MBA643: Project Risk, Finance, and Capital Budgeting Analysis of Apple

This report provides a comprehensive analysis of project risk management, focusing on Apple Inc. The report begins with an executive summary and then delves into key areas such as project selection, cost management, and funding options. It examines Apple's strategies for selecting projects using benefit measurement and constrained optimization, as well as its approaches to cost control. The report also explores various funding measures available to Apple, including personal investment and venture capital. Furthermore, it addresses implementation and winding-up considerations for projects, including potential issues and legal requirements. Part B of the report conducts a capital budgeting analysis, examining equity capital, reasons for raising equity, Apple's share prices in 2019, FCFS, and NPV of a proposed project, with recommendations provided throughout. The report offers insights into the financial aspects of Apple's operations and provides valuable recommendations for managing project risks and making informed financial decisions. The report uses tools like Gantt charts and PERT to assess project timelines and uses NPV to evaluate the financial viability of projects.

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Project Risk, Finance and Monitoring
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date
Executive summary

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This report provides recommendations on project risk management. In addition, the paper makes
an analysis for Apple Corporation. The report indicates that project selection is always an
important element that every business should look at before starting its operations. Also, the
paper illustrates that project cost management plays an important role in determining the
organization’s budget. Further, the reports assert that for Apple to funds is proposed new
projects, it should consider various funding options or measures available such as personal
investment. In brief, the report provides various risk management recommendations to Apple
Corporation
Table of Contents

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Executive summary...............................................................................................................................2
Table of Contents...................................................................................................................................3
PART A..................................................................................................................................................4
Introduction...........................................................................................................................................4
Project selection.....................................................................................................................................4
Cost management..................................................................................................................................5
Funding..................................................................................................................................................6
Implementation and winding up...........................................................................................................6
PART B..................................................................................................................................................7
Equity capital on the issue....................................................................................................................7
Reasons for raising equity capital........................................................................................................7
Apple share prices in 2019....................................................................................................................8
FCFS of the project.............................................................................................................................10
NPV of the project...............................................................................................................................10
Conclusion............................................................................................................................................11

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PART A
Introduction
For the purpose of this paper, we shall make a report assessing the project key
management of a given technology company. The selected company to be evaluated in this paper
is Apple Inc. The company is an American based multinational technology with headquarters in
California, and Cupertino that develops designs and sells its product to consumers. The company
products and services include electronic, online services and computer software. The company is
considered among the top four technology companies across the world such as Facebook,
Google, and Amazon. The company was selected because it deals with IT related services and
products. The report will provide various recommendations on various topics such as project
selection, cost management, funding, and implementation and windup. Also, the report is aimed
at conducting a capital budget analysis for Apple Corporation. Therefore, the paper will basically
focus on two major aspects, that is to say, capital budget analysis and project risk
recommendations for the organization (Foroohar 2016).
Project selection
Project selection is always an important element that every business should look at before
starting its operations. Projects are always categorized into two that is to say; organization
project and business need a project. In order for Apple to determine the type of the project to
undertake and what ones to avoid it should follow a formal procedure used in selectingthe
projects so as to use the limited organizational resources. In this case, Apple should use these
two major processes, that is to say, benefit measurement and Constrained Optimization process.
While using benefit measurement, the company will be well assured of its integrated change
projects and programs which will be implemented by the organization members with a major

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focus of attaining benefits. This method involves analysis, consolidation, and collection of
different categories of data so as to determine if the organization stakeholders are in the position
to attain the expected benefits (Greenberg 2015). By doing so, the organization will be in the
position to understand the project that it should avoid or undertake.
On the other hand, constrained Optimization involves solving an organization’s problems
where the members seek to maximize or minimize the real function of the project by
systematically selecting the purposes of integer or real variables that lie within a given set
(Górecki 2018). This method involves finding the "best available" figures of the objective
function contained in a given domain with different categories of functional objectives and
different domains. With the help of the scalar, Apple could be in the position to determine the
best project to select and avoid. In this case, the tools, measures, and practices available to the
project analysts in Apple are Ghant chart (used to illustrate the project tasks on the calendar),
PERT (used as a control and planning element for controlling and defining the tasks that are
required complete the organization's project), and determine the critical path of the project
(Taylor 2016).
Cost management
For my chosen company, project cost management plays an important role in determining
the organization’s budget that is required to implement the project by controlling and monitoring
the costs of the project so as to meet the estimated budget. Project cost management is important
in determining the costs of the organization resources that are required to complete given project
activities. Apple should adopt the following approaches or strategies in order to effectively
manage project cots, that is to say, budget determination, spending control, and cost estimation
(Heisler 2017).

