Apple, Inc.

Revenue Decomposition

Fiscal Years Ending January 31 2014 2015 2016 2017E 2018E 2019E 2020E 2021E
iPhone 101,991 155,041 136,700 149,003 166,883 176,896 191,048 210,153
Services 18,063 19,909 24,348 27,270 30,542 34,207 38,312 42,909
Mac 24,079 25,471 22,831 24,657 25,644 26,670 27,736 28,846
iPad 30,283 23,227 20,628 17,534 15,430 14,041 13,199 12,803
Other Products 2,286 10,067 11,132 12,310 13,612 15,052 16,644 18,405
Total 176,702 233,715 215,639 230,774 252,111 266,866 286,939 313,116
% of Total Sales
iPhone 57.72% 66.34% 63.39% 64.57% 66.19% 66.29% 66.58% 67.12%
Services 10.22% 8.52% 11.29% 11.82% 12.11% 12.82% 13.35% 13.70%
Mac 13.63% 10.90% 10.59% 10.68% 10.17% 9.99% 9.67% 9.21%
iPad 17.14% 9.94% 9.57% 7.60% 6.12% 5.26% 4.60% 4.09%
Other Products 1.29% 4.31% 5.16% 5.33% 5.40% 5.64% 5.80% 5.88%
Apple, Inc.
Income Statement

Fiscal Years Ending January 31 2014 2015 2016 2017E 2018E 2019E 2020E 2021E
Net Sales 182,346 231,283 214,224 230,774 252,111 266,866 286,939 313,116
Cost of sales (excl. D&A) 104,017 126,664 120,741 129,365 141,326 149,598 160,850 175,524
Depreciation 6,863 10,010 9,031 11,711 12,448 13,403 14,316 15,338
Amortization of Intangibles 1,083 1,247 1,474 1,003 921 846 777 713
Total COGS 111,963 137,921 131,246 142,080 154,696 163,846 175,942 191,575
Gross Profit 70,383 93,362 82,978 88,694 97,415 103,020 110,997 121,541
Research & development expense 6,041 8,067 10,045 8,839 9,656 10,221 10,990 11,992
Selling, general & administrative expense 11,993 14,329 14,194 14,922 16,302 17,256 18,554 20,246
Total operating expenses 18,034 22,396 24,239 23,761 25,957 27,477 29,543 32,239
EBITA 52,349 70,966 58,739 64,933 71,458 75,543 81,454 89,302
Interest & dividend income 1,795 2,921 3,999 5,835 6,213 6,631 7,087 7,614
(Interest expense) (384) (733) (1,456) (1,887) (2,163) (2,236) (2,302) (2,377)
Other income (expenses), net 4,969 4,926 7,177 9,783 10,263 11,026 11,871 12,851
Earnings Before Taxes 57,318 75,892 65,916 74,717 81,721 86,569 93,325 102,153
Provision for (benefit from) income taxes 13,973 19,121 15,685 20,032 21,909 23,209 25,020 27,387
Net income (loss) 43,345 56,771 50,231 54,685 59,811 63,360 68,304 74,766
Weighted average shares outstanding - basic 6,086 5,753 5,471 5,306 5,182 5,082 4,998 4,931
Net income (loss) per WA Shares Out 7.12 9.87 9.18 10.31 11.54 12.47 13.67 15.16
Cash dividends declared per common share 1.82 1.98 2.18 2.40 2.65 2.92 3.22 3.54
Apple, Inc.
Balance Sheet

