Intrinsic value of Apple Inc. - AAPL

Previous Close

$198.78

  Intrinsic Value

$166.94

stock screener

  Rating & Target

hold

-16%

Previous close

$198.78

 
Intrinsic value

$166.94

 
Up/down potential

-16%

 
Rating

hold

We calculate the intrinsic value of AAPL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 937.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  270,907
  277,138
  284,260
  292,256
  301,117
  310,838
  321,425
  332,884
  345,229
  358,478
  372,652
  387,776
  403,880
  420,994
  439,154
  458,399
  478,771
  500,314
  523,077
  547,111
  572,471
  599,216
  627,406
  657,108
  688,391
  721,328
  755,997
  792,478
  830,857
  871,226
Variable operating expenses, $m
  198,221
  202,685
  207,788
  213,517
  219,865
  226,830
  234,415
  242,624
  251,469
  260,961
  266,986
  277,822
  289,359
  301,620
  314,631
  328,420
  343,015
  358,449
  374,758
  391,977
  410,146
  429,307
  449,504
  470,784
  493,197
  516,795
  541,633
  567,769
  595,266
  624,189
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  198,221
  202,685
  207,788
  213,517
  219,865
  226,830
  234,415
  242,624
  251,469
  260,961
  266,986
  277,822
  289,359
  301,620
  314,631
  328,420
  343,015
  358,449
  374,758
  391,977
  410,146
  429,307
  449,504
  470,784
  493,197
  516,795
  541,633
  567,769
  595,266
  624,189
Operating income, $m
  72,686
  74,452
  76,472
  78,739
  81,252
  84,008
  87,010
  90,259
  93,760
  97,517
  105,666
  109,955
  114,521
  119,373
  124,523
  129,980
  135,756
  141,865
  148,319
  155,134
  162,325
  169,909
  177,902
  186,324
  195,194
  204,534
  214,364
  224,708
  235,591
  247,037
EBITDA, $m
  84,456
  86,398
  88,619
  91,111
  93,874
  96,904
  100,205
  103,777
  107,626
  111,756
  116,175
  120,890
  125,910
  131,245
  136,907
  142,907
  149,258
  155,974
  163,070
  170,563
  178,469
  186,806
  195,595
  204,855
  214,607
  224,875
  235,683
  247,056
  259,021
  271,606
Interest expense (income), $m
  2,092
  6,182
  6,465
  6,793
  7,167
  7,588
  8,054
  8,565
  9,122
  9,724
  10,373
  11,070
  11,815
  12,611
  13,458
  14,358
  15,313
  16,325
  17,396
  18,529
  19,726
  20,990
  22,323
  23,730
  25,212
  26,774
  28,419
  30,151
  31,974
  33,893
  35,911
Earnings before tax, $m
  66,504
  67,987
  69,679
  71,572
  73,664
  75,955
  78,445
  81,138
  84,036
  87,143
  94,596
  98,139
  101,910
  105,916
  110,165
  114,667
  119,432
  124,469
  129,791
  135,408
  141,335
  147,585
  154,172
  161,112
  168,420
  176,115
  184,213
  192,734
  201,698
  211,126
Tax expense, $m
  17,956
  18,357
  18,813
  19,324
  19,889
  20,508
  21,180
  21,907
  22,690
  23,529
  25,541
  26,498
  27,516
  28,597
  29,745
  30,960
  32,247
  33,607
  35,043
  36,560
  38,161
  39,848
  41,627
  43,500
  45,473
  47,551
  49,737
  52,038
  54,458
  57,004
Net income, $m
  48,548
  49,631
  50,866
  52,248
  53,775
  55,447
  57,265
  59,231
  61,346
  63,615
  69,055
  71,642
  74,394
  77,319
  80,421
  83,707
  87,185
  90,862
  94,747
  98,848
  103,175
  107,737
  112,546
  117,612
  122,947
  128,564
  134,475
  140,696
  147,240
  154,122

