Compare to analysts long-term earnings growth forecast

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Reference no: EM133696570

Assignment:

1) Now use the ROE and the plowback ratio, calculate the growth rate of the company. How does this compare to analysts' long-term earnings growth forecast? Is it realistic for Appleto sustain this growth rate forever? (Your answer to this question can be subjective.) Based on the analysts' forecasts what is your forecast for earnings in each of the next 5 years?

2) Now assume both Apple earnings and dividends grow at the above calculated rate for 5 years but then dividend growth slows down. Approximately what growth rate would dividends need to grow at from year 5 on to rationalize current share prices (closing price on March 30th)? (Hint: Use the two-stage growth model.)

Reference no: EM133696570

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