Let's analyze Apple's stock using the given data and the Gordon Growth Model. **1. Data Summary:** - **Most recent quarterly dividend (D₀):** $0.26 per share - **Annual dividend (D₁):** $0.26 × 4 = **$1.04** per share - **Next dividend (D₁):** $0.26 (since dividends are announced quarterly, and the upcoming dividend is expected to be $0.26) - **Dividend growth rate (g):** 5% (average over 3–5 years) - **Required rate of return (r):** assume 8% (0.08) to 10% (0.10), let's use **8%** for this calculation. --- **2. Gordon Growth Model Formula:** \[ P = \frac{D_1}{r - g} \] Where: - \( P \) = intrinsic stock price - \( D_1 \) = expected dividend next year = $0.26 × 4 = $1.04 - \( r \) = required rate of return = 8% (0.08) - \( g \) = dividend growth rate = 5% (0.05) --- **3. Calculation of Intrinsic Value:** \[ P = \frac{1.04}{0.08 - 0.05} = \frac{1.04}{0.03} \approx \$34.67 \] **Note:** This value reflects the intrinsic price based on the assumptions provided. --- **4. Comparison to Current Stock Price:** - As of recent data (October 2023), Apple's stock price typically ranges around **$150–$160**. **5. Interpretation:** - **Intrinsic value:** approximately **$34.67** - **Market price:** around **$150–$160** Since the intrinsic value (~$34.67) is significantly lower than the current market price (~$150–$160), the stock appears **overvalued** based on this dividend discount model and assumptions. --- ### **Summary:** - **Dividend:** $1.04 annually (based on recent quarterly dividend and growth rate) - **Dividend growth rate:** 5% - **Required rate of return:** 8% - **Intrinsic value (per Gordon Model):** ~$34.67 - **Current market price:** ~$150–$160 **Conclusion:** *Based on this analysis, Apple's stock seems overvalued relative to its intrinsic value derived from dividend growth assumptions.*