Professional Documents
Culture Documents
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5. Intrinsic Value (Forecasting) Model and Analysis with ML, OPT., PESS.....
Possible Scores 2 4
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9. Final Analysis. Is it consistent with the resto of your analysis and interpretation?
Does the logic flow from your previous discussion and what is your recommendati
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ECT GRADE SHEET
Your Score
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10
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10 12 15 15
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3 4 5 5
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PT., PESS.....
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Apple Inc
About Apple
The Company designs, manufactures, and markets mobile communication and media devices, personal computers, and
portable digital music players, and sells a variety of related software, services, accessories, networking solutions, and thirdparty
digital content and applications. The Companys products and services include iPhone, iPad, Mac, iPod, Apple
TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a
variety of accessory, service and support offerings. In September 2014, the Company announced Apple Watch, which is
expected to be available in early calendar year 2015, and Apple Pay, which became available in the U.S. in October 2014.
The Company also sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store
and Mac App Store. The Company sells its products worldwide through its retail stores, online stores and direct sales force, as
well as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. In addition, the Company
sells a variety of third-party iPhone, iPad, Mac and iPod compatible products, including application software, and various
accessories, through its online and retail stores. The Company sells to consumers, small and mid-sized businesses (SMB)
and education, enterprise and government customers. The Companys fiscal year is the 52 or 53-week period that ends on the
last Saturday of September. The Company is a California corporation established in 1977.
Mission Statement: Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional
software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with
its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.
History: Intel, founded in 1968 to build computer memory products, introduced the world's first microprocessor in 1971. Intel has an
employee base of 82,500 (as of 2010) with about 55% of those employees living in the United States.
Objectives: Values:
200 million to 250 million units of iPhone 6, iPhone 6 Plus and Apple Watch after the Different kinds of people
company asked suppliers to prepare chips for the devices. Deducting the 30 million to Make a difference in the world
40 million chips for the upcoming Apple Watch, the shipments will be just enough to honor Indivividuality
produce over 200 million units of iPhone 6 and iPhone 6 Plus. Best work of our lives
Objectives: Values:
200 million to 250 million units of iPhone 6, iPhone 6 Plus and Apple Watch after the Different kinds of people
company asked suppliers to prepare chips for the devices. Deducting the 30 million to Make a difference in the world
40 million chips for the upcoming Apple Watch, the shipments will be just enough to honor Indivividuality
produce over 200 million units of iPhone 6 and iPhone 6 Plus. Best work of our lives
Board of Directors
CEO: Tim Cook is the CEO of Apple and serves on its Board of Directors.
Before being named CEO in August 2011, Tim was Apple's Chief Operating Officer and was responsible for all of the companys
worldwide sales and operations, including end-to-end management of Apples supply chain, sales activities, and service and support
in all markets and countries. He also headed Apples Macintosh division and played a key role in the continued development of
strategic reseller and supplier relationships, ensuring flexibility in response to an increasingly demanding marketplace. Prior to joining
Apple, Tim was vice president of Corporate Materials for Compaq and was responsible for procuring and managing all of Compaqs
product inventory. Previous to his work at Compaq, Tim was the chief operating officer of the Reseller Division at Intelligent
Electronics.
Executive Vice President: Andy D. Bryant is executive vice president, Technology, Manufacturing and Enterprise Services, and chief
administrative officer of Intel Corporation. He is responsible for technology development and manufacturing, financial operations,
human resources, information technology and e-business functions and activities worldwide.
Executive Vice President: Angela Ahrendts is Apple's senior vice president of retail and online stores, reporting to CEO Tim
Cook. Angela is responsible for the operation and expansion of Apple retail and online stores, which have redefined the
shopping experience for hundreds of millions of customers around the world. Apple retail stores set the standard for
customer service with innovative features like the Genius Bar, personal setup and one-to-one personal training to help
customers get the most out of their Apple products. Angela joined Apple from Burberry, where she served as CEO and led
the company through a period of outstanding global growth. Prior to Burberry, she was executive vice president at Liz
Claiborne Inc., and earlier in her career she served as president of Donna Karan International.
