[XLS] · Web viewDuPont Analysis Geometric Mean Intrinsic Value Analysis Pessimistic Optimistic Most Likely The Graham Model Combined Buffett Model ACRR - Equity Bond ACRR - EPS Summary

135 PROJECT GRADE SHEET

Company Name: Apple Inc

Student Name (s) Ryan Carreon, Nik Heisinger

1. Financial Statements and Ratios, including analysis………………………………………………………………

Possible Scores 2 4

Professor's Comments:

2. Ratio comparison and analysis……………………………………………………………………………………………..

Possible Scores 4 8


3. DuPont Analysis and Interpretation (3 Years)………………………………………………………………………..

Possible Scores 1 2


4. Value Line Spread sheet and analysis ………………………………………………………………………………….

Possible Scores 4 8


5. Intrinsic Value (Forecasting) Model and Analysis with ML, OPT., PESS…………...……………..…

Possible Scores 2 4


6. Graham Model Possible Scores 1 2

7. Buffett Model and Analysis with Interpretation ………………………...………………………………….……

Possible Scores 2 4


8. ROE Model and Analysis with Interpretation …………………………………………………………………….

Possible Scores 2 4


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 recommendation?

Possible Scores 4 8


135 PROJECT GRADE SHEET

Student Name (s) Ryan Carreon, Nik Heisinger

1. Financial Statements and Ratios, including analysis……………………………………………………………… Your Score

6 8 10

10

2. Ratio comparison and analysis……………………………………………………………………………………………..

10 12 15 15

3. DuPont Analysis and Interpretation (3 Years)………………………………………………………………………..

3 4 5 5

4. Value Line Spread sheet and analysis ………………………………………………………………………………….

10 12 15 15

5. Intrinsic Value (Forecasting) Model and Analysis with ML, OPT., PESS…………...……………..…

6 8 10 10

3 4 5 5

7. Buffett Model and Analysis with Interpretation ………………………...………………………………….……

6 8 10 10

8. ROE Model and Analysis with Interpretation …………………………………………………………………….

6 8 10 10

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 recommendation?

12 16 20 20

TOTAL 100

Apple Inc

An Analysis of Apple Stock Potential

Presented by: Ryan Carreon and Nik Heisinger

About Apple

The Company designs, manufactures, and markets mobile communication and media devices, personal computers, andportable digital music players, and sells a variety of related software, services, accessories, networking solutions, and thirdpartydigital content and applications. The Company’s products and services include iPhone®, iPad®, Mac®, iPod®, AppleTV®, a portfolio of consumer and professional software applications, the iOS and OS X® operating systems, iCloud®, and avariety of accessory, service and support offerings. In September 2014, the Company announced Apple Watch™, which isexpected 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, aswell as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. In addition, the Companysells a variety of third-party iPhone, iPad, Mac and iPod compatible products, including application software, and variousaccessories, through its online and retail stores. The Company sells to consumers, small and mid-sized businesses (“SMB”)and education, enterprise and government customers. The Company’s fiscal year is the 52 or 53-week period that ends on thelast 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: 200 million to 250 million units of iPhone 6, iPhone 6 Plus and Apple Watch after the company asked suppliers to prepare chips for the devices. Deducting the 30 million to 40 million chips for the upcoming Apple Watch, the shipments will be just enough to

produce over 200 million units of iPhone 6 and iPhone 6 Plus.

Values: Different kinds of people

Make a difference in the world honor Indivividuality Best work of our lives

Board of Directors

Board Of Directors

Arthur D Levinson, Ph. D. Tim CookChairman of the Board, Apple CEOFormer Chairman and CEO AppleGenentech

Andrea Jung Ronald D Sugar, Ph.D.President and CEO Former Chairman and CEOGrameen America, Inc. Northrop Grumman

Albert Gore Jr. Susan L wagnerFormer Vice President of the United States Co-founder and Director

BlackRockRober A IgerChairman and CEO

Objectives: 200 million to 250 million units of iPhone 6, iPhone 6 Plus and Apple Watch after the company asked suppliers to prepare chips for the devices. Deducting the 30 million to 40 million chips for the upcoming Apple Watch, the shipments will be just enough to

produce over 200 million units of iPhone 6 and iPhone 6 Plus.