Fiscal Years Ending January 31 2014 2015 2016 2017E 2018E 2019E 2020E 2021E
Assets:
Cash & cash equivalents 13,844 21,120 20,484 46,502 76,299 109,438 149,359 197,584
Short-term marketable securities 11,233 20,481 46,671 47,152 47,637 48,128 48,624 49,125
Accounts receivable, net 17,460 16,849 15,754 18,627 20,349 21,540 23,160 25,273
Inventories 2,111 2,349 2,132 2,437 2,663 2,819 3,031 3,307
Deferred tax assets 4,318 5,546 - - - - - -
Vendor non-trade receivables 9,759 13,494 13,545 13,469 14,714 15,575 16,747 18,275
Other current assets 9,806 9,539 8,283 10,284 11,235 11,892 12,787 13,953
Total current assets 68,531 89,378 106,869 138,470 172,897 209,392 253,707 307,516
Long-term marketable securities 130,162 164,065 170,430 173,895 177,431 181,039 184,720 188,476
Property, plant & equipment, net 20,624 22,471 27,010 28,709 30,912 33,017 35,375 38,233
Goodwill 4,616 5,116 5,414 5,414 5,414 5,414 5,414 5,414
Acquired intangible assets, net 4,142 3,893 3,206 2,944 2,703 2,482 2,279 2,092
Other non-current assets 3,764 5,556 8,757 6,580 7,189 7,609 8,182 8,928
Total LT Assets 163,308 201,101 214,817 217,543 223,649 229,561 235,970 243,143
Total assets 231,839 290,479 321,686 356,013 396,546 438,953 489,677 550,659
Liabilities:
Accounts payable 30,196 35,490 37,294 37,934 41,442 43,867 47,167 51,469
Accrued expenses and other 18,453 25,181 22,027 24,069 26,295 27,834 29,927 32,657
Deferred revenue 8,491 8,940 8,080 8,812 9,627 10,190 10,957 11,957
Commercial paper 6,308 8,499 8,105 9,063 9,313 9,636 9,915 10,240
Current portion of long-term debt - 2,500 3,500 6,500 6,834 6,454 7,750 7,750
Total current liabilities 63,448 80,610 79,006 86,379 93,511 97,981 105,716 114,074
Deferred revenue - non-current 3,031 3,624 2,930 3,386 3,699 3,916 4,210 4,594
Long-term debt 28,987 53,463 75,427 80,171 82,843 85,818 87,547 91,120
Deferred tax liabilities 20,259 24,062 26,019 29,982 34,316 38,907 43,857 49,274
Other non-current liabilities 4,567 9,365 10,055 10,832 11,833 12,526 13,468 14,697
Total liabilities 120,292 171,124 193,437 210,749 226,202 239,148 254,798 273,759
Equity:
Common stock 23,313 27,416 31,251 31,255 31,260 31,264 31,265 31,265
Retained earnings 87,152 92,284 96,364 113,374 138,450 167,907 202,980 245,002
Accumulated other comprehensive income (loss)
1,082 (345) 634 634 634 634 634 634
Total shareholders' equity 111,547 119,355 128,249 145,264 170,344 199,805 234,878 276,900
Apple, Inc.
Cash Flow Statement