Board Of Directors
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AAPL RATIOS
Profitability ratios
Gross Profit Margin 0.4387 0.3762 0.3859
Net Profit Margin 0.2667 0.2167 0.2161
ROA (NI/TA) 0.2370 0.1789 0.1704
ROE (NI/TE) 0.3530 0.2998 0.3542
ROEWGW (NI/TEWGW): This accounts for Goodwill 0.3374 0.2878 0.3426
Market value ratios
Price/Earnings Ratio 12.0000 12.3000 13.0000
Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael Davis
FIN 135, September 23, 2011
FINANCIAL STATEMENTS
Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael Davis
FIN 135, September 23, 2011
Income Statement
Three Years Ended December 25, 2010
(In Millions, Except Per Share Data) 2012 2013 2014
Net revenue 156,508 170,910 182,795
Cost of sales 87,846 106,606 112,258
Gross margin 68,662 64,304 70,537
Research and development 3,381 4,475 6,041
Selling , general and administrative 10,040 10,830 11,993
Restructuring and asset impairment charges 0 0 0
Amortization of acquisition-related intangibles 0 0 0
Operating expenses 13,421 15,305 18,034
Operating income (EBIT) 55,241 48,999 52,503
Other Income 522 1,156 980
Income before taxes 55,763 50,155 53,483
Provision for taxes 14,030 13,118 13,973
Net income 41,733 37,037 39,510
Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael Davis
FIN 135, September 23, 2011
Apple Inc
RATIO COMPARISON
Efficiency
Average Collection Period Accounts Receivable/(Sales / 360) 25.14 27.60 34.39 77.06 Good GOOD
Inventory Turnover Total Revenues/Inventory 197.86 96.89 86.59 64.84 Good Variable
Receivable Turnover Total Revenues/Accounts Receivable 14.32 13.04 10.47 4.67 Good Variable
Fixed Asset Turnover Total Revenues/Fixed Assets 10.13 10.30 8.86 7.54 Good Variable
Total Asset Turnover Total Revenues/Total Assets 0.89 0.83 0.79 0.61 Good Variable
Profitability
Gross Profit Margin (GPM) Gross Profits/Net Operating Income 0.44 0.38 0.39 0.76 Bad Variable
Net Profit Margin (NPM) Net Profits/Net Operating Income 0.27 0.22 0.22 0.31 Bad Variable
Return on Total Assets (ROA) Net Income/Total Assets 0.24 0.18 0.17 0.14 Good Variable
Return on Equity (ROE) RETURN ON EQUITY 0.35 0.30 0.35 0.26 Good Variable
VALUE LINE
Calculations
ue Line Data
Price: $125.86
2013 2014
$27.15 $31.16
$6.96 $8.09
$5.66 $6.45
$1.63 $1.81
$1.30 $1.63
$19.63 $19.02
6294.5 5866.0
12.3 13.0
2.3% 2.2%
$170,910 $182,795
32.6% 33.1%
$6,757.0 $7,946.0
$37,037.0 $39,510.0
26.2% 26.1%
21.7% 21.6%
$29,628.0 $5,083.0
$16,960.0 $28,987.0
$123,549.0 $111,547.0
29.98% 35.42%
29% 28%
lculations
$69.62 $83.85
$35,611.16 $37,894.42
-3.04% 6.41%
9.17% 6.96%
($1.61) $1.36
$5.66 $6.46
3.55 4.41
FORECAST - PESSIMISTIC
INTRINSIC VALUATION MODEL - TWO-STAGE EARNINGS GROWTH PROJECTIONS
Prior year cash flows (mil) 37,894 45,473 54,568 65,482 78,578 94,293
10-year growth rate (.00) 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%
Cash flow 45,473 54,568 65,482 78,578 94,293 113,152
Discount Rate (.00) 0.15 0.15 0.15 0.15 0.15 0.15
Discount Factor (mult.) 0.869565 0.756144 0.657516 0.571753 0.497177 0.432328
Discounted value per annum 39,542 41,261 43,055 44,927 46,881 48,919
Sum of present value of cash flows $482,474
Residual value
Cash flow in year 10 $234,632 8
Growth rate (.00) (g) 0.04
Cash flow in year 11 $244,018 7
Capitalization rate (k-g) 0.11
6
Value at end of year 10 $2,218,341
Discount factor year 10 0.24718 5
2020
### 2021
### 2022
### 2023
2 3 4 5 6 7 8
Residual value
Cash flow in year 10 $352,919
Growth rate (.00) (g) 0.04 8
Cash flow in year 11 $367,036
Capitalization rate (k-g) 0.11 7
Value at end of year 10 $3,336,691
6
Discount factor year 10 0.24718
5
Present value of residual $824,779
Total Intrinsic Value (mil) $1,441,552 4