Make a difference in the world honor Indivividuality Best work of our lives

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 company’s worldwide sales and operations, including end-to-end management of Apple’s supply chain, sales activities, and service and support in all markets and countries. He also headed Apple’s 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 Compaq’s 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.

The Walt Disney Company

An Analysis of Apple Stock Potential

Presented by: Ryan Carreon and Nik Heisinger

About Apple

The Company designs, manufactures, and markets mobile communication and media devices, personal computers, andportable digital music players, and sells a variety of related software, services, accessories, networking solutions, and thirdpartydigital content and applications. The Company’s products and services include iPhone®, iPad®, Mac®, iPod®, AppleTV®, a portfolio of consumer and professional software applications, the iOS and OS X® operating systems, iCloud®, and avariety of accessory, service and support offerings. In September 2014, the Company announced Apple Watch™, which isexpected 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, aswell as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. In addition, the Companysells a variety of third-party iPhone, iPad, Mac and iPod compatible products, including application software, and variousaccessories, through its online and retail stores. The Company sells to consumers, small and mid-sized businesses (“SMB”)and education, enterprise and government customers. The Company’s fiscal year is the 52 or 53-week period that ends on the

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


Make a difference in the worldhonor Indivividuality Best work of our lives

Board of Directors


Make a difference in the worldhonor Indivividuality Best work of our lives

Before being named CEO in August 2011, Tim was Apple's Chief Operating Officer and was responsible for all of the company’s worldwide sales and operations, including end-to-end management of Apple’s supply chain, sales activities, and service and support in all markets and countries. He also headed Apple’s 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 Compaq’s product inventory. Previous to his work at Compaq, Tim was the chief operating officer of the Reseller Division at

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,

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

Intel Corporation Ratios Financial Statements Cynthia Kenyon and Michael DavisFIN 135, September 23, 2011

Apple Inc

AAPL RATIOS

2012 2013 2014 Short term solvency ratiosCurrent Ratio 1.4958 1.6786 1.0801 Quick Ratio 1.4753 1.6382 1.0468 Cash Ratio 0.8654 1.0244 0.4605 Net Working Capital to Current Liabilities 0.4958 0.6786 0.0801

Asset Utilization or Turnover ratiosAverage Collection Period 25.1412 27.5977 34.3861 Inventory Turnover Ratios 197.8609 96.8878 86.5917 Receivable Turnover 14.3191 13.0446 10.4694 Fixed Asset Turnover 10.1287 10.2976 8.8632 Total Asset Turnover 0.8889 0.8257 0.7885

Financial Leverage ratiosTotal Debt Ratio (TD/TA) 0.3286 0.4031 0.5189 Debt/Equity 0.4894 0.6754 1.0784 Equity Ratio (TE/TA) 0.6714 0.5969 0.4811 Long-term Debt Ratio (LTD/TA) 0.0000 0.0819 0.1250 Times Interest Earned Ratio (EBIT/TI) there are no interest payments 0.0000 0.0000 0.0000

Profitability ratiosGross 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 ratiosPrice/Earnings Ratio 12.0000 12.3000 13.0000


FINANCIAL STATEMENTS

Balance Sheet for AAPL

Three Years Ended September 29, 2014(In Millions, Except Par Value) 2012 2013 2014 AssetsCurrent Assets:

Cash and cash equivalents 10,746 19% 14,259 19% 13,844 Short-term marketable securities 18,383 32% 26,287 36% 11,233 Accounts receivable, less allowances of $98 and $53, respectively 10,930 19% 13,102 18% 17,460 Inventories 791 1% 1,764 2% 2,111 Deferred tax assets 2,583 3% 3,453 3% 4,318 Vendor non trade receivables 7,762 13% 7,539 10% 9,759 Other current assets 6,458 11% 6,882 9% 9,806

Total current assets 57,653 33% 73,286 35% 68,531 Long term marketable securities 92,122 52% 106,215 51% 130,162 Property, plant and equipment, net 15,452 9% 16,597 8% 20,624 Goodwill 1,135 1% 1,577 1% 4,616 Acquired intangible assets, net 4,224 2% 4,179 2% 4,142 Other long-term assets 5,478 3% 5,146 2% 3,764

Total assets 176,064 207,000 231,839

Liabilities and stockholders' equityCurrent Liabilities

Accounts payable 21,175 22,367 30,196 Accrued expenses 11,414 13,856 18,453 Deferred revenue 5,953 7,435 8,491 Commercial paper 0 0 6,308

Total current liabilities 38,542 43,658 63,448 Defered revenue- non-current 2,648 2,625 3,031 Long-term debt 0 16,960 28,987 Other non-current liabilities 16,664 20,208 24,826 Total Liabilities 57,854 83,451 120,292 Stockholders' equity:

16,422 19,764 23,313 Accumulated other comprehensive income (loss) 499 (471) 1,082 Retained earnings 101,289 104,256 87,152

Total stockholders' equity 118,210 123,549 111,547 Total liabilities and stockholders' equity 176,064 207,000 231,839

Common stock and additional paid-in capital, $0.00001 par value, 12,,600,000 shares authorized; 5,866,161 issued and 6,294,494 outstanding, respectively…


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

Basic earnings per common share 44.64 40.03 6.49 Diluted earnings per common share 44.15 39.75 6.45 Weighted average common shares outstanding:

Basic 934,818 925,331 6,085,572 Diluted 945,355 931,662 6,122,663

Intel Corporation Ratio Comparison Cynthia Kenyon and Michael DavisFIN 135, October 5, 2011

Apple Inc

RATIO COMPARISON

2012 2013 2014 MICRO

SolvencyCurrent Ratio Current Assets/Current Liabilities 1.50 1.68 1.08 2.60 Bad VariableQuick Ratio (Acid Test) Current Assets - Inventory/Current Liabilities 1.48 1.64 1.05 2.57 Bad VariableCash Ratio Cash/Current Liabilities 0.87 1.02 0.46 1.93 Bad WarningNet. Capital to Current Liabilities Networking Capital/Current Liabilities 0.50 0.68 0.08 1.60 Bad Variable

Cash as a % of Current Assets 0.19 0.19 0.20 0.17 Good OK

EfficiencyAverage Collection Period Accounts Receivable/(Sales / 360) 25.14 27.60 34.39 77.06 Good GOODInventory Turnover Total Revenues/Inventory 197.86 96.89 86.59 64.84 Good VariableReceivable Turnover Total Revenues/Accounts Receivable 14.32 13.04 10.47 4.67 Good VariableFixed Asset Turnover Total Revenues/Fixed Assets 10.13 10.30 8.86 7.54 Good VariableTotal Asset Turnover Total Revenues/Total Assets 0.89 0.83 0.79 0.61 Good Variable

Financial Leverage RatiosTotal Debt Ratio Total Debt/Total Assets 0.33 0.40 0.52 0.45 Bad VariableDebt-Equity Ratio Total Debt/Total Equity 0.49 0.68 1.08 0.12 Bad WarningEquity Ratio Total Equity/Total Assets 0.67 0.60 0.48 0.55 Good WarningLong-term Debt Ratio (LTD/TA) Long-term Debt / Total Assets 0.00 0.08 0.13 0.09 Bad OKTimes Interest Earned EBIT/Total Interest Payments 0.00 0.00 0.00 22267.00 Good Warning