Fiscal Years Ending September 24 2017E 2018E 2019E 2020E 2021E

Operating Activities:
Net Income 54,685 59,811 63,360 68,304 74,766
Adjustments to reconcile net income to operating cash:
Depreciation and Amortization 12,714 13,369 14,249 15,092 16,051
Deferred Tax Assets - - - - -
Other Non Current Assets 2,177 (608) (421) (572) (746)
Other Non Current Liabilities 777 1,002 693 942 1,229
Deferred Tax Liabilities 3,963 4,334 4,591 4,950 5,418
Working Capital Accounts:
Share Based Compensation Expense (927) (1,014) (1,074) (1,158) (1,267)
Accounts Receivables (2,873) (1,722) (1,191) (1,620) (2,113)
Vendor Non Trade Receivables 76 (1,245) (861) (1,172) (1,528)
Inventories (305) (225) (156) (212) (276)
Other Assets (2,001) (951) (658) (895) (1,166)
Accounts Payable 640 3,507 2,425 3,300 4,303
Accrued Expenses and Other Liabilities 2,042 2,225 1,539 2,094 2,730
Deferred Revenue 732 815 563 767 1,000
Deferred Revenue - Non-current 456 313 217 295 384
Net Cash Provided (Used) by Operating Activities 72,157 79,611 83,277 90,114 98,783
Investing Activities:
Net Purchases of Short-Term Investments (481) (486) (491) (496) (501)
Net Purchases of Long Term Investments (3,465) (3,536) (3,608) (3,681) (3,756)
Capital Expenditures (13,410) (14,650) (15,508) (16,674) (18,195)
Purchases of Intangible Assets (741) (680) (625) (574) (527)
Business Acquisition - - - - -
Net Cash Provided (Used) by Investing Activities (18,098) (19,352) (20,231) (21,425) (22,979)
Financing Activities:
Issuance (Repayment) of Commercial Paper 958 250 323 279 325
Issuance (Repayment) of Long Term Debt 7,744 3,006 2,595 3,025 3,572
Dividends Paid (Net Share Repurchases) (12,748) (13,721) (14,830) (16,073) (17,476)
Share Issuance (Repurchases) (23,996) (19,996) (17,996) (16,000) (14,000)
Net Cash Provided (Used) by Financing Activities (28,042) (30,461) (29,907) (28,769) (27,579)
Change in Cash:
Beginning Cash and Cash Equivalents 20,484 46,502 76,299 109,438 149,359
(Net Change in Cash) 26,018 29,798 33,139 39,920 48,225
Ending Cash Balance 46,502 76,299 109,438 149,359 197,584
Apple, Inc.
Income Statement
(In millions, except number of shares which are reflected in thousands and per share amount)
Fiscal Years Ending January 31 2014 2015 2016 2017E 2018E 2019E 2020E 2021E
Cost of sales % of Revenue 57.04% 54.77% 56.36% 56.06% 56.06% 56.06% 56.06% 56.06%
Gross margin % of Revenue 38.60% 40.37% 38.73% 38.43% 38.64% 38.60% 38.68% 38.82%
Operating expenses:
Research and development % of Revenue 3.31% 3.49% 4.69% 3.83% 3.83% 3.83% 3.83% 3.83%
Selling, general and administrative % of Revenue 6.58% 6.20% 6.63% 6.47% 6.47% 6.47% 6.47% 6.47%
Total operating expenses % of Revenue 9.89% 9.68% 11.31% 10.30% 10.30% 10.30% 10.30% 10.30%
Operating income % of Revenue 28.71% 30.68% 27.42% 28.14% 28.34% 28.31% 28.39% 28.52%
Other income/(expense), net % of Revenue 2.73% 2.13% 3.35% 4.24% 4.07% 4.13% 4.14% 4.10%
Income before provision for income taxes % of Revenue 31.43% 32.81% 30.77% 32.38% 32.41% 32.44% 32.52% 32.62%
Provision for income taxes % of Revenue 7.66% 8.27% 7.32% 8.68% 8.69% 8.70% 8.72% 8.75%
Net income % of Revenue 23.77% 24.55% 23.45% 23.70% 23.72% 23.74% 23.80% 23.88%
Apple, Inc.
Balance Sheet

