4. Apple's stock is expected to pay a dividend of $2.15 at the end of the...

 

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4. Apple's stock is expected to pay a dividend of $2.15 at the end of the year, and the dividend is expected to grow at 11.2% per year forever. The return on the short term T- bill is 3% and the expected return on the S&P500 is 11.40% and the Apple beta is 1.4524. (20 points) a) What is the current price of Apple stock? b) If an investor were to buy Apple stock now and sell it after receiving a dividend of $2.15 a year from now. What is the expected capital gain in percentage terms? What is the dividend yield, and what is the total rate of return in investment? c) What is the expected price of Apple stock in the next two years? d) What would be your estimate of Apple's stock value if you believe that the Apple stock is riskier? 4. Apple's stock is expected to pay a dividend of $2.15 at the end of the year, and the dividend is expected to grow at 11.2% per year forever. The return on the short term T- bill is 3% and the expected return on the S&P500 is 11.40% and the Apple beta is 1.4524. (20 points) a) What is the current price of Apple stock? b) If an investor were to buy Apple stock now and sell it after receiving a dividend of $2.15 a year from now. What is the expected capital gain in percentage terms? What is the dividend yield, and what is the total rate of return in investment? c) What is the expected price of Apple stock in the next two years? d) What would be your estimate of Apple's stock value if you believe that the Apple stock is riskier?

Answer rating: 100% (QA)

a To calculate the current price of Apple stock we can use the Gordon Growth Model also known as the Dividend Discount Model DDM Current Price Dividen... View the full answer