ProfitabilityGross Profit Margin (GPM) Gross Profits/Net Operating Income 0.44 0.38 0.39 0.76 Bad VariableNet Profit Margin (NPM) Net Profits/Net Operating Income 0.27 0.22 0.22 0.31 Bad VariableReturn on Total Assets (ROA) Net Income/Total Assets 0.24 0.18 0.17 0.14 Good VariableReturn on Equity (ROE) RETURN ON EQUITY 0.35 0.30 0.35 0.26 Good Variable

Cross-Sectional

Time-Series


Apple Inc

VALUE LINE

Value Line Data

Symbol: AAPL Beta: 0.85

2009 2010 2011 2012 ACRR

Sales per share 40.0% $5.80 $10.17 $16.64 $23.81Cash flow per share 51.3% $1.02 $2.35 $4.26 $6.85Earnings per share 48.3% $0.90 $2.16 $3.95 $6.31Dividends per share 36.6% $0.00 $0.00 $0.00 $0.38Capital Spending per share 55.4% $0.18 $0.31 $0.65 $1.26Book value per share 33.9% $4.42 $7.45 $11.78 $17.98Common Shares Outstanding (Mill) 6298.6 6411.8 6504.9 6574.5Average annual P/E ratio 19.2 15.2 12.4 12.0Average price to earnings ratio 14.0 Average annual dividend yield 0.0% 0.0% 0.0% 0.5%Sales ($mill) 38.0% $36,537 $65,225 $108,249 $156,508Operating margin 7.6% 22.9% 29.8% 32.9% 37.4%Depreciation ($Mill) $703.0 $1,027.0 $1,814.0 $3,277.0Net profit ($Mill) 47.3% $5,704.0 $14,013.0 $25,922.0 $41,733.0Income tax rate (%) 28.6% 24.4% 24.2% 25.2%Net profit margin (%) 0.1% 21.5% 22.5% 23.9% 26.7%Working Capital ($Mill) $16,983.0 $20,956.0 $17,018.0 $19,111.0Long-term Debt ($Mill) $0.0 $0.0 $0.0 $0.0Shareholder equity ($Mill) 32.0% $27,832.0 $47,791.0 $76,615.0 $118,210.0Return on equity 20.49% 29.32% 33.83% 35.30%Average return on equity 30.73%ACRR = AVERAGE Compounded Rate of ReturnDividend payout ratio 0% 0% 0% 6%Minimum P/E Ratio 12.0Maximum P/E Ratio 19.2

Calculations


2009 2010 2011 2012 ACGR

Price per share $17.28 $32.83 $48.98 $75.72Owners cash flow 48.4% $5,273.24 $13,052.35 $23,507.79 $36,726.18Annual cash flow growth rate 147.52% 80.10% 56.23%5 year average cash flow growth 57.4% Annual sales growth 78.49% 66.00% 44.62%5 year average sales growth 41.0% VALUE ADDED $7.26 $4.17 $4.29 Average value added $3.09 Owners cash flow per share $0.84 $2.04 $3.61 $5.59 SHARE PRICE/BOOK VALUE 3.91 4.41 4.16 4.21 The first 35 rows are simply restated from your Value Line Data Sheet. These numbers must be accurately transcribed in orderto provide relevant information. Make sure all information is consistent with what is found on the Financial Statements andthe Ratio Comparison page.