Fiscal Years Ending January 31 2014 2015 2016 2017E 2018E 2019E 2020E 2021E
Cash & cash equivalents 8% 9% 10% 20% 30% 41% 52% 63%
Short-term marketable securities 6% 9% 22% 20% 19% 18% 17% 16%
Other Cash & ST Investments 6% 9% 22% 20% 19% 18% 17% 16%
Accounts receivable, net 10% 7% 7% 8% 8% 8% 8% 8%
Inventories 1% 1% 1% 1% 1% 1% 1% 1%
Deferred tax assets 2% 2% 0% 0% 0% 0% 0% 0%
Vendor non-trade receivables 5% 6% 6% 6% 6% 6% 6% 6%
Other current assets 5% 4% 4% 4% 4% 4% 4% 4%
Total current assets 38% 39% 50% 60% 69% 78% 88% 98%
Long-term marketable securities 71% 71% 80% 75% 70% 68% 64% 60%
Property, plant & equipment, net 11% 10% 13% 12% 12% 12% 12% 12%
Goodwill 3% 2% 3% 2% 2% 2% 2% 2%
Acquired intangible assets, net 2% 2% 1% 1% 1% 1% 1% 1%
Deferred Tax Assets 0% 0% 0% 0% 0% 0% 0% 0%
Other non-current assets 2% 2% 4% 3% 3% 3% 3% 3%
Total assets 127% 126% 150% 154% 157% 164% 171% 176%
Accounts payable 17% 15% 17% 16% 16% 16% 16% 16%
Accrued expenses and other 10% 11% 10% 10% 10% 10% 10% 10%
Deferred revenue 5% 4% 4% 4% 4% 4% 4% 4%
Commercial paper 3% 4% 4% 4% 4% 4% 3% 3%
Current portion of long-term debt 0% 1% 2% 3% 3% 2% 3% 2%
Total current liabilities 35% 35% 37% 37% 37% 37% 37% 36%
Deferred revenue - non-current 2% 2% 1% 1% 1% 1% 1% 1%
Long-term debt 16% 23% 35% 35% 33% 32% 31% 29%
Deferred tax liabilities 11% 10% 12% 13% 14% 15% 15% 16%
Other non-current liabilities 3% 4% 5% 5% 5% 5% 5% 5%
Total liabilities 66% 74% 90% 91% 90% 90% 89% 87%
Total shareholders' equity 61% 52% 60% 63% 68% 75% 82% 88%
Apple, Inc.
Weighted Average Cost of Capital (WACC) Estimation
Equity:
CAPM
Risk-Free Rate 3.02%
MRP 5.39%
Beta 1.33
Cost of Equity 10.18%
MV of Equity
Shares Outstanding 5,471
Share Price 141.83
Value of Equity 775,926
Debt:
Cost of Debt
Pre-tax Cost of Debt 2.26%
Marginal Tax Rate 27%
Cost of Debt (After Tax) 1.47%
BV of Debt (Aprox. MV)
Total LT Debt 78927
Commercial Paper 8105
PV operating Leases 6866
Value of Debt 93898
Total Market Value of Apple 869,825
WACC:
Weight of Debt: 10.80%
Weight of Equity: 89.20%
Cost of Equity 10.18%
Cost of Debt (After Tax) 1.47%
WACC 9.24%
Apple, Inc.
Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs:
CV Growth 3.00%
CV ROIC 252%
WACC 9.24%
Cost of Equity 10.18%
Annual Dividend Yield 1.69%

Fiscal Years Ending January 31 2017E 2018E 2019E 2020E 2021E

DCF Model
NOPLAT 43,607 48,251 50,967 55,161 60,824
Beginning Invested Capital 16,721 20,847 21,700 22,958 24,140
Ending Invested Capital 20,847 21,700 22,958 24,140 25,489
Change in Invested Capiral 4,126 853 1,258 1,182 1,349
FCF 39,481 47,398 49,710 53,978 59,476
CV 963,500

Value of Operating Assets:

Discount Periods 1 2 3 4 4
FCF 39,481 47,398 49,710 53,978 963,500
PV 36,142 39,720 38,135 37,908 676,647
Value of Operating Assets: 828,552
+ Total Non-Operating Value 215,959
- Total Value of Non-Equity Claims 93,898

Value of Equity 950,613

Shares Outstanding 5,471
Intrinsic Value of Apple 173.76

EP Model
ROIC 261% 231% 235% 240% 252%
Beginning Invested Capital 16,721 20,847 21,700 22,958 24,140
EP 42,062 46,325 48,963 53,040 58,594
CV 939,360

Value of Operating Assets:

