MBA643 Project Risk, Finance, and Monitoring Report for Apple Inc.

This MBA assignment report analyzes project selection, cost management, funding, implementation, and winding up for Apple Inc. Part A focuses on project risk management and provides recommendations. Part B conducts a capital budgeting analysis, including calculating Free Cash Flows (FCF) and Net Present Value (NPV) to determine whether Apple should invest in a project, and discusses the implications of funding via equity versus debt. The report also examines Apple's share price movements in 2019 and the reasons behind them. The analysis covers investment appraisal techniques, cost management strategies, and funding options, offering a comprehensive financial overview of Apple's project evaluation processes.

Running head: MBA ASSIGNMENT
MBA Assignment
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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Table of Contents
Executive Summary:........................................................................................................................2
Part A:..............................................................................................................................................2
i) Project Selection:..........................................................................................................................2
ii) Cost management:.......................................................................................................................3
iii) Funding:.....................................................................................................................................3
iv) Implementation and winding up:................................................................................................4
Conclusion and recommendations:..................................................................................................5
Part B:..............................................................................................................................................5
a. Indicting why do companies raise equity capital, while indicating what has happened to
Apple’s share price in 2019 and why has this happened:................................................................5
bi. Indicating the FCFs for this project:...........................................................................................7
bii. Calculating the NPV of the project:..........................................................................................8
biii. Depicting whether Apple should invest in the project with proper explanation:.....................9
biv. Indicating whether funding the project with ordinary shares is the cheapest way to finance
the business, while indicating what will happen if bond was used to finance the project:.............9
References and Bibliography:........................................................................................................10

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Executive Summary:
The relevant analysis has been conducted on the process of project selection, cost
management, funding, implementation and winding. The in-depth information about each of the
project measurement and selection process has been discussed, which can be used by companies
like Apple Inc. for improving their productivity and revenue generation capability.
Part A:
i) Project Selection:
The relevant ways in which organization such as appealing can used to adequately select
and determine the projects that should we take Undertaken or avoided. From the relevant
evaluation, it could be identified that investment appraisal techniques such as net present value,
internal rate of return, discounted payback period, profitability index, and equivalent annual
annuity can be used for identifying the viable investment option for Apple Inc. Investment
appraisal techniques are relatively able to identify the current financial value of the project by
effectively implementing the time value of money on the future cash inflows and outflows. the
comparison of the current cash flow conditions of the project with the future cash flows is
essential to understand the level of income and benefits that could be generated by Apple Inc. in
future use. Technology industry is based on futuristic assumptions and products, which need
relevant evaluation of customer demand and customer, need where the investment appraisal
techniques would be beneficial for identifying the financially viable project for the company
falling under the technology sector. Companies such as IBM, Samsung, and Canon uses

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investment appraisal techniques for determining the capability of their designated projects, which
intern improve their investment scope and uses losses incurred from time value of money
(Burtonshaw-Gunn 2017).
ii) Cost management:
The major role of Cost Management in a project is to identify all the relevant expenses
and cash outflows, which has been anticipated by the organization. Cost management is an
effective tool for reducing the level of expenses and maximizing the overall cash inflows of the
project. The major components or strategies that can be used by Apple Inc. are budget planning,
cost tracking, and time management, as it eventually helps in smoothing the process of project
competition. With the help of adequate budget planning, organizations are able to identify all the
relevant of expenses and resources that are needed by a particular project at a particular time,
which mainly reduces the damages that is conducted from excessive wastage of essential
resources. Moreover, with the help of cost tracking for the Apple Inc. can adequately detect all
the relevant details regarding the expenses incurred in each product and the segments in the
overall production process. Lastly, with the help of time management relevant task that is
essential for applying to complete can be adequately monitored. Hence, with the adequate cost
management tools Apple Inc. can boost the financial viability of a project and select the best
investment option that can improve their revenues in the long run (Sadgrove 2016).
iii) Funding:
Generally, there are two types of funding that is available to the organization for assisting
with the relevant projects. From the element analysis, it could be identified that companies like

