Apple Inc Financial Plan
Apple Inc. is a multinational company that produces software, electronics, and accessories such as mobile phones, tablets, and computers.
Why is funding required?
Funding is needed to facilitate the achievement of company goals. Such goals include maintaining an efficient supply chain, paying its short and long-term maturing obligations when they fall due, purchasing raw materials inventory, and paying operating expenses.
Sources of funding
Apple Inc. can consider crowdfunding which entails running a campaign on the Internet to raise funds. Further, the company should consider venture capital funding to raise funds from investing companies. Lastly, Apple Inc. can consider issuing new shares to the public through an Initial Public Offer (IPO), which will raise public funds.
Evaluation of funding sources
Crowdfunding will be expected to raise a total of $1,070,000 in a period of one year. Notably, individual investors will be limited in the amount of funding they can make to limit their influence on the company processes. On the other hand, the IPO will be raised through a stock-market listing in which the shares of the company will be traded publicly. Further, the need for venture capital is justified expertise and experience held by the management and the large market size served by the company from which many venture capitalists exist.
Risks associated with funding sources
Crowdfunding can damage a company’s reputation, especially when the projects that are funded fail. Further, crowdfunding has a higher vulnerability to hacker attacks and the risk of doubtful returns, fraud, and failure (Yasar, 2021). On the other hand, IPO funding has lower risk levels. However, the company will have to undertake lengthy and costly processes before getting the funding, making it inappropriate for the urgent need for funds. Lastly, venture capital has a high risk regarding managers failing to pull off the planned exit strategy. Notably, venture capital can lead the company to liquidity problems if a failure occurs in the undertaken projects.
Best funding option
Considering the three options for funding as analyzed above, the issue of new shares is the more appropriate option. Notably, this is justified by the fact that the option has a relatively lower risk than the others. Further, the company is not facing urgent needs for money and thus, it will have no problem in using lengthy means to offer new shares.
Cost of capital estimation
Considering the selected option is the issue of shares, the company’s cost of equity will represent the cost of capital and will be used for long-term funding. Notably, it is given by
Cost of the capital=Risk-free rate of return+ Beta of asset *(Expected return of the market-Risk-free rate of return)
= 2.86%+1.28*6%
=10.54%
| Year | 2019 | 2020 | 2021 |
| Weighted cost of | 7.69% | 8.06% | 8.88% |
| capital (WACC) |
Source: Gurufocus (2022)
Apples APR for funding
Source: NASDAQ (2022)
Estimated costs
| Year 1($) | Year 2($) | Year 3 ($) | |
| Direct costs | 230,000 | 240,000 | 260,000 |
| Capital expenditure | 500,000 | 500,000 | 500,000 |
| Marketing expense | 50,000 | 60,000 | 80,000 |
| Labor costs | 100,000 | 100,000 | 110,000 |
| Equipment | 400,000 | 400,000 | 420,000 |
| Inventory/supply costs | 300,000 | 350,000 | 400,000 |
| Total | 1,580,000 | 1,650,000 | 1,770,000 |
Budget provisions
| Year 1 ($) | Year 2($) | Year 3 ($) | |
| Opening balance | 0 | 350,000 | 730,000 |
| Total monthly expenses | 1,580,000 | 1,650,000 | 1,770,000 |
| Loan expense | 70,000 | 70,000 | 70,000 |
| Cash outflows | 1,650,000 | 1,720,000 | 1,840,000 |
| Cash inflows | 2,000,000 | 2,100,000 | 2,240,000 |
| Income | 350,000 | 380,000 | 400,000 |
| Closing balance | 350,000 | 730,000 | 1,130,000 |
Projected income statement
| Year 1 ($) | Year 2 ($) | Year ($) | |
| Revenues/sales | 2,000,000 | 2,100,000 | 2,240,000 |
| Less: Operating expenses | (1,580,000) | (1,650,000) | (1,770,000) |
| Operating income | 420,000 | 450,000 | 470,000 |
| Fewer expenses | (70,000) | (70,000) | (70,000) |
| Net revenues | 350,000 | 380,000 | 400,000 |
Assumption made:
- Economic conditions will remain constant, allowing businesses to thrive
- The company will have access to a long-term loan to support its operations
- Revenues will grow at approximately 8% per
References
GuruFocus. (2022). Apple WACC. https://www.gurufocus.com/term/wacc/NAS:AAPL/WACC-/Apple
NASDAQ. (2022). Apple Inc. Stocks. https://www.nasdaq.com/market-activity/stocks/aapl
Yasar, B. (2021). The new investment landscape: Equity crowdfunding. Central Bank Review, 21(1), 1-16.
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Question 
You, as the business manager, need to be able to determine larger sources of funding by creating a financial plan to help reduce duplication of resources, identify requirements and risks, and determine various financing options. Completing this planning is an important step for all businesses to take if they want to succeed. Larger companies may delegate this process to financial managers, financial analysts, or operations managers.
Apple Inc Financial Plan
You decide to create a financial plan for your company to help distinguish between sources, requirements, and risks associated with various types of long- and short-term financing capital structures that your company can potentially use in the future.
Assessment Deliverable
Draft a 3- to 4-page financial plan for your company. This plan should include sections for a business case and profit-and-loss statements. Include the following items:
- A business case that includes a description, type of business, and sources of funding
- Note: Use your Wk 5 Assessment Prep: Business Case Research assignment and feedback.
- A profit-and-loss statement for a 3-year period
- Project revenue. State realistic assumptions, such as growth per year, in your projections.
- Estimate direct costs, including capital, marketing, labor, and supply costs.
- A conclusion that includes an explanation of what working through a financial plan can do for a larger company
Cite references to support your assessment according to APA guidelines.
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