Week 5 Final Assignment MUST BE COMPLETED BY SATURDAY AUG 27th

PART 2

PRELIMINARY VALUATION

Using the formula for compound growth, one can determine the value of Apple stock. The stock price is computed using the continuous growth method by combining the most recent dividend (D), a dividend growth rate (g), and a discount rate. This yields the final result (r). The following is the solution to the problem:

To be included in the first computation of dividend growth, DIS must always sustain a growth rate of 4.76 percent or above. (g). According to the most recent information provided by NASDAQ, the dividend per share will be $0.88 in 2022. (D). Because Apple has a significant amount of cash on hand, the discount rate will be 10%. (r). When we consider everything, we get an estimate for the share price of Apple that comes out to $17.60 on average. To be more specific, we get to these conclusions:

When using the second approach, Apple's maximum dividend growth rate is 7.69%. (g). These shares currently provide a dividend yield of $0.88 per year, and the current discount rate is 10% (r) (D). The current price of a share of DIS is $41.02, as of right now. The following is how it computes out:

On February 11, 2021, NASDAQ will announce that one share will sell for $149.41. If we utilize the strategy of continuous growth, the minimum and maximum values anticipated are less than the price currently being offered on the market. This suggests that the price of DIS on the market is currently at an extraordinarily high level.

If this estimate comes true, the value of a single share would be $41.02 in terms of the currency used in the United States (Deutschman, 2020). Due to increased sales, net income, and inventory turnover, this stock valuation considers a dividend growth rate of 7.69% per year beginning in 2020 and continuing beyond. Since the price of an individual share of stock right now is $41.02, it's plausible that the market as a whole is now overvalued.

References