Discount Periods 1 2 3 4 4
Beginning Invested Capital 16,721
EP 42,062 46,325 48,963 53,040 939,360
PV of EP 38,505 38,821 37,562 37,249 659,693
Value of Operating Assets: 828,552
+ Total Non-Operating Value 215,959
- Total Value of Non-Equity Claims 93,898
Value of Equity 950,613
Shares Outstanding 5,471
Intrinsic Value of Apple 173.76

Mid-year Adjustment
Today 5/1/2017
Next FYE 12/31/2017
Last FYE 12/31/2016
Days in FY 365
Days to FYE 121
Elapsed Fraction 0.332
EP = DCF Check TRUE
Unadjusted Stock Price 173.761
Adjusted Stock Price 178.52

Nonoperating Assets and Nonequity Claim Calculations:

Non-Operating Assets:
Excess Cash 5725
ST Marketable Securities 46671
LT Marketable Securities 170430
PV of Operating Leases (Subtract) 6866
Total Non-Operating Value 215,959
Value of Debt and Other Claims:
Commercial Paper 8105
Operating Leases 6866
Total Long Term Debt 78927
Total Value of Debt 93,898.38
Apple, Inc.
Dividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending January 31 2017E 2018E 2019E 2020E 2021E

EPS $ 10.31 $ 11.54 $ 12.47 $ 13.67 $ 15.16

Key Assumptions
CV growth 3.00%
CV ROE 31.83%
Cost of Equity 10.18%
Dividend Yield 1.69%

Future Cash Flows

P/E Multiple (CV Year) 12.62
EPS (CV Year) 15.16
Future Stock Price 191.31
Dividends Per Share 2.40 2.65 2.92 3.22
Future Cash Flows 2.40 2.65 2.92 3.22 191.31
Discount Years 1 2 3 4 4
Discounted Cash Flows $2.18 $2.18 $2.18 $2.18 $129.83

Intrinsic Value $138.55

Intrinsic Value Partial Adj. $ 142.35
Apple, Inc.
Relative Valuation Models
Price Market Cap Earnings Per Share Price to Earnings Ratio Est. LT Price to Earnings Growth
Ticker Company Per Share ($MM) 2017E 2018E 2017E 2018E 5 yr. growth 2017E 2018E
GOOG Alphabet Inc 830 579,426 41.241 48.971 20.11 16.94 16.9% 119 100
MSFT Microsoft Corp 66 508,935 2.96 3.264 22.25 20.18 8.8% 252 228
HPQ HP Inc. 18 30,231 1.607 1.683 11.13 10.62 1.6% N/A N/A
IBM International Business Machines Corporation 174 164,251 13.775 14.125 12.64 12.33 6.2% 206 200
Average 16.5 15.0 192.0 176.3

AAPL Apple, Inc. 141.83 $10.31 $11.54 13.8 12.3 8.03% 171.5 153.1

Implied Value:
Relative P/E (EPS17) 170.40
Relative P/E (EPS18) 173.32
PEG Ratio (EPS17) 158.82
PEG Ratio (EPS18) 163.25

Analyst Consensus
AAPL Apple, Inc. 144 753,718 8.959 10.151 16.04 14.15 10.6% 151 133
Apple, Inc.
Key Management Ratios

