Apple Inc.

AAPL ·Technology, Computer Hardware, United States

Two-Stage DCF — Fair Value

For companies expected to have a high growth period followed by a mature steady state.

FCF per share ($) Market Price ($) High-Growth Rate (%) High-Growth Years Terminal Growth Rate (%) Discount Rate (%)

Fair Value —

Market Value —

vs. Fair Value —

Formula: Fair Value = Σ CFₙ ÷ (1 + Discount Rate)ⁿ for n = 1…High-Growth Years — years 1…High-Growth Years grow at the High-Growth Rate — plus Terminal Value ÷ (1 + Discount Rate)^High-Growth Years, where Terminal Value = Final Cash Flow × (1 + Terminal Growth Rate) ÷ (Discount Rate − Terminal Growth Rate)

Rule No. 1 : Never lose money. Rule No. 2 : Never forget Rule No. 1.