VALUE LINE

Value 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 $19.026294.5 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 $39,510.026.2% 26.1%21.7% 21.6%

$29,628.0 $5,083.0$16,960.0 $28,987.0

$123,549.0 $111,547.029.98% 35.42%

29% 28%

Calculations


2013 2014

$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


Apple Inc

FORECAST - PESSIMISTIC INTRINSIC VALUATION MODEL - TWO-STAGE EARNINGS GROWTH PROJECTIONS

2014 2015 2016 ### 2017 ### 2018 ### 2019 ###

Prior year cash flows (mil) 37,894 45,473 54,568 65,482 78,578 94,29310-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 94,293 113,152Discount Rate (.00) 0.15 0.15 0.15 0.15 0.15 0.15Discount Factor (mult.) 0.869565 0.756144 0.657516 0.571753 0.497177 0.432328Discounted value per annum 39,542 41,261 43,055 44,927 46,881 48,919Sum of present value of cash flows $482,474

Residual valueCash flow in year 10 $234,632Growth rate (.00) (g) 0.04Cash flow in year 11 $244,018Capitalization rate (k-g) 0.11Value at end of year 10 $2,218,341Discount factor year 10 0.24718

Present value of residual $548,340Market value (mil) $1,030,814Number of shares (mil) 5,866 Intrinsic value per share $175.73Intrinsic / Market 1.40

Input discount & growth ratesFirst 10 year growth rate 20.00%2nd period growth rate 0.04Discount rate 0.15Owners cash flow (mil) $37,894.42

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Annual sales growthVALUE ADDEDOwners cash flow per share


FORECAST - PESSIMISTIC INTRINSIC VALUATION MODEL - TWO-STAGE EARNINGS GROWTH PROJECTIONS

2020 ### 2021 ### 2022 ### 2023

113,152 135,783 162,939 195,52720.00% 20.00% 20.00% 20.00%

135,783 162,939 195,527 234,6320.15 0.15 0.15 0.15

0.375937 0.326902 0.284262 0.24718551,046 53,265 55,581 57,998

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Apple Inc

FORECAST - MOST LIKELY INTRINSIC VALUATION MODEL - TWO-STAGE EARNINGS GROWTH PROJECTIONS

2014 2015 2016 ### 2017 ###

Prior year cash flows (mil) 37,894 47,368 59,210 74,01310-year growth rate (.00) 25.00% 25.00% 25.00% 25.00%Cash flow 47,368 59,210 74,013 92,516Discount Rate (.00) 0.15 0.15 0.15 0.15Discount Factor (mult.) 0.869565 0.756144 0.657516 0.571753Discounted value per annum 41,190 44,771 48,664 52,896Sum of present value of cash flows $616,773

Residual valueCash flow in year 10 $352,919Growth rate (.00) (g) 0.04Cash flow in year 11 $367,036Capitalization rate (k-g) 0.11Value at end of year 10 $3,336,691Discount factor year 10 0.24718

Present value of residual $824,779Total Intrinsic Value (mil) $1,441,552Number of shares (mil) 5,866 Intrinsic value per share 245.75Intrinsic / Market 1.95

Input discount & growth ratesFirst 10 year growth rate 25.00%Growth Rate Year 11 in perpetuity 0.04Discount rate 0.15Owners cash flow (mil) $37,894.42

1 2 3 4 5 6 7 8

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FORECAST - MOST LIKELY INTRINSIC VALUATION MODEL - TWO-STAGE EARNINGS GROWTH PROJECTIONS

2018 ### 2019 ### 2020 ### 2021 ### 2022 ### 2023

92,516 115,645 144,556 180,695 225,868 282,33525.00% 25.00% 25.00% 25.00% 25.00% 25.00%

115,645 144,556 180,695 225,868 282,335 352,9190.15 0.15 0.15 0.15 0.15 0.15

0.497177 0.432328 0.375937 0.326902 0.284262 0.24718557,496 62,495 67,930 73,837 80,257 87,236

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Annual sales growthVALUE ADDED