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Funding
For Apple to funds is proposed new projects, it should consider various funding options
or measures available such as personal investment, this is always the first funding that every
organization should always look at before starting any project. Personal investment is either in
the form of an organization’s collateral or own cash on its assets. This helps the organization to
bankers and investors that it is ready to face risks. Another funding measure is Venture capital.
This is always concerned with technology-driven companies and businesses possessing high-
growth abilities in the information technology sector. This will help the organization to perform
its projects but at a higher risk (Vincent 2016).
Implementation and winding up
While commencing a project, there are always various issues that are associated that
Apple must consider, some of them include improper management of risks, ambiguous project
plans, poor communication, impossible deadline, resource deprivation, and many others. These
issues are very important to consider before commencing a project because they may result in
project failure. The issues affect both the project managers and the organization owners because
they may create losses to the business as a result of failure or increased funding. If the project
finishes, it needs to be continuously evaluated to determine the problems that might affect it
(Farivar 2014). In addition, it is supposed to be updated so as to continue meeting the changing
demands. Projects wound up as a result of various issues such as court order to wound up a
project, an extraordinary resolution passed by members that directs the meaner of the
organization to wind up a given project and a scheme coming to an end. Projects do not just
come to an end but various considerations are made such as project constitution and the

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Corporations Act. However, the project may also end as a result of environmental factors such as
Court order and government intervention (Orlowski & Andrew 2017).
PART B
Equity capital on the issue
The sources identified show a positive trend in the stock prices for apple on the stock
market. According to Gordon, (2019), the Apple stock prices are estimated to be having a
positive direction. He reports a +2.65% increase in the company's share prices on the stock
market. Additionally, the sources such approve such information with an added rise in the stock
prices for the company. The Apple stock prices are trading at 195.08 from the original $190.15
per share which represent about 2.66 percentage increase of the company's share price. All these
are signs of great ability to obtain equity capital on the issue. This type of information can act as
a reliable source for one to conclude that Apple has access to equity capital on the issue.
Reasons for raising equity capital
Equity capital can be simply defined as funds that are obtained from the sale of shares on
the stock market. This can reliably be done through what is known as an IPO especially for
companies that are trading on the stock market for their very first time. Companies, therefore,
require this equity capital for a number of reasons and these can are explained as follows;
One of the major reasons as to why companies raise equity capital is to meet the daily or
short term obligations (Banton, 2019). These can be in the form of clearing operating expenses
such as utilities, production costs among others. The equity capital, on the other hand, can also
be used as part of working capital for a firm in the short run. It is also therefore notable equity
capital can as well play a significant role in financing long term objectives. For instance, the
requirement by Apple to develop the new iPhone xi project would require the company to get

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access to equity capital. Since this is a long term project of four years, then equity capital would
have a significant role in developing such a new project for the company.
Additionally raising equity capital comes with a variety of advantages to the company in
most cases. Unlike through debt financing raising equity capital does not require the company to
pay monthly interest payments. The equity method of raising capital works more like a tradeoff
between the investor and the company. This is because the investor will buy a given number of
shares in the company at a specified price and the company, on the other hand, will get access to
cash or funds to run the business. The recommendation here is that Apple should as well utilize
the availability of capital form the stock market to sustain its projects.
Apple share prices in 2019
The apple share prices as projected in 2019 show rise in value. For example, the prices of
the company are recorded to be having between +2.66 to +2.65percentage increases (Spence
2018). This is a result of the $4.93 increase from the previously known $190.15 share price
(yahoo finance 2019). This means that each share of the company has been appreciating over the
period with such a relative percentage increase in value. The chart below is a representation of
the above information about Apple share prices on the stock market.