Fiscal Years Ending January 31 2014 2015 2016 2017E 2018E 2019E 2020E 2021E
Liquidity Ratios
Current Current Assets/Current Liabilities 108.01% 110.88% 135.27% 160.31% 184.90% 213.71% 239.99% 269.58%
Acid Test (Cash & Eq+ST securities+Net Receivables)/Current Liabilities 82.42% 89.25% 122.08% 145.58% 170.03% 198.69% 225.03% 254.45%
Cash Ratio Cash & Eq/Current Liabilities 21.82% 26.20% 25.93% 53.83% 81.59% 111.69% 141.28% 173.21%
Activity or Asset-Management Ratios
Receivables Turnover (days) 365/(Net Sales/Net Receivables) 54.48 47.89 49.92 50.76 50.76 50.76 50.76 50.76
Inventory Turnover (days) Total COGS/Inventories 6.88 6.22 5.93 6.26 6.28 6.28 6.29 6.30
Fixed Asset Turnover Net Sales/Net PP&E 8.84 10.29 7.93 8.04 8.16 8.08 8.11 8.19
Total Asset Turnover Net Sales/Total Assets 0.79 0.80 0.67 0.65 0.64 0.61 0.59 0.57
Financial Leverage Ratios
Debt/Equity (Commercial Paper+Current Portion LT Debt+LT Debt)/Total Shareholders Equity 31.64% 54.01% 67.86% 65.90% 58.11% 51.00% 44.79% 39.40%
Interest Coverage EBITA/-Interest Expense 136.33 96.82 40.34 34.41 33.04 33.78 35.38 37.57
Debt Ratio Total Liabilities/Total Assets 51.89% 58.91% 60.13% 59.20% 57.04% 54.48% 52.03% 49.71%
Equity Multiplier Total Assets/Total Equity 2.08 2.43 2.51 2.45 2.33 2.20 2.08 1.99
Profitability Ratios
Gross Margin Gross Profit/Net Sales 38.60% 40.37% 38.73% 38.43% 38.64% 38.60% 38.68% 38.82%
Operating Margin EBITA/Net Sales 28.71% 30.68% 27.42% 28.14% 28.34% 28.31% 28.39% 28.52%
ROA Net Income/((Previous Total Assets+Current Total Assets)/2)) 19.75% 21.74% 16.41% 16.14% 15.90% 15.17% 14.71% 14.37%
ROE Net Income/Beg. Total Shareholders Equity 35.08% 50.89% 42.09% 42.64% 41.17% 37.20% 34.19% 31.83%
Payout Policy Ratios
Dividend Payout Cash Dividend Per Share/Earnings Per Share 18.44% 21.56% 21.15% 20.82% 21.24% 21.35% 21.21% NA
EPS Net Income/Shares Outstanding 7.12 9.87 9.18 10.31 11.54 12.47 13.67 15.16
Dividend Coverage Earnings Per Share/Cash Dividends Per Share 3.91 4.98 4.21 4.29 4.36 4.27 4.25 4.28
Apple, Inc.
Calculations and Schedules

Fiscal Years Ending January 31 2017E 2018E 2019E 2020E 2021E

LT Debt:
Beginning Debt 75,427 86,671 89,677 92,272 95,297
(Repayment) (3,500) (6,500) (6,834) (6,454) (7,750)
Issuance 14,744 9,506 9,429 9,479 11,322
Ending Debt 86,671 89,677 92,272 95,297 98,870
Interest Expense on Long Term Debt 1,704 1,958 2,026 2,085 2,153

PPE:
Beginning PPE 27,010 28,709 30,912 33,017 35,375
(Depreciation) (11,711) (12,448) (13,403) (14,316) (15,338)
CapEx 13,410 14,650 15,508 16,674 18,195
Ending PPE 28,709 30,912 33,017 35,375 38,233

Purchased Intangibles:
Beginning Intangibles 3,206 2,944 2,703 2,482 2,279
(Amortization) (1,003) (921) (846) (777) (713)
Purchases 741 680 625 574 527
Ending Intangibles 2,944 2,703 2,482 2,279 2,092

Commercial Paper
Beginning 8,105 9,063 9,313 9,636 9,915
Issuance (repayment) 958 250 323 279 325
Ending 9,063 9,313 9,636 9,915 10,240
Interest Expense on Commercial Paper 183 205 210 218 224
Apple, Inc.
Value Driver Estimation