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Apple Inc. can adequately acquire capital from both internal and external source. The internal
source comprises of funding from retained earnings, sale of assets, funds from family and
friends. Moreover, the external source funds that can be accumulated by companies like Apple
Inc. are bank loans, mortgage loans, share issue, overdraft, and bonds. Both internal and external
funding have their advantages and disadvantages that need to be taken into consideration before
opting for the adequate source of funds for supporting the future activities. Therefore, Apple Inc.
could adequately choose debt financing or equity financing, which is the external form of
finance, for gathering the relevant funds to support the new project. Using bonds, bank loan, or
Mortgage Loan would eventually allow Apple Inc. to acquire the required capital quickly, which
can help in commencing the project faster. However, the share issue process would eventually
need more time where relevant process needs to be conducted by the organization, which might
have negative impact on its share price valuation (Wu, Chen and Olson 2014).
iv) Implementation and winding up:
The major issue that needs to be evaluated before commencing a project is the validity of
all the relevant assumptions that has been made during the initial project selection stage. Without
adequate knowledge and resources, the anticipation of the future cash flows cannot be conducted
by an organization. Hence, it could be understood that without adequate research, if the project is
evaluated on the basis of investment appraisal techniques, the results are derived from the
analysis would bear no fruit. Thus, it is essential for identifying the relevant issues before
commencing a project as it might negatively affect the investment capital of the project. Project
selectively roundup after the completion of the tenure of the lifecycle where all the relevant
benefit that is generated from the project without out within the anticipated project life. moreover

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the resources of infrastructure construction also needs to be conducted by adequate Salvage
values are required after selling the relevant machinery all and that was purchased for the
purpose of the project. However, there are some environmental issues that is related to the end of
a project as it might reshape the overall structure of a landscape which was previously used for
some other productive purposes (Bowers and Khorakian 2014).
Conclusion and recommendations:
From the relevant evaluation, it can be detected that while investing organizations should
consider the above criteria’s or factors, as it helps in minimizing the level of damages that might
be incurred on their investment capital. Moreover, Apple Inc. should adequately utilize the
investment appraisal techniques for determining the risk levels that is present on a particular
project. Furthermore, with the help of adequate Cost Management strategies the risk attribute of
the project needs to be controlled and minimized, as it would directly affect the overall earnings
capability of the organization. Thus, with adequate evaluation of the project Apple Inc. could
directly detect the level of incomes that could be generated from a project.
Part B:
a. Indicting why do companies raise equity capital, while indicating what has happened to
Apple’s share price in 2019 and why has this happened:
The analysis of the Apple Inc. has mainly helped in detecting that there is no Share issue
plant by the organization during the upcoming years. The negative impact on the share price of
the organization is due to the anticipation of lower revenues during the financial quarter, as

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discounts are being imposed on the current products of Apple Inc. The decline in the overall
prices due to adequate discount and price cuts as a relatively initiate a warning for Apple's future
earnings that will be conducted in the holiday quarter. The discount of 20% across all iPhones is
a relatively reducing the overall revenues of the organization by more than $5 to $9 billion
dollars from the original forecasted values. This decline in anticipated revenue is directly
affecting share price of Apple Inc., as analyst reduce the target price for the stock due to low
earnings.
There are several reasons when an organization raises equity capital, as adequate level of
investment is to be conducted by the organization for ensuring high level of returns from
investment. Equity capital is directly required by the organization when high level of investments
are needed such as expansion improvement of production process and other capital requirements
that is needed by the organization. Equity capital is considered to be risky Endeavour as
organization can only acquire the capital from issuing shares. Moreover, the demand for the
company shares needs to be high for effectively completing the share issue and allowing the
organization to acquire the required sum from the equity capital.

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Figure 1: Share price movement of Apple Inc. in 2019
(Source: Finance.yahoo.com 2019)
The above figure directly provides information about the overall share price movement of
Apple Inc. during the financial year of 2019. From the element analysis, it could be identified
that the company share price has relatively increased new levels during the financial year.
During 2019 the share price of Apple Inc. relatively touched all low of $154.23, which was
tested during January of 2019. On the other hand, share price of Apple Inc. tested the highs
during main of 2019 where the values reached to the levels of $215.31. However, after May the
overall share price of the organization started to decline to new lows where the current share
price is at the levels of $175.07. Hence, analyzing the share price trend of the organization has
directly indicated that the company has adequately provided higher returns over the period of
2019. Nevertheless, due to declining sales revenue the overall share price of the company has
relatively reduced to new lows, while it might continue to decline in near future.
bi. Indicating the FCFs for this project:
Particulars 0 1 to 3 4
∆NR 54,00,000 18,00,000
∆OpEx 10,80,000 3,60,000
∆EBITDA 43,20,000 14,40,000
∆D&A 22,50,000 7,50,000
∆EBIT 20,70,000 6,90,000
(1-t) 70.0% 70.00%
∆NOPAT 14,49,000 4,83,000
∆D&A 22,50,000 7,50,000
∆CFO 36,99,000 12,33,000
∆CapEx -50,00,000
Working Cap -30,000 30,000
Salvage 20,00,000

