K2:

5,389.42

6,477.67

7,785.66

9,357.77

11,247.32

13,518.41

53,776.26

Absolute Valuation

E(FCFF)2014 = FCFF20013 * (1+g)


FCFF MODEL=E(FCFF1)/k-g
Using k1
E(FCFF2014)
4484.000
est(IV2013)1
21859.846
est(IV2013)2
22076.280
est(IV2013)3
22292.714
est(IV2013)4
22509.148
est(IV2013)5
22725.582
est(IV2013)6
22942.016
est(IV2013)7
23158.450
est(IV2013)8
23374.884
est(IV2013)9
23591.319
est(IV2013)10
23807.753
est(IV2013)11

k1
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363

g
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1

est(IV2013)
32,898.019
173,078.746
189,821.838
209,715.088
233,739.855
263,332.354
300,681.733
349,297.894
415,184.449
509,531.719
655,860.956

est(IV2007)
15283.10891
80405.48963
88183.663
97425.27445
108586.2237
122333.7197
139684.7533
162269.8845
192878.1529
236708.1355
304686.8689

k2
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816

g
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1

est(IV2013)
54950.980
305305.107
358381.165
432029.339
541085.289
719163.992
1062130.382
1996418.135
14609302.800
-2808490.309
-1293899.604

est(IV2007)
34322.22
190692.7
223843.8
269844.3
337960.3
449187.7
663403.5
1246957
9124927
-1754175
-808166

Using
est(IV2013)1
est(IV2013)2
est(IV2013)3
est(IV2013)4
est(IV2013)5
est(IV2013)6
est(IV2013)7
est(IV2013)8
est(IV2013)9
est(IV2013)10
est(IV2013)11

E(FCFF2014)
4484.000
21859.846
22076.280
22292.714
22509.148
22725.582
22942.016
23158.450
23374.884
23591.319
23807.753

Absolute Valuation

Terminal Value

Scenario One: 0 Growth Rate


PV with 0 Growth Rate
PV(2007)
2008
K1:
3,946.04
K2:
4,145.71

2009
3,472.62
3,832.94

Firm Value Using 0 Growth Rate


K1:
E(Price 2007):
$
K2:
E(Price 2007):
$

2010
3,055.99
3,543.77

2011
2,689.35
3,276.41

2012
2,366.70
3,029.23

2013
2,082.76
2,800.69

Sum
$17,613.45
$20,628.76

36.99
61.79

Scenario two: 1% Growth Rate


K1:
E(Price 2007):
$ 140.15
K2:
E(Price 2007):
$ 274.90

Scenario Seven: 6% Growth Rate


K1:
E(Price 2007):
$
206.81
K2:
E(Price 2007):
$
806.45

Scenario Three: 2% Growth Rate


K1:
E(Price 2007):
$ 148.90
K2:
E(Price 2007):
$ 312.18

Scenario Eight: 7% Growth Rate


K1:
E(Price 2007):
$
232.21
K2:
E(Price 2007):
$ 1,462.65

Scenario Four: 3% Growth Rate


K1:
E(Price 2007):
$ 159.29
K2:
E(Price 2007):
$ 363.90

Scenario Nine: 8% Growth Rate


K1:
E(Price 2007):
$
266.63
K2:
E(Price 2007):
$10,321.27

Scenario Five: 4% Growth Rate


K1:
E(Price 2007):
$ 171.84
K2:
E(Price 2007):
$ 440.50

Scenario Ten: 9% Growth Rate


K1:
E(Price 2007):
$
315.91
K2:
E(Price 2007):
$ (1,912.06)

Scenario Six: 5% Growth Rate


K1:
E(Price 2007):
$ 187.30
K2:
E(Price 2007):
$ 565.57

Scenario Eleven: 10% Growth Rate


K1:
E(Price 2007):
$
392.35
K2:
E(Price 2007):
$ (848.30)

Absolute Valuation

Recommendation
Buy 100 Shares