Valuation through Discounted Cash Flow using Weighted Average Cost of Capital and Adjusted Present Value, Apple Inc

Abstract

The objective of this research is to compare the valuation model through Discounted Cash Flow using the Weighted Average Cost of Capital (WACC) and the Adjusted Present Value Model (APV), in Apple Inc. in order to determine which of these methodologies is more appropriate, considering that most North American companies in the technology sector have high levels of indebtedness, but have prospects for sustained growth. The study is based on theories related to the valuation of companies, the Discounted Cash Flow model, the Adjusted Present Value (APV) model and the company Apple Inc. Methodologically, the research has a quantitative, documentary and descriptive approach with a bibliographic design. The information for the valuations is obtained from the websites morningstar.com and bloomberg.com. The results show that the valuation with the APV method is more favorable for the evaluated company. Therefore, it is concluded that tax shields add value to the company, since debt increases the financial cost, but reduces taxes by generating a lower calculation base; therefore, for companies with high indebtedness, it is more favorable for them to be valued using the APV method.