This document discusses the method used by technology companies for project selection, cost management measures, funding options, and the implementation process. It includes a case study on Apple Inc. and provides recommendations for improving project selection and financial performance.
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Running head:PROJECT RISK, FINANCE, AND MONITORING Project Risk, Finance, and Monitoring Name of the Student: Name of the University: Author’s Note: Course ID:
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1 PROJECT RISK, FINANCE, AND MONITORING Table of Contents Executive Summary:........................................................................................................................2 Part A:..............................................................................................................................................2 Conclusion and recommendations:..................................................................................................5 Part B:..............................................................................................................................................5 Question a:.......................................................................................................................................5 Question bi):....................................................................................................................................7 Question bii:.....................................................................................................................................8 Question biii:...................................................................................................................................8 Question biv:....................................................................................................................................8 References list:.................................................................................................................................9
2 PROJECT RISK, FINANCE, AND MONITORING Executive Summary: The relevant analysis has been conducted on the procedure that could be used by companies falling under the technology industry. The evaluation has been conducted on the specific segments of the operations that need to be conducted by the technology company for ensuring the section of an adequate investment option. Part A: Analysing the method used by Technology Company by identifying the selection process: One of the major processes that need to be used by technology companies are the selection process, as it eventually helps in detecting the adequate projects, which could support the financial performance an organization. The evaluation is directly indicated that with the help of investment appraisal techniques such as payback period, internal rate of return, and net present value organizations are able to identify the financial viability of a project and determine the impact on its revenue generation capability. Technology companies for efficiently evaluating a project and the prospect it brings to the organization relatively use investment appraisal techniques (Burtonshaw-Gunn 2017). Therefore, Apple Inc. can efficiently utilize the investment appraisal techniques for detectingthefinancialperformanceofaproject.Thepaybackperioddirectlyprovides information about the overall time that will be taken by the project for accumulating the overall initial investment. From the analysis, it is detected that investments in the project would eventually help in determining the overall performance that will be generated by the project over
3 PROJECT RISK, FINANCE, AND MONITORING the period of time. With the help of internal rate of return, the managers are able to gather the information regarding the income of percentage of income that will be generated by the project over the period of time. Lastly, with the help of net present value project’s valuation is determined, which can eventually help in protecting the time value of future cash flows that is generated by the project. Evaluating the cost management measure that can be used companies falling under the technological sector: The different level of cost of management measures that is utilized by technology companies for effectively improving the financial viability of a project. The different measures that can be used by the organization effectively reducing the expenses that might be conducted on the completion of the project. Measures such as time tracking, time management and budget planning which can be used for effectively increasing the financial performance of the particular project. The future cash flows of the company is relatively evaluated on the measures of the above cost management system which eventually helps in improving the financial performance of the project and reducing any kind of excess of expenses that might be incurred over the timeline of the project (Tonchia 2018). Apple Inc. can utilize the cost management system to improve the efficiency of the selected projects. From the analysis it is determined that with the help of Cost Management overall financial performance of the project is improved by reducing the level of expenses that is entered in the process. Moreover, budgeting and time management would eventually help reduce the level of cost factors that is affecting the project financial perspective. Detecting the different level of funding that can be used by companies falling under the Technological sector:
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4 PROJECT RISK, FINANCE, AND MONITORING Technology Company uses two different types of financing measures that allows them to secure the level of operations over the period of time. Equity financing and debt financing are the relevant sources of finance that is used by companies to effectively commence the projects that is selected from the above process. Moreover, Equity financing is mainly used for big projects, which require hefty amount of Investments in the initial year. Moreover, the debt financing is directly utilized by the organization only when small projects are presented which can eventually help the organization to reduce the cost involved in equity financing and acquire the project efficiently without any hassle or excess expense on sources of finance. From the relevant evaluation, it could be identified that Apple Inc. can utilize equity financing for effectively securing the relevant amount for initiating the project. Jaipur Station can effectively utilize the equity financing conditions for effectively improving the current efficiency conditions of a project and produce any kind of risk involved in investment. However, it could be understood that equity financing will require additional expenses and time for gathering all the relevant findings for the overall project. Determining the process of implementation and winding up: There is a music concern regarding the prerequisite measures that is used by the organizationbeforeinitiatingtheoverallproject.Theresearchthatisconductedbythe organization needs to be evaluated for efficiency and reliability as it is the base on which the overallinvestmentappraisaltechniquesarebeingdeployedbytheorganization.Hence, authenticity of the data is required as it would directly affect the decision making process of the management on the basis of the results provided by the investment appraisal techniques. Therefore, it could be understood that detection of the research conducted for a particular project is crucial for an organization (Dorobantu, Müllner and Salomon 2018).
