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?

**Case study attached**

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