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:

1. Economic conditions will remain constant, allowing businesses to thrive
2. The company will have access to a long-term loan to support its operations
3. 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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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.

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.