Owners cash flow per share


Apple Inc

FORECAST - OPTIMISTIC INTRINSIC VALUATION MODEL - TWO-STAGE EARNINGS GROWTH PROJECTIONS

2011 2012 2013 ### 2014 ### 2015 ### 2016 ###

Prior year cash flows (mil) 37,894 61,558 99,998 162,443 263,882 428,66610-year growth rate (.00) 62.45% 62.45% 62.45% 62.45% 62.45% 62.45%Cash flow 61,558 99,998 162,443 263,882 428,666 696,351Discount Rate (.00) 0.15 0.15 0.15 0.15 0.15 0.15Discount Factor (mult.) 0.869565 0.756144 0.657516 0.571753 0.497177 0.432328Discounted value per annum 53,529 75,613 106,809 150,876 213,123 301,052Sum of present value of cash flows $3,974,138

Residual valueCash flow in year 10 $4,849,123Growth rate (.00) (g) 0.04Cash flow in year 11 $5,043,088Capitalization rate (k-g) 0.11Value at end of year 10 $45,846,253Discount factor year 10 0.24718

Present value of residual $11,332,493Market value (mil) $15,306,630Number of shares (mil) 5,866 Intrinsic value per share $2,609.38Intrinsic / Market 20.73

Input discount & growth ratesFirst 10 year growth rate 62.45%2nd period growth rate 0.04Discount rate 0.15Owners cash flow (mil) $37,894.42

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FORECAST - OPTIMISTIC INTRINSIC VALUATION MODEL - TWO-STAGE EARNINGS GROWTH PROJECTIONS

2017 ### 2018 ### 2019 ### 2020

696,351 1,131,193 1,837,577 2,985,06962.45% 62.45% 62.45% 62.45%

1,131,193 1,837,577 2,985,069 4,849,1230.15 0.15 0.15 0.15

0.375937 0.326902 0.284262 0.247185425,257 600,707 848,543 1,198,629

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Apple Inc

DuPont Analysis 2012

Sales$156,508 Net Income Net Profit Margin

Cost of Goods Sold $41,733 AAPL$87,846 26.67%

Operating Expenses MSFT$13,421 Sales 31.40%

Other Inc./Exp. $156,508 $522 Taxes

$14,030 Sales T.A. Turnover

$156,508 AAPL88.89%

Current Assets MSFT$57,653 Total Assets 60.79%

Balance SheetNet Fixed Assets $176,064

$118,411 Current Liabilities

$38,542 Total Liabilities Total Liab. & Equity

Long-term Debt $57,854 AAPL$19,312 $176,064

MSFTStockholders Equity $121,271

$118,210

Stockholders EquityAAPL

$118,210 MSFT

$66,363

Income Statement


Return on Assets (ROA)

AAPL23.70%MSFT

14.000%

AAPL35.30%MSFT

25.58%

AAPL1.49

MSFT1.83

Return on Equity (ROE)

Financial Leverage Mult. (FLM)

COMMENTARY

Apple Inc





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%



$43,658 Total Liabilities Total Liab. & EquityLong-term Debt $83,451 AAPL

$39,793 $207,000 MSFT

Stockholders Equity $142,431$123,549


$123,549 MSFT

$78,944

Income Statement


AAPL17.89%MSFT

15.35%

AAPL29.98%MSFT

27.69%

AAPL1.68

MSFT1.80




COMMENTARY

Apple Inc





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%



$63,448 Total Liabilities Total Liab. & EquityLong-term Debt $120,292 AAPL

$56,844 $231,839 MSFT

Stockholders Equity $172,384$111,547


$111,547 MSFT

$89,784

Income Statement


AAPL17.04%MSFT

12.81%

AAPL35.42%MSFT

24.59%

AAPL2.08

MSFT1.92




INTERPRETATION/COMMENTARY


Apple Inc

The Buffett Model

EPS ACGR (from Value Line) 48.27% Average ROE (8 Years) 30.73% ! This is the average ROE from the Value Line

Initial EPS Rate of Return @ Curent Price 5.12% ! Equal to 2010 EPS divided by current share priceVALUE RELATIVE TO GOVERNMENT BONDS $430.00 ! Most recent EPS divided by yield on treasury bonds

