Apple APV | Valurator

For informational and educational purposes only • Not investment advice.

Apple

iPhone, services, devices

Estimated Fair Value

$190.13

Stock price: $333.69

Fair value below stock price

APV estimates a company's fair value by separately valuing its operating business and the financing benefit from debt.

APV Value Composition

This chart shows the present value of projected operating cash flows, terminal value, and the financing benefit from the tax shield.

Key Valuation Metrics

Revenue Growth Rate

Time Horizon

Terminal Growth

Equity Risk Premium

Range: 2–10%

APV Formulas

Unlike a traditional DCF, APV values the operating business independently of financing decisions. The value created by debt financing—the tax shield—is calculated separately and then added to the operating value.

Free Cash Flow to the Firm

\text{FCFF} = \text{EBIT}\times(1-\text{Tax Rate}) + \text{Depreciation \& Amortization} - \text{Capital Expenditures} - \Delta\text{Working Capital}

Unlevered Firm Value

\text{Unlevered Firm Value} = \sum_{t=1}^{n} \frac{FCFF_t}{(1+r_U)^t} + \frac{TV}{(1+r_U)^n}

Terminal Value

\text{Terminal Value} = \frac{FCFF_{n+1}} {r_U-g}

Annual Tax Shield

\text{Tax Shield} = \text{Debt} \times r_D \times T

Adjusted Firm Value

\text{Adjusted Firm Value} = \text{Unlevered Firm Value} + \text{PV(Tax Shield)}

Fair Value per Share

\text{Fair Value Per Share} = \frac{ \text{Adjusted Firm Value} - \text{Net Debt} }{ \text{Shares Outstanding} }

What is Adjusted Present Value?

Adjusted Present Value (APV) estimates a company's intrinsic value by separating the value of its operating business from the value created by financing decisions.

The operating business is valued as if it were financed entirely with equity, while the financing benefit from debt is valued separately through the Interest Tax Shield.

The Unlevered Firm Value and the Present Value of the Interest Tax Shield are then combined to determine the Adjusted Firm Value.

How the APV Model Works

Adjusted Present Value separates operating value from financing value. The model first values the business as if it were entirely equity financed, then adds the present value of the debt tax shield, adjusts for net debt or net cash, and converts the result into fair value per share.

Forecast Revenue

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Estimate & Forecast FCFF

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Calculate Unlevered Cost

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Calculate Terminal Value

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Calculate Unlevered Firm Value

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Calculate Interest Tax Shield

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Adjusted Firm Value

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Fair Value Per Share

Key Model Assumptions

• Free Cash Flow to the Firm (FCFF) is projected over the selected Forecast Horizon.
• Starting Revenue and Free Cash Flow to the Firm (FCFF) use trailing twelve-month (TTM) values when available, with the latest annual values used as a fallback.
• The Base Revenue Growth Rate is derived from the company's historical Revenue Growth and adjusted according to the selected Revenue Growth scenario.
• Revenue Growth gradually converges toward the Terminal Growth Rate over the forecast period.
• The model uses the current FCFF Margin as its starting point and gradually converges toward a normalized FCFF Margin based on the median of up to the five most recent valid historical FCFF Margins.
• The operating business is valued as if it were financed entirely with equity, with projected FCFF discounted using the Unlevered Cost of Capital.
• The Risk-Free Rate is based on the U.S. 10-Year Treasury yield published by the Federal Reserve Board.
• The company is assumed to maintain approximately its current Debt level during the explicit forecast period.
• The Interest Tax Shield is estimated from Debt, Cost of Debt and the Tax Rate, and discounted using the Cost of Debt.
• Terminal Growth represents the company's sustainable long-term growth rate.

Step 1 — Forecast Revenue

Revenueₜ = Revenueₜ₋₁ × (1 + Growthₜ)

Year 1 Revenue = $466.8B × (1 + 13.1%) = $528.1B

Revenue Growth gradually converges toward the Terminal Growth Rate

13.1% → 2.5% over 10 years

Revenue Growth by Forecast Year

The model forecasts Apple's revenue over the explicit forecast period. The starting Revenue base is trailing twelve-month (TTM) Revenue of $466.8B.

The model then applies an initial revenue growth rate of 13.1%, estimated from historical growth and adjusted using the selected growth scenario. Revenue growth gradually converges toward the long-term terminal growth rate of 2.5%.

