THE BIG DECISION

John has collected some data on the firm from Yaboo finance as shown below:

The expected annual growth by the analysts for Apple for the next $5$ years: $11\mathrm{.}63\%$

The expected annual growth by the analysts for the industry for the next $5$ years: $11\mathrm{.}44\%$

The expected annual growth rate by the analysts for the whole market $($S&P$500)$: $5\mathrm{.}28\%$

The most recent closing price for the stock: $$109\mathrm{.}85($April $15,2016)$

He also gathered the financial statements for the company $($Exhibits $1$ and $2).$ He wants to use the two$-$stage dividend growth model to estimate the value of Apple shares. Since the last dividend paid was $$1\mathrm{.}98($Exhibit $1),$ he took it as $D_0.$

Then, he proceeds with the valuation of the stock under different scenarios. John wants to answer the following questions:

What is the purpose of the dividend discount model?