Increase of dividend helps demonstrate the growing

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especially if the company is a historically dividend-paying company. Increase of dividend helps demonstrate the growing status of a company and increases the overall market share value. 4. What are the pitfalls in P/E analysis? Ans . P/E analysis mostly relies on historical data and does not necessarily indicate accurate expectations for the future, as the ratio changes with the changing business cycle which in turn is tied to the fluctuating market. 5. Use the financial statements of Apple to answer the following questions. a. Compute the book value and market value of Apple (price = $525.31). Compute both aggregate and per share. Book Value = Total Assets – Total Liabilities = $176,064 - $57,854 = $118,210 Market Value = b. Using the dividend discount model, back out the capitalization rate of Apple. This entails computing “g” and then manipulating the Gordon Growth Model. Does this rate seem reasonable? K = ((Dt+1)/ Pt) + g
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