1. The forecasted Apples dividend next year is $4 per share. The current share price of Apple is $ 14.28 and dividends are expected to grow at 4% per annum? (Think of a failing company). What is the current cost of equity capital or required rate of return for similar firms is 14% per annum. (3 marks)

2. Worldwide computer chips Inc. is experiencing the period of a rapid growth. The regular dividend paid by the company is $3 and the earnings are expected to grow at the rate of 18% during the next 2 years, at 15% in third year and at a constant rate of 9% thereafter. Worldwides stock is expected to sell at $ 72 after the third year and the required rate of return on the stock is 12 %.

Required:

1. How much is Worldwides stock worth today?
2. Keeping in view the intrinsic worth and the market price of the stock equal to $950, such stock is currently overvalued or undervalued in the market? What should be an investors selling decision and why?