Projected ACRR as Equity BondAverage Dividend Payout Ratio 28% ! From Value Line, last Dividend %Average % of Earnings Retained 72% ! 1 minus average dividend payout ratioAverage 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 10thProjected EPS in 10 Years $43.05 ! Future book value times 10%Average P/E Ratio 14.02 ! Average P/E from Value LineVALUE RELATIVE TO GROWING GOV'T BONDS $603.42 ! Projected EPS times average P/E ratioACRR @ Current Price 16.97%

Projected ACRR Using Average EPSLast Year EPS 6.45 ! From Value LineProjected EPS in 10 Years $331.28 ! 10 year ACGR times last years EPSProjected Share Price in 10 Years $4,643.43 ! Projected EPS in 10 Years times average P/E ratioACGR @ Current Price 43.45%

November 2011 ACGR - Average Compounded Growth Rate in EPS from Value LineYield on T-Bonds: 1.50% ACRR - Average Compounded Rate of ReturnShare Price: $125.86 Shares Outstanding: 5866

Book (Equity) Value per Share: $19.02

INSTRUCTIONAL INFORMATION


Apple Inc

Graham Analysis

Variables Values

Current Price $125.86 AAA Yield 3.50%Average P/E over last 3 years 12.43 Average P/E over last 8 years 14.02 Net Current Assets per Share (4.08)Total Debt per Share $20.51

Group A Values Points#1 Earnings / Price 5.12% 0.5 #2 Price / Earnings 19.5 0.0 #3 Price / Book 4.41 0.0 #4 Dividends / Price 1.44% 0.0 #5 Price / Net Current Assets Per Share ($30.89) 0.0

Group B Values Points#6 Current Ratio 1.08 0.0 #7 Total Debt / Equity 1.08 0.5 #8 Total Debt / Net Current Assets (5.03) 0.0 #9 Growth for last 10 years 4.50% 0.5

Growth for last 5 years 48.27%#10 Number of earnings decline 0 1.0

This Graham Analysis is based on Resultsmy presentation in class related to Group Total Pointsthe Graham model. Virtually no Group A 0.5 stock is likely to pass this con- Group B 2.0 servative criteria but it is still worth Does Company Pass the Graham Model?looking at. No


Apple Inc

Projected ROE Based on P/E Ratios

The Kuhle ROE ModelProjections for 10 Year Period

Reinvested DividendsYear 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 $4.202 $28.36 $7.14 $2.00 $7.69 $5.28 $5.133 $34.63 $8.71 $2.45 $7.94 $5.71 $6.274 $42.28 $10.64 $2.99 $8.19 $6.18 $7.655 $51.62 $12.99 $3.65 $8.45 $6.68 $9.346 $63.03 $15.86 $4.45 $8.72 $7.23 $11.417 $76.97 $19.37 $5.43 $9.00 $7.82 $13.938 $93.98 $23.65 $6.64 $9.29 $8.46 $17.019 $114.75 $28.87 $8.10 $9.59 $9.15 $20.77

10 $140.11 $35.26 $9.89 $9.89 $9.89 $25.3647.24 ### 86.23 ### 71.29 121.09

Price Appreciation (Low P/E) $423.09 Price Appreciation (High P/E) $676.94Rate 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%

This model is intended to present a projection of the annual compounded

Input Variables return on equity over a projected 10 year period. This projection is madeassuming re-invested dividends. If dividends are re-invested the investormust 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 $19.02Payout Ratio 28.1%P/E High 19.20P/E Low 12.00