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  373,150
  381,732
  391,543
  402,557
  414,761
  428,152
  442,734
  458,518
  475,522
  493,771
  513,295
  534,127
  556,308
  579,881
  604,896
  631,404
  659,464
  689,138
  720,492
  753,597
  788,528
  825,366
  864,196
  905,108
  948,197
  993,565
  1,041,318
  1,091,567
  1,144,431
  1,200,036
Adjusted assets (=assets-cash), $m
  373,150
  381,732
  391,543
  402,557
  414,761
  428,152
  442,734
  458,518
  475,522
  493,771
  513,295
  534,127
  556,308
  579,881
  604,896
  631,404
  659,464
  689,138
  720,492
  753,597
  788,528
  825,366
  864,196
  905,108
  948,197
  993,565
  1,041,318
  1,091,567
  1,144,431
  1,200,036
Revenue / Adjusted assets
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
  0.726
Average production assets, $m
  38,198
  39,076
  40,081
  41,208
  42,457
  43,828
  45,321
  46,937
  48,677
  50,545
  52,544
  54,676
  56,947
  59,360
  61,921
  64,634
  67,507
  70,544
  73,754
  77,143
  80,718
  84,489
  88,464
  92,652
  97,063
  101,707
  106,596
  111,739
  117,151
  122,843
Working capital, $m
  -30,612
  -31,317
  -32,121
  -33,025
  -34,026
  -35,125
  -36,321
  -37,616
  -39,011
  -40,508
  -42,110
  -43,819
  -45,638
  -47,572
  -49,624
  -51,799
  -54,101
  -56,536
  -59,108
  -61,824
  -64,689
  -67,711
  -70,897
  -74,253
  -77,788
  -81,510
  -85,428
  -89,550
  -93,887
  -98,449
Total debt, $m
  119,722
  125,790
  132,726
  140,513
  149,141
  158,609
  168,918
  180,077
  192,099
  205,001
  218,805
  233,533
  249,215
  265,881
  283,566
  302,308
  322,146
  343,126
  365,293
  388,698
  413,394
  439,439
  466,892
  495,816
  526,281
  558,356
  592,117
  627,643
  665,018
  704,330
Total liabilities, $m
  263,817
  269,885
  276,821
  284,608
  293,236
  302,704
  313,013
  324,172
  336,194
  349,096
  362,900
  377,628
  393,310
  409,976
  427,661
  446,403
  466,241
  487,221
  509,388
  532,793
  557,489
  583,534
  610,987
  639,911
  670,376
  702,451
  736,212
  771,738
  809,113
  848,425
Total equity, $m
  109,333
  111,848
  114,722
  117,949
  121,525
  125,449
  129,721
  134,346
  139,328
  144,675
  150,395
  156,499
  162,998
  169,905
  177,234
  185,001
  193,223
  201,917
  211,104
  220,804
  231,039
  241,832
  253,209
  265,197
  277,822
  291,115
  305,106
  319,829
  335,318
  351,611
Total liabilities and equity, $m
  373,150
  381,733
  391,543
  402,557
  414,761
  428,153
  442,734
  458,518
  475,522
  493,771
  513,295
  534,127
  556,308
  579,881
  604,895
  631,404
  659,464
  689,138
  720,492
  753,597
  788,528
  825,366
  864,196
  905,108
  948,198
  993,566
  1,041,318
  1,091,567
  1,144,431
  1,200,036
Debt-to-equity ratio
  1.100
  1.120
  1.160
  1.190
  1.230
  1.260
  1.300
  1.340
  1.380
  1.420
  1.450
  1.490
  1.530
  1.560
  1.600
  1.630
  1.670
  1.700
  1.730
  1.760
  1.790
  1.820
  1.840
  1.870
  1.890
  1.920
  1.940
  1.960
  1.980
  2.000
Adjusted equity ratio
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293
  0.293

