Project Risk, Finance & Monitoring

This document discusses the process of project selection, cost management, funding detection, and implementation methods in project risk, finance & monitoring. It also analyzes the share price performance of Apple Inc. and evaluates the free cash flow conditions and net present value of the project.

Running head: PROJECT RISK, FINANCE & MONITORING
Project Risk, Finance & Monitoring
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PROJECT RISK, FINANCE & MONITORING
Table of Contents
Executive Summary:........................................................................................................................2
Part A:..............................................................................................................................................2
i) Process of Project Selection:........................................................................................................2
ii) Method of Cost management:.....................................................................................................3
iii) Detecting the Funding’s:............................................................................................................3
iv) Identifying the implementation and winding up methods:.........................................................4
Conclusion and recommendations:..................................................................................................5
Part B:..............................................................................................................................................5
a. Analyzing the share price performance of Apple Inc. and detect whether the organization has
intention for an IPO:........................................................................................................................5
bi. Evaluating the free cash flow conditions of the project:............................................................7
bii. Net present value of the project:................................................................................................8
biii. Analyzing whether Apple Inc. should investment in the project:............................................9
biv. Detecting why ordinary shares are the cheapest way to finance the business and evaluate
performance of the company if bond was used to finance the project:...........................................9
References and Bibliography:........................................................................................................10

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Executive Summary:
The assessment aims in evaluating the process that can be used by the organization such
as Apple Inc. to improve their project selection method and adequately support their future
activities. Moreover, in the evaluation of all the relevant information has been conducted about
the project management conditions, which can be used by Apple Inc. to effectively improve its
project selection process and in turn increase their revenue generation capability.
Part A:
i) Process of Project Selection:
The project selection process needs to be activated for each and every organization, as it
eventually help them to select the adequate level of investment option that can support their
future endeavors. Therefore, Apple Inc. should relatively use adequate selection process for
adequately identifying the most appropriate investment option that can support its future growth
prospects. From the analysis, it could be identified that Apple Inc. should use investment
appraisal techniques such as profitability index, net present value, internal rate of return,
payback period and equivalent annual annuity formula for identifying the financial viability of a
project. The above investment appraisal techniques are relatively used by maximum of the
technological sector companies, as it help them to analyze and detect the most valuable
investment option that can support their revenue generation capability. The investment appraisal
techniques have been an adequate instrument in the selection process of development projects
that can allow companies to eradicate losses and generate higher revenue from operations. Major

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industries in the technological sector such as Canon and Samsung are relatively using the
investment appraisal techniques for supporting their project selection process as it helps in
segregating the viable investment options with non-viable ones (Lock 2018).
ii) Method of Cost management:
One of the best methods that are used by organizations in the current era is the cost
management techniques, which allows them to minimize the level of excessive expenses and
maximize the income that could be generated from operations. The cost management is relatively
related to methods such as time management, cost tracking, and budget planning, which is
essential for companies to effectively improve its productivity and reduce excessive damage on
their essential resources. Apple Inc. can adequately utilize the above-mentioned cost
management methods for managing the overall expenses of the project and identified all the
relevant resources that will be needed for commencing the project. Therefore, with the help of
adequate cost tracking measures Apple Inc. can detect the level of expenses that is required in a
particular project and select the best possible investment option, which might reduce the negative
impact on its financial capability. The time management process can also help Apple Inc. to
analyze the current operational capability of the project, which can be, improve for reducing the
efficiency and maximizing their level of productivity. Hence, the adoption of Cost Management
techniques would eventually allow Apple Inc. to improve the current functionality of the selected
project and maximize the income from investment (Avkiran, Ringle and Low 2018).

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iii) Detecting the Funding’s:
Majorly there are two types of financing that is needed by Companies associated with
technological sector, as it would eventually help in supporting the relevant projects that are
available for investment. The two types of financing that is available to organizations are equity
finance and debt Finance, which eventually allow the organization to acquire the required level
of investments that could support the future activities and projects. One of the major equity
financing is from equity share issue or preference shares issue that can be conducted by the
organizations to acquire the required funding for their projects. This type of funding will directly
require adequate planning and needs excessive time to support the public offering process and
the acquisition of relevant capital from the issue. The second major financing method that can be
used by Apple Inc. is by issuing debt, which is in form of bonds or bank loans that can be
gathered quickly than the share issue process. Thus, it can be identified that the equity financing
method is the most preferable in option for Apple Inc., as it would reduce the probability of
insolvency that might occur due to high level of accumulation by the organization (Hopkin
2018).
iv) Identifying the implementation and winding up methods:
From the relevant analysis, it could be identified that adequate validity of the overall
assumptions that has been made for the particular project needs to be evaluated by the
organization. This analysis of the assumption is essential as managers can manipulate the overall
project viability for securing their Investments for the company. The hands detecting the
implementation of the overall project would eventually allow Apple Inc. to identify the viability
of the investment and the assumptions that were made for future projections before initiating the

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project. The non-identification of adequate verification for the assumptions would directly
hamper the investment capital of the organization. The project is round up only after the
completion of the overall tenure of the investment, which is detected during the initial
stages. During this process the organization is able to sell all the properties and other components
of the project to gather all the relevant to Salvage value that can support the cash inflow of the
project. There is relatively low damage to the environment as after completion of the project the
company does not reshape the land and building, where only the machinery and other
components of the project is sold (Kumar, Jindal and Velaga 2018).
Conclusion and recommendations:
The above mentioned project selection process and other cost measurement process can
be used by Apple Inc., to improve their current operational capability and reduce the excessive
expenditure on unattended job activities. from the relative valuation it could be identified that in
Apple Inc. should use adequate investment appraisal techniques to identify the risk levels that is
involved in each project and make relevant decisions to support its future operations and growth
prospects.
Part B:
a. Analyzing the share price performance of Apple Inc. and detect whether the
organization has intention for an IPO:
The case study analysis has relatively revealed That share price decline of Apple Inc was
due to the reduction in its overall forecasted earnings, due to the use of discount to conduct