The projected growth rates are shown in the chart below, and the complete revenue forecast can be found in the APV Projection Table.

Step 2 — Estimate Free Cash Flow to the Firm

FCFF = EBIT × (1 − Tax Rate) + Depreciation & Amortization − Capital Expenditures − Change in Working Capital

Starting FCFF = Reported Free Cash Flow to the Firm = $112.9B

Free Cash Flow to the Firm represents the cash generated by the operating business that is available to both shareholders and lenders before financing costs.

For Apple, the model uses reported Free Cash Flow to the Firm of $112.9B as the starting operating cash flow.

Step 3 — Forecast Future Free Cash Flow to the Firm

FCFF Margin = Current FCFF / Current Revenue

$112.9B / $466.8B = 24.2%

Forecast FCFFₜ = Forecast Revenueₜ × Forecast FCFF Marginₜ

Year 1 FCFF = $528.1B × 24.2% = $127.7B

Forecast FCFF Margin = Current FCFF Margin → Normalized FCFF Margin

24.2% → 30.0% over 10 years

The model applies a projected FCFF Margin to each year's projected Revenue to estimate future Free Cash Flow to the Firm.

The model begins with the current FCFF Margin and gradually moves toward a normalized margin based on the median of up to the five most recent valid historical FCFF Margins. This helps reduce the impact of unusually high or low cash flow in a single year.

The complete year-by-year forecast, including projected revenue, FCFF Margin and Forecast FCFF, is shown in the APV Projection Table.

Step 4 — Calculate the Unlevered Cost of Capital

Unlevered Beta = Levered Beta / [1 + (1 − Tax Rate) × Debt / Equity]

Unlevered Beta = 1.17 / [1 + (1 − 17.3%) × $84.3B / $4901.0B] = 1.15

Unlevered Cost of Capital = Risk-Free Rate + Unlevered Beta × Equity Risk Premium

4.7% + 1.15 × 5.0% = 10.4%

APV values the operating business as if it were financed entirely with equity. The model therefore removes the effect of debt from Apple's reported Beta to estimate an Unlevered Beta, which reflects the risk of the company's operations.

The Unlevered Beta is then combined with the Risk-Free Rate and the selected Equity Risk Premium using CAPM to estimate an Unlevered Cost of Capital of 10.4%. This discount rate is used to value the operating business before the financing benefits of debt are added separately.

Step 5 — Calculate Terminal Value

Terminal Value = Final Forecast FCFF × (1 + Terminal Growth) / (Unlevered Cost of Capital − Terminal Growth)

$322.9B × (1 + 2.5%) / (10.4% − 2.5%) = $4183.3B

Present Value of Terminal Value = Terminal Value / (1 + Unlevered Cost of Capital)ⁿ

$4183.3B / (1 + 10.4%)¹⁰ = $1553.7B

Terminal Value captures the operating cash flows expected after the explicit 10-year forecast period.

The final forecast FCFF is grown at the Terminal Growth Rate and capitalized using the difference between the Unlevered Cost of Capital and Terminal Growth.

Because Terminal Value is measured at the end of the forecast period, it is discounted back to present value using the Unlevered Cost of Capital.

Step 6 — Calculate Unlevered Firm Value

Present Value of Forecast FCFF = Σ FCFFₜ / (1 + Unlevered Cost of Capital)ᵗ

Present Value of Forecast FCFF = $1246.2B

Unlevered Firm Value = Present Value of Forecast FCFF + Present Value of Terminal Value

$1246.2B + $1553.7B = $2799.9B

The operating business is valued independently of financing decisions. Each projected FCFF is discounted to present value using the Unlevered Cost of Capital.

Adding the Present Value of Forecast FCFF and the Present Value of the Terminal Value produces the Unlevered Firm Value.

Under the current assumptions, Apple's Unlevered Firm Value is $2799.9B.

The complete year-by-year forecast and discounting calculation can be reviewed in the APV Projection Table.

Step 7 — Calculate the Interest Tax Shield

Annual Interest Tax Shield = Debt × Cost of Debt × Tax Rate

$84.3B × 4.0% × 17.3% = $583.8M

Present Value of Interest Tax Shield = Present Value of Explicit Tax Shields + Present Value of Terminal Tax Shield

$4.7B + $9.9B = $14.6B

Explicit tax shields and the Terminal Tax Shield are discounted using the Cost of Debt.