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Value
∆FCF -50,30,000 36,99,000 32,63,000
The above table provides information about the overall free cash flow of the project that
has been evaluated for Apple Inc. the above table directly value with the overall income
operating expenditure depreciation and capital investment to determine the level of free cash
flow that will be generated from the project. The analysis has also indicated that other values are
also evaluated to determine the level of cash flows that will be generated from the overall
project. Hence, from the valuation it could be identified that the overall initial investment is at
the levels of $5.03 million, file cash inflows during you first three years at the levels of $3.699
million and 3.263 million at year 4. Therefore, the free cash flows of the project can be used for
further analyzing the financial viability of the investment (Hazır 2015).
bii. Calculating the NPV of the project:
Years FCF Dis-rate Dis-cash flow
Year
0 -50,30,000 1.00 -50,30,000
Year
1 12,33,000 0.91 11,20,909
Year
2 12,33,000 0.83 10,19,008
Year
3 12,33,000 0.75 9,26,371
Year
4 32,63,000 0.68 22,28,673
NPV 2,64,961
The above table provides information about the net present value of the project, which
has been calculated to be at the levels of 264,961. The cost of capital of 10% has been used for

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deriving the discounted rate of present value of the overall future cash flows that would be
generated from the overall project. This analysis of net present value will directly help Apple
Inc. to identify the future cash inflows that might be generated by the project. Hence, utilization
of time value of money would eventually help apple in to identify the financial viability of the
project and detect whether investments would bear adequate returns from investment. Kerzner
(2017) indicated that with the help of investment appraisal techniques the organization is able to
segregate optimal investment options with non-viable investments.
biii. Depicting whether Apple should invest in the project with proper explanation:
From the relevant analysis, it could be identified that the overall project is financially
viable, which could eventually help in generating high level of income from investment.
biv. Indicating whether funding the project with ordinary shares is the cheapest way to
finance the business, while indicating what will happen if bond was used to finance the
project:
Equity financing is not the cheapest way to finance the business, the capital cost needs to
be low, which might eventually help in reducing the cash outflow and maximizing the level of
retained earnings for the organization. The use of bonds would directly reflect the overall bond
rate as the costs of capital, which will eventually alter the NPV of the project. Thus, if the cost of
debt is higher than 12% then the project will not be viable, whereas within the confinements the
project will be selected.

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References and Bibliography:
Adrian, T., Covitz, D. and Liang, N., 2015. Financial stability monitoring. Annual Review of
Financial Economics, 7, pp.357-395.
Angeloni, I., Faia, E. and Duca, M.L., 2015. Monetary policy and risk taking. Journal of
Economic Dynamics and Control, 52, pp.285-307.
Ben-Amar, W., Chang, M. and McIlkenny, P., 2017. Board gender diversity and corporate
response to sustainability initiatives: evidence from the Carbon Disclosure Project. Journal of
Business Ethics, 142(2), pp.369-383.
Bowers, J. and Khorakian, A., 2014. Integrating risk management in the innovation
project. European Journal of innovation management, 17(1), pp.25-40.
Burtonshaw-Gunn, S.A., 2017. Risk and financial management in construction. Routledge.
Cagliano, A.C., Grimaldi, S. and Rafele, C., 2015. Choosing project risk management
techniques. A theoretical framework. Journal of Risk Research, 18(2), pp.232-248.
Danthine, J.P. and Donaldson, J.B., 2014. Intermediate financial theory. academic press.
Finance.yahoo.com. 2019. Yahoo is now part of Oath. [online] Available at:
https://finance.yahoo.com/quote/AAPL?p=AAPL [Accessed 2 Jun. 2019].

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Gelb, A., Tordo, S., Halland, H., Arfaa, N. and Smith, G., 2014. Sovereign wealth funds and
long-term development finance: risks and opportunities. The World Bank.
Hall, M., Mikes, A. and Millo, Y., 2015. How do risk managers become influential? A field
study of toolmaking in two financial institutions. Management Accounting Research, 26, pp.3-
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Hazır, Ö., 2015. A review of analytical models, approaches and decision support tools in project
monitoring and control. International Journal of Project Management, 33(4), pp.808-815.
Hopkin, P., 2018. Fundamentals of risk management: understanding, evaluating and
implementing effective risk management. Kogan Page Publishers.
Kerzner, H., 2017. Project management metrics, KPIs, and dashboards: a guide to measuring
and monitoring project performance. John Wiley & Sons.
Sadgrove, K., 2016. The complete guide to business risk management. Routledge.
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.
Wu, D.D., Chen, S.H. and Olson, D.L., 2014. Business intelligence in risk management: Some
recent progresses. Information Sciences, 256, pp.1-7.