Fiscal Years Ending January 31 2014 2015 2016 2017E 2018E 2019E 2020E 2021E
Marginal Tax Rate:
Federal statutory tax rate 35% 35% 35% 35% 35% 35% 35% 35%
State tax rate, net federal effect 1% 1% 1% 1% 1% 1% 1% 1%
Indfinitely invested earnings of foerign subsidiaries -9% -9% -9% -9% -9% -9% -9% -9%
Marginal Tax Rate: 27% 27% 27% 27% 27% 27% 27% 27%
NOPLAT Calcuation:
EBITA:
Net Sales 182,346.00 231,283.00 214,224.00 230,773.71 252,110.94 266,866.09 286,939.34 313,115.91
-COGS (excl. D&A) 104,017.00 126,664.00 120,741.00 142,079.77 154,695.52 163,846.42 175,942.39 191,575.41
-D&A related to PP&E 6,863.00 10,010.00 9,031.00 11,711.19 12,447.97 13,402.92 14,315.58 15,338.29
-Amortization of purchased intangibles (total) 1,083.00 1,247.00 1,474.00 1,003.31 921.23 845.86 776.66 713.11
-SG&A Expenses 11,993.00 14,329.00 14,194.00 14,922.04 16,301.72 17,255.80 18,553.76 20,246.36
-Research & development expenses 6,041.00 8,067.00 10,045.00 8,838.54 9,655.75 10,220.87 10,989.67 11,992.22
+Implied Interest on Operating Leases 458.83 473.69 626.94 760.62 708.88 757.15 811.24 876.76
EBITA 52,807.83 71,439.69 59,365.94 52,979.49 58,797.61 62,051.37 67,172.53 74,127.27
Less Adjusted Taxes:
Provision for Income Taxes 14,263.40 19,303.00 15,916.01 14,203.80 15,763.64 16,635.97 18,008.96 19,873.52
+Tax Shield on Interest Expense 103.72 198.06 390.35 505.97 579.87 599.60 617.27 637.29
+Tax Shield on Implied Interest on Operating Lease 127.94 169.40 203.92 190.05 202.99 217.49 235.06 251.44
-Tax on interest (or investment) Income 484.83 789.25 1,072.13 1,564.44 1,665.65 1,777.89 1,899.94 2,041.33
Total Adjusted Taxes: 14,085.05 19,053.86 15,414.03 13,335.38 14,880.85 15,675.18 16,961.35 18,720.91

Plus Change in Deferred Taxes:

Def Tax Liability 20,259 24,062 26,019 29,982 34,316 38,907 43,857 49,274
Def Tax Assets 4,318 5,546 - - - - - -
Change in Deferred Taxes: 2,905 2,575 7,503 3,963 4,334 4,591 4,950 5,418
NOPLAT: EBITA - Adjusted Taxes + Change in DT 41,628 54,961 51,455 43,607 48,251 50,967 55,161 60,824
Invested Capital Calculation
Net Operating Working Capital:
+Normal Cash 12,563 15,935 14,759 15,900 17,370 18,386 19,769 21,573
+Accounts & Vendor Receivables 27,219 30,343 29,299 32,096 35,063 37,115 39,907 43,547
+Inventory 2,111 2,349 2,132 2,437 2,663 2,819 3,031 3,307
+Other Operating Current Assets 9,806 9,539 8,283 10,284 11,235 11,892 12,787 13,953
-Accounts Payable 30,196 35,490 37,294 37,934 41,442 43,867 47,167 51,469
-Accrued Expenses 18,453 25,181 22,027 24,069 26,295 27,834 29,927 32,657
-Deferred Revenue 8,491 8,940 8,080 8,812 9,627 10,190 10,957 11,957
Net Opperating Working Capital: (5,441) (11,445) (12,928) (10,099) (11,033) (11,679) (12,557) (13,703)
+Net PPE 20,624 22,471 27,010 28,709 30,912 33,017 35,375 38,233
+Capitalized PV of Operating Leases 4,513 5,644 6,866 6,931 7,462 7,970 8,540 9,230
+Other Long Term Operating Assets 3,764 5,556 8,757 9,524 9,892 10,091 10,461 11,020
-Other Long Term Operating Liabilities 7,598 12,989 12,985 14,218 15,533 16,442 17,678 19,291
Invested Capital 15,862 9,237 16,721 20,847 21,700 22,958 24,140 25,489
Value Drivers:
ROIC 244.0% 346.5% 557.1% 260.8% 231.5% 234.9% 240.3% 252.0%
EP 40,052 53,496 50,602 42,062 46,325 48,963 53,040 58,594
FCF 40,428 48,335 58,939 47,732 49,104 52,225 56,343 62,173
Present Value of Operating Lease Obligations (2016) Present Value of Operating Lease Obligations (2015) Present Value of Operating Lease Obligations (2014)