SUMMARY

Page 37

Apple Inc

Summary

Decision Summary

Model Method Value Recommendation

DuPont Analysis

2012 35.30%

Yes2013 29.98%2014 35.42%

Geometric Mean 33.47%

Intrinsic Value AnalysisPessimistic 1.40 NoOptimistic 20.73 Yes

Most Likely 1.95 Yes

The Graham ModelGroup A 0.5

NoGroup B 2Combined 2.5

Buffett ModelACRR - Equity Bond 16.97% Yes

ACRR - EPS 43.45% Yes

Kuhle ROE Projections Low P/E 14.1% NoHigh P/E 19.75% Yes

The Decision

SUMMARY

Page 38

SUMMARY

Page 39

COMMENTARY

The Decision

SUMMARY

Page 40


Microsoft (MSFT)

RATIOS

2012 2013 2014 Short term solvency ratiosCurrent Ratio 2.60 2.71 2.50 Quick Ratio 2.57 2.66 2.45 Cash Ratio 1.93 2.06 1.88 Net Working Capital to Current Liabilities 1.60 1.71 1.50

Asset Utilization or Turnover ratiosAverage Collection Period 77.06 80.86 81.03 Inventory Turnover Ratios 64.84 40.17 32.64 Receivable Turnover 4.67 4.45 4.44 Fixed Asset Turnover 7.54 7.18 5.95 Total Asset Turnover 0.61 0.55 0.50

Financial Leverage ratiosTotal Debt Ratio (TD/TA) 0.45 0.45 0.48 Debt/Equity 0.12 0.13 0.13 Equity Ratio (TE/TA) 0.55 0.55 0.52 Long-term Debt Ratio (LTD/TA) 0.09 0.09 0.12 Times Interest Earned Ratio (EBIT/TI) 22,267.00 27,052.00 27,820.00

Profitability ratiosGross Profit Margin 0.76 0.74 0.69 Net Profit Margin 0.314 0.289 0.254ROA (NI/TA) 0.1400 0.1535 0.1281ROE (NI/TE) 0.2558 0.2769 0.2459

Market value ratiosPrice/Earnings Ratio 10.4000 11.20 14.00


FINANCIAL STATEMENTS

Balance Sheet

Three Years Ended December 25, 2010(In Millions, Except Par Value) 2012 2013 2014 AssetsCurrent 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

Total current assets 85,084 101,466 114,246 Long Term Assets:

Property, plant and equipment, net 8,269 9,991 13,011 Equity and other investments 9,776 10,844 14,597 Goodwill 13,452 14,655 20,127 Intangible Assets 3,170 3,083 6,981 Other long term assets 1,520 2,392 3,422 Total assets 121,271 142,431 172,384

Liabilities and stockholders' equityCurrent Liabilities

Accounts Payable 4,175 4,828 7,432 Short term debt 0 0 2,000 Current Portion long term debt 1,231 2,999 0 Accrued compensation 3,875 4,117 4,797 Income Taxes 789 592 782 Short term unearned revenue 18,653 20,639 23,150 Securities lending payable 814 645 558 Other 3,151 3,597 6,906

Total current liabilities 32,688 37,417 45,625

Long-term debt 10,713 12,601 20,645 Long term unearned revenue 1,406 1,760 2,008 Deferred Income Taxes 1,893 1,709 2,728 Other long-term liabilities 8,208 10,000 11,594 Total Liabilities 54,908 63,487 82,600 Stockholders' equity:

65,797 67,306 68,366 Retained Earnings (856) 9,895 17,710 Accumulated other comprehensive income 1,422 1,743 3,708

Total stockholders' equity 66,363 78,944 89,784 Total liabilities and stockholders' equity 121,271 142,431 172,384

outstanding 8,239 and 8,328


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

Net income 16,978 21,863 22,074

Basic earnings per common share 2.02 2.61 2.66 Dilluted earnings per common share 2.00 2.58 2.63 Weighted average common shares outstanding:

Basic 8,396 8,375 8,299 Dilluted 8,506 8,470 8,399

Documents

[XLS] · Web viewDuPont Analysis Geometric Mean Intrinsic Value Analysis Pessimistic Optimistic Most Likely The Graham Model Combined Buffett Model ACRR - Equity Bond ACRR - EPS Summary