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Image obtained from
the NASDAQ website;
A number of reasons can be identified for such a rise in the company share prices. For
example, information plays a very significant role in the influencing a particular company shares.
Positive information is more likely to draw more investors towards buying the shares of that
particular company. Negative information, on the other hand, causes company share prices to
fall. For a company such as Apple, however, information has been of useful value. The
information leaks about the new APPLE xi has been one of the major factors for the rise in price
shares in 2019. Many investors currently have an idea about the possible profitability that the
company is expected to generate when the new gadget is launched on the market. This would
guarantee these investors with certainty that their investments are not subjected to high levels of
unfavorable risk. With the increased level of demand for the company shares, the prices as well
tend to rise higher hence creating the above trend of rising Apple share prices in 2019. Therefore,
one can recommend the company to maintain the trend in the market as it a sustainable way of
obtaining the necessary capital.

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FCFS of the project
In determining the FCFs of the new iPhone xi project of the company, a method known
as the Gantt chart and logarithm scheduling will be used. This method operates just like the FIFO
method, fcfs operates on the principle that the processes that come first are executed first.
Therefore, the fcfs of this project would be identified to include; carrying out research and
development about the new project, identifying sources of required capital to execute the project,
product idea generation. The product idea generation would include the specifications of the new
product or project. These processes, however, are not listed in a systematic order and this means
that the project manager will execute programs depending on the need at a particular period of
time.
NPV of the project
The project NPV is estimated to be -$5,465,418.40, the result is generated from the excel
calculation. According to the above result, the company should not invest in such a project with a
negative NPV. This is because the profitability of the project is far less than the costs involved in
developing such a project. Funding the project would however be relatively the cheaper as
compared to funding through debt. For instance, if the firm decided to borrow $5 million to
finance the project, it would be subjected to additional monthly or annual interest payments on
the bond or loan. This interest payment would depend upon the agreed interest rate. For example,
if the company obtained a bond of $5milion at an interest rate of 5%, then this would sum to an
entire cost of $6,077,531.25 at maturity. This is obtained from the formula given as fv = pv (
1
( 1+ r ) )n. financing the project through a bond would have an impact on the NPV of the project
(Lewis, 2019). This is because interest payments would have to be included as costs in the

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discounted cash flows of the project. These would ultimately reduce the present values of the
project at the end period.
Conclusion
Conclusively, the paper has provided a comprehensive analysis and overview of various
risk management recommendations to Apple Corporation. Further, FCFS of the project, NPV of
the project, Apple share prices in 2019, reasons for raising equity among others has also been
effectively discussed.

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References
Banton, C. 2019. What Is Equity Financing?. Retrieved from
Farivar, C. 2014. "Apple expands data encryption under iOS 8, making a handover to cops
moot". Ars Technica
Foroohar, R. 2016. ?
Gordon. K. 2019. Apple's 2019 iPhones May Pack Wifi 6. Retrieved from
https://www.forbes.com/sites/gordonkelly/2019/01/13/apple-iphone-11-upgrade-update-release-
date-price-cost-xr-xs-max/#344c5be52440
Górecki, J. 2018. "Big Data as a Project Risk Management Tool". . London: IntechOpen. pp. 27–
49. .
Greenberg, A. 2015. "Apple's latest selling point: how little it knows about you". Wired.
Heisler, Y. 2017. "Apple is expertly trolling Android users with its new iPhone ads". BGR.
Penske Media Corporation
Lewis. M.R. 2019. How to Calculate Bond Value. Retrieved from
https://www.wikihow.com/Calculate-Bond-Value
Orlowski, A. 2017. .
Spence. E., 2018.Apple Loop: Massive iPhone 11 Leaks, Tim Cook's Big Battery Problem,
iPhone XR Price Cuts. Retrieved from
https://www.forbes.com/sites/ewanspence/2019/01/18/apple-news-iphone-xr-iphone-11-price-
cut-new-leak-rumor-usbc-qualcomm-smart-battery-case/#1a867f9a1a8c