FIN - Assume that you own a sizeable investment portfolio that is invested

1. Assume that you own a sizeable investment portfolio that is invested exclusively in a broad-based stock market index fund. Assume also that you contemplate adding a sizeable investment in the stock of Apple Inc. What will happen to the overall riskiness of the portfolio, and why, with the addition of the new investment? What specific indicators support your conclusion? Should you make the additional investment – why or why not?

2. Value a share of Apple's stock using both the (1) constant growth dividend discount model, and (2) a discounted free cash flow model, and compare those values to the current trading price of a share of the stock? Is the stock undervalued or overvalued? Carefully explain the assumptions used in the valuations and the rationale for your response? (You may use http://www.valuepro.net for the discounted free cash flow valuation model.)