Suppose that Apple Inc. (AAPL) is selling for $280.00. Analysts believe that the growth rate for AAPL will be 25% per year for the next three years, 15% per year for the following two years, and thereafter the growth rate will be 8% indefinitely. AAPLs most recent cash dividend per share was $3.00. The dividend will grow by the same rate as the company. Stockholders require a return of 10 percent on AAPLs common stock.

Required:

a) Based on the above assumptions, determine the price of AAPLs common stock.

b) Explain whether an investor should buy the stock.