Operating Operating Operating

Fiscal Years Ending January 31 Leases Fiscal Years Ending January 31 Leases Fiscal Years Ending January 31 Leases
2017 929 2016 772 2015 662
2018 919 2017 774 2016 676
2019 915 2018 744 2017 645
2020 889 2019 715 2018 593
2021 836 2020 674 2019 534
Thereafter 3139 Thereafter 2592 Thereafter 1877
Total Minimum Payments 7627 Total Minimum Payments 6271 Total Minimum Payments 4987
Less: Interest 761 Less: Interest 627 Less: Interest 474
PV of Minimum Payments 6866 PV of Minimum Payments 5644 PV of Minimum Payments 4513

Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases

Pre-Tax Cost of Debt 2.26% Pre-Tax Cost of Debt 2.26% Pre-Tax Cost of Debt 2.26%
Number Years Implied by Year 6 Payment 3.8 Number Years Implied by Year 6 Payment 3.8 Number Years Implied by Year 6 Payment 3.5

Lease PV Lease Lease PV Lease Lease PV Lease

Year Commitment Payment Year Commitment Payment Year Commitment Payment
1 929 908.5 1 772 754.9 1 662 647.4
2 919 878.8 2 774 740.2 2 676 646.5
3 915 855.7 3 744 695.8 3 645 603.2
4 889 813.0 4 715 653.9 4 593 542.3
5 836 747.6 5 674 602.8 5 534 477.6
6 & beyond 836 2662.7 6 & beyond 674 2196.5 6 & beyond 534 1596.4
PV of Minimum Payments 6866.4 PV of Minimum Payments 5644.1 PV of Minimum Payments 4513.3
Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 0.91

Average Time to Maturity (years): 3.10
Expected Annual Number of Options Exercised: 0.29

Current Average Strike Price: $ 15.08

Cost of Equity: 10.18%
Current Stock Price: 141.83

2017E 2018E 2019E 2020E 2021E

Increase in Shares Outstanding: 0.29 0.29 0.29 0.03 0
Average Strike Price: $ 15.08 $ 15.08 $ 15.08 $ 15.08 $ -
Increase in Common Stock Account: 4.414 4.414 4.414 0.441 -

Change in Treasury Stock 24,000 20,000 18,000 16,000 14,000

Expected Price of Repurchased Shares: $ 141.83 $ 156.27 $ 172.17 $ 189.69 $ 209.00
Number of Shares Repurchased: 169 128 105 84 67

Shares Outstanding (beginning of the year) 5,471 5,306 5,182 5,082 4,998
Plus: Shares Issued Through ESOP 4.41 4.41 4.41 0.44 0
Less: Shares Repurchased in Treasury 169 128 105 84 67
Shares Outstanding (end of the year) 5,306 5,182 5,082 4,998 4,931
VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol AAPL

Current Stock Price 141.83
Risk Free Rate 3.02%
Current Dividend Yield 1.69%
Annualized St. Dev. of Stock Returns 18.94%

Average Average B-S Value

Range of Number Exercise Remaining Option of Options
Outstanding Options of Shares Price Life (yrs) Price Granted
Range 1 0.91 15.08 3.10 $ 120.84 $ 110
Total 0.91 $ 15.08 3.10 $ 128.10 $ 109.64