Step 1: Go to http://finance.yahoo.com/and enter AAPL (Apple) in the Get Quotes area. Do the following:

Pick up Apples opening stock price on 1/4/2016 (the first trading day in 2016). You can find this in Historical Prices and then change the frequency to monthly.

When looking at historical prices, pick up the total quarterly dividends paid in 2015. Youll see dividends listed with the monthly prices.

Look under Analyst Estimates and find out what analysts estimate the growth rate will be for the next five years.

Also find Apples beta under Key Statistics.

Step 2: Assume that the risk-free rate of return is 3% and that the market rate of return is 12%. Also assume that Apple is a constant growth firm. Complete the following requirements. Show your supporting calculations for parts 1-3.

1. Compute the required rate of return on Apple using the Capital Asset Pricing Model (CAPM).

2. Using the annual dividend, the required rate of return from CAPM, and the growth rate from analysts, compute the intrinsic value of Apple using the constant growth model. If the estimated growth rate is more than your required rate of return, then use 10% as the growth rate.

3. Compare intrinsic value to Apples current stock price. Discuss the investment decision given these results; that is, would Apple be a good investment when you compare price to intrinsic value? Explain your answer.

Step 3: Identify and briefly discuss two potential weaknesses of your analysis and results.