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relevant sales. Therefore, the management of Apple Inc. has no plan for issuing shares in the
capital market in near future, as a company has adequate capital to support its operations and
future endeavors. The drastic decline of share price was due to the deduction in anticipated
income by $9 billion to $5 billion. Due to the decline in the overall anticipated revenues the
analyst as a relatively reviewed the overall share price of Apple Inc. to be overvalued which will
be reduced to accommodate the decline in its overall revenue generation capability.
The organizations raise capital from equity only when they need extensive funds for
future development and progress, as it directly allow the management to acquire the required
level of funding’s to support their operations. However, the analysis has directly indicated that
share companies use the equity capital method for reducing their debt obligations and protect the
insolvency conditions.
Figure 1: Apple Inc. share price movement during 2019
(Source: Finance.yahoo.com 2019)

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The surprise performance of Apple Inc. can be identified from the above figure, which
directly indicates about the share price trend of the organization. From the relevant analysis, it
could be identified that the overall share price of the company has been increasing until May,
where rapid decline in share value is witnessed, due to the announcement of discounted products
sold in Apple Store to boost the level of sales for the last quarter. The information of discounted
product has relatively reduced the level of share price value of Apple Inc., from the levels of 210
to 173.30 in one month period. Thus, it could be anticipated that the share price of the
organization will further decline, due to the dissatisfaction of the investors regarding the
decisions made by the management.
bi. Evaluating the free cash flow conditions of the project:
Particulars 0 1 to 3 4
∆NR $ 54,00,000.0 $ 18,00,000.0
∆OpEx $ 10,80,000.0 $ 3,60,000.0
∆EBITDA $ 43,20,000.0 $ 14,40,000.0
∆D&A $ 22,50,000.0 $ 7,50,000.0
∆EBIT $ 20,70,000.0 $ 6,90,000.0
(1-t) $ 0.7 $ 0.7
∆NOPAT $ 14,49,000.0 $ 4,83,000.0
∆D&A $ 22,50,000.0 $ 7,50,000.0
∆CFO $ 36,99,000.0 $ 12,33,000.0
∆CapEx $ -50,00,000.0
Working Cap $ -30,000.0 $ 30,000.0
Salvage
Value $ 20,00,000.0
∆FCF $ -50,30,000.0 $ 36,99,000.0 $ 32,63,000.0
The free cash flow calculations are directly conducted in the above table, which helps in
understanding the level of income and expenses that would be incurred by the project of the

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period of four years. Moreover, the analysis has directly indicated that Investments in the project
work directly provide positive cash inflow of $ 3.699 million in first three years and $3.263
million at year 4. However, the analysis directly indicated that the overall initial investments that
is required for the project is relatively at the levels of $5.03 million. This directly suggests that
the overall income from the project is relatively higher in comparison to the initial investment
that has been conducted in year zero. Titarenko, Hasnaoui and Titarenko (2018) stated that with
the help of free cash flow organizations are able to use investment appraisal techniques for
detecting the financial viability of the project.
bii. Net present value of the project:
Years FCF Dis-rate Dis-cash flow
Year 0 $ -50,30,000.0 1.0 $ -50,30,000.0
Year 1 $ 12,33,000.0 0.9 $ 11,20,909.1
Year 2 $ 12,33,000.0 0.8 $ 10,19,008.3
Year 3 $ 12,33,000.0 0.8 $ 9,26,371.1
Year 4 $ 32,63,000.0 0.7 $ 22,28,672.9
NPV $ 2,64,961.4
The net present value has been calculated in the above table, which directly represents the
confinement of 10% cost of capital that has been taken into consideration for evaluating the
financial prospects of the project. From the relevant analysis, it could be identified that the
project is viable, as the NPV value is positive, which directly indicates that Apple Inc. can
adequately acquire the required level of revenues in the long run with the accommodation of the
project. The net present value has directly discounted all the future cash flows that would be

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presented by the project, as it help in projecting the overall present value of cash inflows which
is subtracted from the initial investment. In this context, Heldman (2018) stated that Investment
appraisal techniques directly allow companies to identify financial viability of a project by using
time value of money and comparing the present value of the future cash flows with the initial
investment.
biii. Analyzing whether Apple Inc. should investment in the project:
After analyzing the overall net present value and free cash flow of the project it could be
identified that Apple in should comments with the proposed project as it would eventually help
in generating high level of revenues in the long run. The relevant, analysis directly indicated that
the investment appraisal techniques and cash inflows of the proposed project a relatively
adequate, where the cash flows in future a relatively higher than the initial investment that will
be conducted by apple Inc. Hence, the management should commence with the project to
improve with productivity and profitability in the process.
biv. Detecting why ordinary shares are the cheapest way to finance the business and
evaluate performance of the company if bond was used to finance the project:
After analyzing the different forms of Finance that is conducted for a business it could be
identified that, equity financing is considered to be the cheapest finance that is provided to an
organization. With the help of equity financing, organizations are able to adequately acquire the
required level of capital without out increasing their commitment to provide adequate returns for
finance cost on yearly basis. Dividends are the only cost that is associated with equity financing,
which can be payable by the organization only if adequate profits are acquired during the

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financial year. Moreover, if bond Finance is used for Commencing the project then the overall
cost of capital can increase from 10%, where is it needs to be restricted within 12% as the project
will not be available after the restricted value.
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Avkiran, N.K., Ringle, C.M. and Low, R., 2018. Monitoring transmission of systemic risk:
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