5 PROJECT RISK, FINANCE, AND MONITORING The winding up process directly includes different level of measures that needs to be conducted by the organization effectively closing the project after the completion of the tenure. This winding up process relatively leads to the selling process that needs to be conducted for particular machinery and other assets of the project, which help in determining its actual salvage value. The drastic impact on the environment after the project completion as the layout of the asset relatively changes due to the selling process of all the relevant machineries and other components used in the project. Conclusion and recommendations: The analysis of the above measures has directly indicated that Apple Inc. should use the appropriate investment appraisal techniques for improving their current project selection process. Hence, the process can allow Apple Inc. to minimize the risk involved in a project and increase the level of profits that might be generated from the process. Part B: Question a: The analysis as indicated that there is no possibility of any kind of share issue that the management of Apple Inc. after evaluating the overall case study will conduct it. Therefore, from the relevant analysis, it is determined that the overall anticipation of future revenues of Apple Inc. was reduced due to the implications of discounting measures used by the management to boost sales of their products during the last quarter of the Year. This is the main reason why the
6 PROJECT RISK, FINANCE, AND MONITORING shareholders unhappy and started to sell the shares to determine the actual value of the company in comparison to the current valuation of their forecasted revenues (Harris 2017). Equity financing is an adequate measure that is used by organization to support its future endeavors where it intends to increases the level of operations. The companies use equity financing to minimize the exposure to their insolvency conditions, which can be conducted by debt financing. Figure 1: Share price of Apple Inc. (Source: Finance.yahoo.com 2019) The share price of Apple Inc. has directly indicated about progress that has been made by the organization during the financial year of 2019. From the relevant analysis, it is determined that Share price of the organization started to increase from January itself and reached a peak of 210 during the month of May. Moreover, the report that was presented to the shareholders of Apple Inc. about the discount and the decline in revenues that would be included in the next
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7 PROJECT RISK, FINANCE, AND MONITORING quarter has resulted in the decline in its share price. This can be witness from May to June where share price of the company continuously declined from the levels of 210 to 175. The straight line was relatively held at the levels of 175 where after which the increment in share price started, while its current pricing is at the levels of 190.15. Question bi): The calculations in the above table have directly provided all the relevant cash inflows and outflows that will be generated by the project of the period of 4 years. From the relevant analysis, it is determined that the overall income of the project is relatively higher in comparison to the cash outflows that were conducted in the initial years. This determination is relatively helpfulinevaluatingtheinvestmentappraisaltechniques,whichalloworganizationsto understand the financial viability of a particular project (Lock 2018).
8 PROJECT RISK, FINANCE, AND MONITORING Question bii: The calculations also represented the overall net present value of the project, which is depicted in the above table. The positive NPV value has directly indicated Daddy project will provide higher returns in the long run and allowed the organization to increase its firm value. Question biii: After validating the projects financial viability and investment appraisal value it be identified that Apple Inc. should commence with the project, as it will increase revenues of the organization in the process. Question biv: There is no consideration regarding the detection of cheapest form of Financing that can be used by organizations to reduce their cost of capital. The lowest interest rate is considered to be the cheapest form of Finance, which can be provided by equity financing or debt financing. However, the NPV value of the project will be impacted if Bond financing was used, as relevant interest rates would alter the NPV, due to the finance cost involved particular source of finance (Weber, Alfen and Staub-Bisang 2016). However, the project will only be viable if the cost of debt is within 12% or else the project will be rejected.
9 PROJECT RISK, FINANCE, AND MONITORING References list: Burtonshaw-Gunn, S.A., 2017.Risk and financial management in construction. Routledge. Dorobantu, S., Müllner, J. and Salomon, R., 2018, July. Pricing Institutional Distance: Project Finance in Different Institutional Environments. InAcademy of Management Proceedings(Vol. 2018, No. 1, p. 17846). Briarcliff Manor, NY 10510: Academy of Management. Finance.yahoo.com.2019.YahooisnowpartofOath.[online]Availableat: https://finance.yahoo.com/quote/AAPL?p=AAPL [Accessed 10 Jun. 2019]. Harris, E., 2017.Strategic project risk appraisal and management. Routledge. Lock, D., 2018.The essentials of project management. Routledge. Tonchia,S.,2018.ProjectCostManagementandFinance.InIndustrialProject Management(pp. 153-170). Springer, Berlin, Heidelberg. Weber, B., Alfen, H.W. and Staub-Bisang, M., 2016.Infrastructure as an asset class: investment strategy, sustainability, project finance and PPP. John wiley & sons.