Number of shares (mil) 5,866
3
Intrinsic value per share 245.75
Intrinsic / Market 1.95 2
2018
### 2019
### 2020
### 2021
### 2022
### 2023
2 3 4 5 6 7 8
FORECAST - OPTIMISTIC
INTRINSIC VALUATION MODEL - TWO-STAGE EARNINGS GROWTH PROJECTIONS
Prior year cash flows (mil) 37,894 61,558 99,998 162,443 263,882 428,666
10-year growth rate (.00) 62.45% 62.45% 62.45% 62.45% 62.45% 62.45%
Cash flow 61,558 99,998 162,443 263,882 428,666 696,351
Discount Rate (.00) 0.15 0.15 0.15 0.15 0.15 0.15
Discount Factor (mult.) 0.869565 0.756144 0.657516 0.571753 0.497177 0.432328
Discounted value per annum 53,529 75,613 106,809 150,876 213,123 301,052
Sum of present value of cash flows $3,974,138
Residual value
Cash flow in year 10 $4,849,123
Growth rate (.00) (g) 0.04 8
Cash flow in year 11 $5,043,088
Capitalization rate (k-g) 0.11 7
Value at end of year 10 $45,846,253 6
Discount factor year 10 0.24718
5
Present value of residual $11,332,493
Market value (mil) $15,306,630 4
Number of shares (mil) 5,866 3
Intrinsic value per share $2,609.38
Intrinsic / Market 20.73 2
1
Input discount & growth rates
First 10 year growth rate 62.45% 0
2nd period growth rate 0.04 1 2 3 4 5 6 7
Discount rate 0.15 -1
Owners cash flow (mil) $37,894.42
-2
2017
### 2018
### 2019
### 2020
2 3 4 5 6 7 8
Sales
$156,508 Net Income Net Profit Margin
Cost of Goods Sold $41,733 AAPL
$87,846 26.67%
Income Operating Expenses MSFT
Statement $13,421 Sales 31.40%
Other Inc./Exp. $156,508
$522
Taxes
$14,030 Sales T.A. Turnover
$156,508 AAPL
88.89%
Current Assets MSFT
$57,653 Total Assets 60.79%
Net Fixed Assets $176,064
Balance Sheet
$118,411
Current Liabilities
$38,542 Total Liabilities Total Liab. & Equity
Long-term Debt $57,854 AAPL
$19,312 $176,064
MSFT
Stockholders Equity $121,271
$118,210
Stockholders Equity
AAPL
$118,210
MSFT
$66,363
012
AAPL
23.70%
MSFT
14.000%
Return on Equity
(ROE)
AAPL
35.30%
MSFT
25.58%
Sales
$170,910 Net Income Net Profit Margin
Cost of Goods Sold $37,037 AAPL
$106,606 21.67%
Income Operating Expenses MSFT
Statement $15,305 Sales 28.90%
Other Inc./Exp. $170,910
$1,156
Taxes
$13,118 Sales T.A. Turnover
$170,910 AAPL
82.57%
Current Assets MSFT
$73,286 Total Assets 54.66%
Net Fixed Assets $207,000
Balance Sheet
$133,714
Current Liabilities
$43,658 Total Liabilities Total Liab. & Equity
Long-term Debt $83,451 AAPL
$39,793 $207,000
MSFT
Stockholders Equity $142,431
$123,549
Stockholders Equity
AAPL
$123,549
MSFT
$78,944
13
Return on Assets
(ROA)
AAPL
17.89%
MSFT
15.35%
Return on Equity
(ROE)
AAPL
29.98%
MSFT
27.69%
Financial Leverage
Mult. (FLM)
AAPL
1.68
MSFT
1.80
COMMENTARY
Apple Inc
Sales
$182,795 Net Income Net Profit Margin
Cost of Goods Sold $39,510 AAPL
$112,258 21.61%
Income Operating Expenses MSFT
Statement $18,034 Sales 25.40%
Other Inc./Exp. $182,795
$980
Taxes
$13,973 Sales T.A. Turnover
$182,795 AAPL
79%
Current Assets MSFT
$68,531 Total Assets 60.79%
Net Fixed Assets $231,839
Balance Sheet
$163,308
Current Liabilities
$63,448 Total Liabilities Total Liab. & Equity
Long-term Debt $120,292 AAPL
$56,844 $231,839
MSFT
Stockholders Equity $172,384
$111,547
Stockholders Equity
AAPL
$111,547
MSFT
$89,784
14
Return on Assets
(ROA)
AAPL
17.04%
MSFT
12.81%
Return on Equity
(ROE)
AAPL
35.42%
MSFT
24.59%
Financial Leverage
Mult. (FLM)
AAPL
2.08
MSFT
1.92
INTERPRETATION/COMMENTARY
Apple Inc
Initial EPS Rate of Return @ Curent Price 5.12% ! Equal to 2010 EPS divided by current share price
VALUE RELATIVE TO GOVERNMENT BONDS $430.00 ! Most recent EPS divided by yield on treasury bonds
Projected ACRR as Equity Bond
Average Dividend Payout Ratio 28% ! From Value Line, last Dividend %
Average % of Earnings Retained 72% ! 1 minus average dividend payout ratio