APV values the financing benefit of debt separately from the operating business. Because interest expense is generally tax deductible, debt can reduce taxable income and create an Interest Tax Shield.

The model estimates the annual tax saving using Apple's Debt, Cost of Debt and effective Tax Rate. The model assumes that the current level of Debt remains constant throughout the explicit forecast period and continues into the terminal period. The tax shields generated during the explicit forecast period and after the forecast period are discounted using the Cost of Debt.

Under the current assumptions, the Present Value of the Interest Tax Shield contributes $14.6B to the company's valuation.

Step 8 — Combine Operating and Financing Value

Adjusted Firm Value = Unlevered Firm Value + Present Value of Interest Tax Shield

$2799.9B + $14.6B = $2814.5B

The Adjusted Firm Value combines the value of the operating business with the financing benefit created by debt.

The Unlevered Firm Value represents the operating business before financing effects, while the Present Value of the Interest Tax Shield represents the additional value created by debt financing.

Under the current assumptions, these components produce an Adjusted Firm Value of $2814.5B.

Step 9 — Calculate Fair Value Per Share

Equity Value = Adjusted Firm Value − Net Debt

$2814.5B − $21.9B = $2792.6B

Fair Value Per Share = Equity Value / Shares Outstanding

$2792.6B / 14.69B shares = $190.13

The final step converts the Adjusted Firm Value into the value attributable to common shareholders. The Adjusted Firm Value is adjusted for Net Debt or Net Cash to estimate Equity Value. Dividing Equity Value by Shares Outstanding produces an estimated Fair Value of $190.13 per share for Apple. If the Adjusted Firm Value does not produce a positive Equity Value after adjusting for Net Debt, the Fair Value per Share is shown as zero. Comparing the estimated Fair Value with the current market price shows whether the APV estimate is above, below or close to the current stock price under the selected assumptions.

APV Projection Table

The table shows the complete forecast used in the APV valuation, including projected Revenue, FCFF, Interest Tax Shields, Unlevered Firm Value, Adjusted Firm Value, Equity Value and Fair Value per Share.

Year	Revenue Growth	Revenue	FCFF Margin	FCFF	PV Operating FCFF	Interest Tax Shield	PV Tax Shield
Y1	13.1%	$528.1B	24.2%	$127.7B	$115.7B	$583.8M	$561.3M
Y2	12.7%	$595.4B	24.4%	$145.3B	$119.2B	$583.8M	$539.7M
Y3	12.0%	$667.0B	24.8%	$165.4B	$122.8B	$583.8M	$519.0M
Y4	11.1%	$741.0B	25.3%	$187.5B	$126.2B	$583.8M	$499.0M
Y5	10.0%	$815.0B	25.9%	$211.2B	$128.7B	$583.8M	$479.8M
Y6	8.7%	$886.1B	26.6%	$235.7B	$130.1B	$583.8M	$461.3M
Y7	7.3%	$951.2B	27.4%	$260.3B	$130.1B	$583.8M	$443.6M
Y8	5.8%	$1006.8B	28.2%	$283.8B	$128.5B	$583.8M	$426.5M
Y9	4.2%	$1049.3B	29.1%	$305.1B	$125.1B	$583.8M	$410.1M
Y10	2.5%	$1075.5B	30.0%	$322.9B	$119.9B	$583.8M	$394.4M
Total Present Value of Forecast FCFF					$1246.2B
Terminal Value	2.5%	$1102.4B	30.0%	$331.0B	$1553.7B	$14.6B	$9.9B
Terminal Value = $331.0B / (10.4% − 2.5%) = $4183.3B before being discounted back to $1553.7B.
Total Present Value of Interest Tax Shield PV Explicit Tax Shields + PV Terminal Tax Shield							$4.7B + $9.9B = $14.6B
Unlevered Firm Value PV Forecast FCFF + PV Terminal Value							$1246.2B + $1553.7B = $2799.9B
Adjusted Firm Value Unlevered Firm Value + Interest Tax Shield							$2799.9B + $14.6B = $2814.5B
Equity Value Adjusted Firm Value − Net Debt							$2814.5B − $21.9B = $2792.6B
Estimated Fair Value per Share = Equity Value / Shares Outstanding = $2792.6B / 14.69B shares = $190.13