Financial Plan-Apple Inc

Apple Inc. is a multinational company that produces software, electronics, and accessories such as mobile phones, tablets, and computers.

Why Funding Is 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 $1,070,000 in 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 by the 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 funded projects fail. Further, crowdfunding is more vulnerable 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 financing, making it inappropriate for urgent funds. Lastly, venture capital has a high risk of 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.

The 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 because the option has a relatively lower risk than the others. Further, the company is not facing urgent money needs, and thus, it will have no problem 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 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 capital (WACC)	7.69%	8.06%	8.88%

Source: Gurufocus (2022)

Apple’s 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
Less: Expenses	(70,000)	(70,000)	(70,000)
Net revenues	350,000	380,000	400,000

Assumptions 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 year.

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

Prepare a financial plan for the Fortune 500 Company selected in week two. (Apple, Inc.)
Describe the organization, including the type of business.

Financial Plan-Apple Inc

Create the business case.

Determine why funding is needed for the company.
Determine the sources of funding. Consider self-funding, borrowing, loans, equity, venture capital, etc.
Evaluate the requirements of each of the funding sources that you plan to use.
Analyze the risks that are associated with each funding source.
Decide which sources are the best fit for your company based on the requirements of each. Justify your decision.
Estimate the cost of capital for both short-term and long-term funding sources. Research current estimated APRs for your selected sources of funding. Create a table or chart to display this information.

Estimate direct costs, including capital, marketing, labor, equipment, and inventory/supply costs.

Prepare a budget that includes starting balances, monthly costs, loan/investment payments, cash flow projections, and required revenue.

Create a profit-and-loss statement for a 3-year period. Provide a revenue forecast, stating realistic assumptions, such as growth per year, in your projections.

Cite references to support your assignment.

Financial Plan-Apple Inc