Average ROE in R/E over the last 10 Years 22.10% ! Average ROE times 59%
Future Book (Equity) Value in 10 Years $140.11 ! Book Value times 1.1324% to the 10th
Projected EPS in 10 Years $43.05 ! Future book value times 10%
Average P/E Ratio 14.02 ! Average P/E from Value Line
VALUE RELATIVE TO GROWING GOV'T BONDS $603.42 ! Projected EPS times average P/E ratio
ACRR @ Current Price 16.97%
November 2011 ACGR - Average Compounded Growth Rate in EPS from Value Line
Yield on T-Bonds: 1.50% ACRR - Average Compounded Rate of Return
Share Price: $125.86
Shares Outstanding: 5866
Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael Davis
FIN 135, September 23, 2011
Apple Inc
Graham Analysis
Variables Values
Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael Davis
FIN 135, September 23, 2011
Apple Inc
Reinvested Dividends
Year Equity Value Per Share Earnings Dividends Paidout High P/E Low P/E Retained Earnings
1 $23.22 $5.84 $1.64 $7.45 $4.88 $4.20
2 $28.36 $7.14 $2.00 $7.69 $5.28 $5.13
3 $34.63 $8.71 $2.45 $7.94 $5.71 $6.27
4 $42.28 $10.64 $2.99 $8.19 $6.18 $7.65
5 $51.62 $12.99 $3.65 $8.45 $6.68 $9.34
6 $63.03 $15.86 $4.45 $8.72 $7.23 $11.41
7 $76.97 $19.37 $5.43 $9.00 $7.82 $13.93
8 $93.98 $23.65 $6.64 $9.29 $8.46 $17.01
9 $114.75 $28.87 $8.10 $9.59 $9.15 $20.77
10 $140.11 $35.26 $9.89 $9.89 $9.89 $25.36
47.24 ### 86.23 ### 71.29 121.09
Price Appreciation (Low P/E) $423.09 Price Appreciation (High P/E) $676.94
Rate of Return on Appreciation 236% Rate of Return on Appreciation 437.85%
Annualized 12.89% Annualized 18.32%
With Reinvested Dividends 273.69% With Reinvested Dividends 506.36%
Annualized 14.09% Annualized 19.75%
Input Variables return on equity over a projected 10 year period. This projection is made
assuming re-invested dividends. If dividends are re-invested the investor
must receive the ROE rate on all dividends that are re-invested. The
Current Price $125.86 ROE's are based on the low and high P/E ratios from the Value Line.
Average ROE from Value Line 30.73%
Initial Book Value $19.02
Payout Ratio 28.1%
P/E High 19.20
P/E Low 12.00
Apple Inc
Summary
Decision Summary
The Decision
Page 37
SUMMARY
Page 38
SUMMARY
COMMENTARY
The Decision
Page 39
SUMMARY
Page 40
Microsoft (MSFT)
RATIOS
Profitability ratios
Gross Profit Margin 0.76 0.74 0.69
Net Profit Margin 0.314 0.289 0.254
ROA (NI/TA) 0.1400 0.1535 0.1281
ROE (NI/TE) 0.2558 0.2769 0.2459
Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael Davis
FIN 135, September 23, 2011
FINANCIAL STATEMENTS
Balance Sheet
Three Years Ended December 25, 2010
(In Millions, Except Par Value) 2012 2013 2014
Assets
Current Assets:
Cash and cash equivalents 6,938 3,804 8,669
Short-term investments 56,102 73,218 77,040
Accounts Receivable, Net 15,780 17,486 19,544
Inventories 1,137 1,938 2,660
Deferred Income Taxes 2,035 1,632 1,941
Other 3,092 3,388 4,392
Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael Davis
FIN 135, September 23, 2011
Income Statement
Three Years Ended December 25, 2010
(In Millions, Except Per Share Data) 2012 2013 2014
Net revenue 73,723 77,849 86,833
Cost of revenue 17,530 20,249 26,934
Gross margin 56,193 57,600 59,899
Research and development 9,811 10,411 11,381
Sales and marketing 13,857 15,276 15,811
General and administrative 4,569 5,149 4,821
Goodwill impairment 6,193 0 0
Integration and restructuring 0 0 127
Total 34,430 30,836 32,140
Operating income 21,763 26,764 27,759
Other Income 504 288 61
Income before taxes 22,267 27,052 27,820
Provision for taxes 5,289 5,189 5,746
Net Income 16,978 21,863 22,074
Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael Davis
FIN 135, September 23, 2011