Apple Inc (AAPL)

Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company's products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. The Company also delivers digital content and applications through the iTunes Store, App StoreSM, iBookstoreSM, and Mac App Store. The Company distributes its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers.

Information on Equity

102.99

+0.52 (0.51%)

After Hours: 103.13 +0.14 (0.14%)

Oct 22, 7:59PM EDT

NASDAQ real-time data

Currency in USD

Range 102.60 104.11

52 week 70.51 - 104.11

Open 102.84

Vol/Avg 68.26M/64.08M

Mkt cap 601.11B

P/E 16.02

Div/yield 0.47/1.83

EPS 6.43

Shares 5.87B

Beta 0.89

Inst. Own 63%

Q3 (Sep 14) 2014

Net profit margin 20.10% 21.61%

Return on average assets 14.95% 18.01%

Return on average equity 29.22% 33.61%

Info extracted on 23rd Oct 2014 from

Morningstar Credit Rating

AA-

NAME	MATURITY DATE	AMOUNT $ (MIL)	PRICE (% of PAR)
Apple 0.45%	05/03/2016	1,500.0	100.2
Apple 1.05%	05/05/2017	1,500.0	100.5
Apple 1%	05/03/2018	4,000.0	98.8
Apple 2.1%	05/06/2019	2,000.0	101.5
Apple 2.85%	05/06/2021	3,000.0	102.5
Apple 2.4%	05/03/2023	5,500.0	97.0
Apple 3.45%	05/06/2024	2,500.0	104.7
Apple 4.45%	05/06/2044	1,000.0	105.0
Apple 3.85%	05/04/2043	3,000.0	94.9

Note on date and amount: 05/03/2016 3rd May 2016, TBV = $1,500, 000, 000

United States Treasury Yields

US TREASURY YIELDS

Tenor Coupon Price Last

3 Month 0.0000 0.0150 0.02%

6 Month 0.0000 0.0850 0.09%

12 Month 0.0000 0.1850 0.19%

2 Year 0.5000 99-29 0.54%

5 Year 1.5000 99-29 1.51%

10 Year 2.2500 101-15 2.09%

Assuming tax rate is 35% and equity premium of 5.43%1, determine the following based on the equity and debt information for Apple:

i. Cost of equity (10 Marks)

ii. Cost of debt (15 Marks)

COUPON ($)	# of Bond	Price ($)	MV ($)	Weightage	YTM (%)	Apple Cost debt
$4.5
10.5
10
21
28.5
24
34.5
44.5
38.5
		TMV =			Total rd =

(hint: APPLE bonds all in Billion amount)

iii. Total market value of equity

iv. Total market value of debt

v. Market Value WACC (Weighted average cost of capital)

1Implied ERP on October 1, 2014= 5.43% (Trailing 12 month cash yield)