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  48,548
  49,631
  50,866
  52,248
  53,775
  55,447
  57,265
  59,231
  61,346
  63,615
  69,055
  71,642
  74,394
  77,319
  80,421
  83,707
  87,185
  90,862
  94,747
  98,848
  103,175
  107,737
  112,546
  117,612
  122,947
  128,564
  134,475
  140,696
  147,240
  154,122
Depreciation, amort., depletion, $m
  11,770
  11,946
  12,147
  12,372
  12,622
  12,896
  13,195
  13,518
  13,866
  14,239
  10,509
  10,935
  11,389
  11,872
  12,384
  12,927
  13,501
  14,109
  14,751
  15,429
  16,144
  16,898
  17,693
  18,530
  19,413
  20,341
  21,319
  22,348
  23,430
  24,569
Funds from operations, $m
  60,318
  61,577
  63,012
  64,620
  66,397
  68,343
  70,460
  72,748
  75,212
  77,854
  79,564
  82,577
  85,784
  89,191
  92,805
  96,634
  100,686
  104,971
  109,498
  114,277
  119,319
  124,635
  130,239
  136,142
  142,359
  148,905
  155,794
  163,044
  170,670
  178,691
Change in working capital, $m
  -600
  -704
  -805
  -904
  -1,001
  -1,099
  -1,196
  -1,295
  -1,395
  -1,497
  -1,602
  -1,709
  -1,820
  -1,934
  -2,052
  -2,175
  -2,302
  -2,434
  -2,572
  -2,716
  -2,866
  -3,022
  -3,186
  -3,356
  -3,535
  -3,722
  -3,918
  -4,122
  -4,337
  -4,562
Cash from operations, $m
  60,918
  62,281
  63,817
  65,523
  67,398
  69,441
  71,656
  74,043
  76,607
  79,351
  81,166
  84,286
  87,603
  91,124
  94,857
  98,809
  102,988
  107,406
  112,070
  116,993
  122,184
  127,657
  133,424
  139,498
  145,894
  152,627
  159,712
  167,166
  175,007
  183,253
Maintenance CAPEX, $m
  -7,509
  -7,640
  -7,815
  -8,016
  -8,242
  -8,491
  -8,766
  -9,064
  -9,387
  -9,735
  -10,109
  -10,509
  -10,935
  -11,389
  -11,872
  -12,384
  -12,927
  -13,501
  -14,109
  -14,751
  -15,429
  -16,144
  -16,898
  -17,693
  -18,530
  -19,413
  -20,341
  -21,319
  -22,348
  -23,430
New CAPEX, $m
  -654
  -879
  -1,004
  -1,127
  -1,249
  -1,371
  -1,493
  -1,616
  -1,741
  -1,868
  -1,999
  -2,133
  -2,271
  -2,413
  -2,561
  -2,714
  -2,872
  -3,038
  -3,210
  -3,389
  -3,576
  -3,771
  -3,975
  -4,188
  -4,411
  -4,644
  -4,888
  -5,144
  -5,412
  -5,692
Cash from investing activities, $m
  -8,163
  -8,519
  -8,819
  -9,143
  -9,491
  -9,862
  -10,259
  -10,680
  -11,128
  -11,603
  -12,108
  -12,642
  -13,206
  -13,802
  -14,433
  -15,098
  -15,799
  -16,539
  -17,319
  -18,140
  -19,005
  -19,915
  -20,873
  -21,881
  -22,941
  -24,057
  -25,229
  -26,463
  -27,760
  -29,122
Free cash flow, $m
  52,755
  53,762
  54,998
  56,380
  57,907
  59,579
  61,397
  63,363
  65,479
  67,748
  69,058
  71,645
  74,397
  77,322
  80,424
  83,711
  87,189
  90,867
  94,752
  98,853
  103,180
  107,743
  112,551
  117,618
  122,953
  128,570
  134,482
  140,703
  147,247
  154,130
Issuance/(repayment) of debt, $m
  5,239
  6,068
  6,936
  7,787
  8,628
  9,467
  10,309
  11,159
  12,022
  12,902
  13,803
  14,729
  15,682
  16,666
  17,685
  18,742
  19,839
  20,979
  22,167
  23,405
  24,696
  26,044
  27,453
  28,925
  30,464
  32,075
  33,761
  35,526
  37,375
  39,312
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  5,239
  6,068
  6,936
  7,787
  8,628
  9,467
  10,309
  11,159
  12,022
  12,902
  13,803
  14,729
  15,682
  16,666
  17,685
  18,742
  19,839
  20,979
  22,167
  23,405
  24,696
  26,044
  27,453
  28,925
  30,464
  32,075
  33,761
  35,526
  37,375
  39,312
Total cash flow (excl. dividends), $m
  57,994
  59,830
  61,934
  64,167
  66,535
  69,046
  71,707
  74,522
  77,501
  80,650
  82,861
  86,373
  90,079
  93,988
  98,109
  102,452
  107,028
  111,846
  116,919
  122,258
  127,876
  133,787
  140,004
  146,542
  153,417
  160,645
  168,243
  176,229
  184,623
  193,443
Retained Cash Flow (-), $m
  -2,186
  -2,515
  -2,874
  -3,227
  -3,576
  -3,923
  -4,272
  -4,625
  -4,982
  -5,347
  -5,720
  -6,104
  -6,499
  -6,907
  -7,329
  -7,767
  -8,222
  -8,694
  -9,187
  -9,700
  -10,235
  -10,794
  -11,377
  -11,987
  -12,625
  -13,293
  -13,991
  -14,723
  -15,489
  -16,292
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  55,808
  57,316
  59,059
  60,940
  62,959
  65,123
  67,434
  69,898
  72,519
  75,303
  77,141
  80,269
  83,580
  87,081
  90,780
  94,685
  98,806
  103,152
  107,732
  112,558
  117,641
  122,993
  128,627
  134,555
  140,792
  147,352
  154,252
  161,506
  169,133
  177,151
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  53,507
  52,471
  51,397
  50,178
  48,801
  47,262
  45,558
  43,688
  41,658
  39,478
  36,633
  34,254
  31,779
  29,235
  26,652
  24,062
  21,499
  18,996
  16,588
  14,303
  12,168
  10,205
  8,430
  6,853
  5,477
  4,299
  3,311
  2,499
  1,846
  1,334
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company's 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. The Company also delivers digital content and applications through the iTunes Store, App StoreSM, iBookstoreSM, and Mac App Store. The Company distributes 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 February 2012, the Company acquired app-search engine Chomp.

