Valuation 14. Assume that Apple's sales growth rate trends linearly between 2022 and 2027 to a terminal growth rate of 3%. Further assume that Apple's margin, turnover and leverage ratios remain constant at their 2022 levels indefinitely. Forecast Apple's income statements and balance sheets through 2027, stating any additional assumptions that you make (Note: You may use forecast turnover and leverage ratios based on year-end balance sheet values). 15. For the purpose of answering this question, use the forecast financial statements from question 14 and a cost of equity capital of 8%. Compute the value per share of Apple stock at the end of fiscal 2022 using: a. The discounted cash flow model, and b. The abnormal profit model. 16. Adjust the forecasting assumptions in question 15 above to represent what you consider to be most appropriate. Provide justifications for the forecasting assumptions that you have selected. How does the resulting valuation compare with the Apple's current market valuation? Try to identify the key reason(s) for any difference.Current Year Forecasting Assumptions Forecasts 2022 Ratio 2023 2024 2025 2026 2027 2028 2023 2024 2025 2026 2027 2028 Net sales 394,328 7.8% 6.8% 6.9% 4.9% 4.0% 3.0% 3.0% 421,280 446,036 467,970 486,496 501,091 516, 123 Cost of sales 223,546 56.7% 56.7% 56.7% 56.7% 56.7% 56.7% 56.7% 238,825 252,859 265,294 275,796 284,070 292,592 Gross margin 170, 782 182, 455 193, 177 202,676 210,699 217,020 223,531 Operating expenses: Research and development 26,251 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 28, 045 29,693 31, 153 32,387 33,358 34,359 Selling, general and administrative 25,094 6.4% .4% 6.4% 6.4% 6.4% 6.4% 6.4% 26,809 28,385 29,780 30,959 31,888 32,845 Total operating expenses 51,345 54,854 58, 078 60,934 63,346 65,246 67,204 Operating income 1 19,437 127,601 135,099 141,742 147,353 151,774 156, 327 Other income/ (expense), net (334) -0. 1% -0. 1% -0. 1% -0. 1% -0. 1% -0. 1% -0. 1% (357) 378) (396) (412 424) (437) Income before provision for income taxes 119, 103 127,244 134,721 141,346 146,941 151,350 155,890 Provision for income taxes 19,300 16.2% 15.6% 15.6% 15.6% 15.6% 15.6% 15.6% 19,875 21,043 22 , 078 22,952 23,641 24,350 Net income 99,803 107,368 113,678 119,268 123,989 127,709 131,540 Current assets Cash and cash equivalents 23,646 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 25,262 26,747 28,062 29, 173 30,048 30,949 Marketable securities 24, 658 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 26 , 343 27,891 29,263 30,421 31,334 32,274 Accounts receivable, net 28, 164 7.1% 7.1% 7.1% 7.1% 7.1% 7.1% 7.1% 30,089 31,857 33,424 34,747 35, 789 36,863 Inventories 4,946 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 5,284 5,595 5 , 870 6, 102 6,285 6,474 Vendor non-trade receivables 32 ,748 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 34,986 37,042 38,864 40, 402 41,614 42, 863 Other current assets 21,223 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 22,674 24,006 25, 186 26, 184 26,969 27,778 Total current assets 135,405 144,639 153, 138 160,669 167,029 172,040 177,201 Non-current assets: Marketable securities 24 , 658 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 26,343 27 , 891 29,263 30, 421 31,334 32,274 Property, plant and equipment, net 42, 117 10.7% 10.7% 10.7% 10.7% 10.7% 10.7% 10.7% 44,996 47,640 49,982 51,961 53,520 55, 126 Other non-current assets 54,428 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% 58, 148 61,565 64,593 67, 150 69, 164 71,239 Total assets 352,755 274, 126 290,234 304,507 316,561 326,058 335,840 Current liabilities: is payable 64, 115 16.3% 16.3% 16.3% 16.3% 16.3% 16.3% 16.3% 68,497 72,522 76,089 79, 101 81,474 83,918 Other current liabilities 60, 845 15.4% 15.4% 15.4% 15.4% 15.4% 15.4% 15.4% 65,004 68, 824 72,208 75,067 77,319 79,638 Deferred revenue 7,912 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 8,453 8,949 9,390 9,761 10,054 10,356 Commercial paper 9,982 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 7,757 8,213 8,617 8,958 9,227 9,503 Term debt 11, 128 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 8,648 9, 156 9,606 9,986 10,286 10,594 Total current liabilities 153,982 158,358 167,664 175,909 182,873 188,359 194,010 Non-current liabilities Term deb 1, 128 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 8,648 9, 156 9 ,606 9,986 10,286 10,594 Other non-current liabilities 19, 142 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 52,501 55,586 58 , 319 60,628 62,447 64,320 Total liabilities 302,083 219,507 232,406 243,834 253,487 261,092 268,924 Shareholders' equity: Common stock and additional paid-in capital 64, 849 Retained earnings (3,068) Accumulated other comprehensive income/ (loss) (11, 109) Total shareholders' equity 50,672 54,619 57,829 60,672 63,074 64,966 66,915 Total liabilities and shareholders' equity 352,755 274, 126 290,234 304,507 316,561 326,058 335,840 203.9% 202.2% 201.3% 200.4% 199.5% 199.5%