Unless otherwise stated, assume a required return (cost of equity) equal to 10% and a growth rate of 7%.

a. What is the current earnings yield? ____ _________

b. What is the expected return on the market? _ _______

c. Given a 15 forward P/E, what is the market estimate for earnings growth in 2013? ___ ______

d. What is your estimate for the sustainable growth rate? __ ________

e. If earnings grow 7% in 2013, what is 2013’s expected dividend? _________

f. Using the DDM, a 2013 dividend of $1.60, a 7% growth rate, and a 10% required return, what is your estimate of the intrinsic value?

g. What is the intrinsic value of APIX if it grew 8% in 2013, 8% in 2014, and 7% every year after?

Company: APIX (APX)

Current price = $58.00 a share

2012 earnings = $3.625

Historical plowback ratio = 60%

ROE = 14%

Beta = 1.4

Risk free rate = 2%

Market risk premium = 6%

Forward P/E = 15