FINANCIAL RATIOS  of  Apple Inc. (AAPL)

Valuation Ratios
P/E Ratio 21.1
Price to Sales 4.4
Price to Book 7.6
Price to Tangible Book
Price to Cash Flow 16
Price to Free Cash Flow 20.1
Growth Rates
Sales Growth Rate 6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5.6%
Cap. Spend. - 3 Yr. Gr. Rate 5.5%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 72.5%
Total Debt to Equity 86.3%
Interest Coverage 32
Management Effectiveness
Return On Assets 14.3%
Ret/ On Assets - 3 Yr. Avg. 16.7%
Return On Total Capital 20.8%
Ret/ On T. Cap. - 3 Yr. Avg. 25.3%
Return On Equity 36.9%
Return On Equity - 3 Yr. Avg. 40%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 38.5%
Gross Margin - 3 Yr. Avg. 39.2%
EBITDA Margin 33.3%
EBITDA Margin - 3 Yr. Avg. 34.4%
Operating Margin 26.8%
Oper. Margin - 3 Yr. Avg. 28.4%
Pre-Tax Margin 28%
Pre-Tax Margin - 3 Yr. Avg. 29.1%
Net Profit Margin 21.1%
Net Profit Margin - 3 Yr. Avg. 21.7%
Effective Tax Rate 24.6%
Eff/ Tax Rate - 3 Yr. Avg. 25.5%
Payout Ratio 26.4%

AAPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AAPL stock intrinsic value calculation we used $265595 million for the last fiscal year's total revenue generated by Apple Inc.. The default revenue input number comes from 0001 income statement of Apple Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AAPL stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AAPL is calculated based on our internal credit rating of Apple Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Apple Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AAPL stock the variable cost ratio is equal to 73.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AAPL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Apple Inc..

Corporate tax rate of 27% is the nominal tax rate for Apple Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AAPL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AAPL are equal to 14.1%.

Life of production assets of 3.4 years is the average useful life of capital assets used in Apple Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AAPL is equal to -11.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $107147 million for Apple Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 4715.291 million for Apple Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Apple Inc. at the current share price and the inputted number of shares is $937.3 billion.

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