Apple Inc Financial Plan
A worldwide corporation, Apple Inc., creates software, gadgets, and accessories for computers, tablets, and cell phones.
Why is the financing necessary?
Funding is required to make it easier for the company to realize its aims. These objectives include preserving a productive supply chain, meeting all short- and long-term maturing commitments when they become due, stockpiling raw resources, and covering operating costs.
Financing sources
Apple Inc. may consider using crowdfunding, which comprises launching an online fundraising campaign. The business should also think about venture capital fundraising to raise money from investing firms. Finally, Apple Inc. may consider making fresh shares available to the public through an Initial Public Offer (IPO), which will raise money from the general public.
A review of the financial options
It is anticipated that crowdfunding will raise $1,070,000 annually. Notably, the amount of funding private investors may contribute will be restricted to reduce their ability to influence business operations. Conversely, the IPO will be funded through a stock market listing in which the company’s shares would be sold openly. Additionally, the management’s knowledge and experience, the company’s extensive market reach, and the numerous venture capitalists’ existence support the need for venture capital.
Risk factors for financing sources
Crowdfunding can harm a company’s reputation, particularly if the funded projects are unsuccessful. Additionally, crowdfunding is more susceptible to hacker attacks and carries a higher risk of fraud, shady returns, and failure (Yasar, 2021). Funding for initial public offerings, however, carries less risk. However, for the company to receive the funding, it will have to go through time-consuming and expensive procedures, which makes it inappropriate for the urgent need for funds. Finally, a significant risk associated with venture capital is that managers must execute the intended exit strategy. Notably, venture capital can cause the company to experience liquidity issues if the projects it has taken on fail.
The best source of money
The issuance of new shares is the better choice when comparing the three funding choices as previously examined. Notably, the option’s relative lack of risk compared to the others justifies this. Furthermore, the company has no immediate financial needs, so it can use time-consuming methods to issue new shares.
Estimating capital costs
Given that the option chosen is the issuance of shares, the cost of equity for the business will serve as the cost of capital and be used for long-term financing. It is particularly provided by
The cost of capital equals the risk-free rate of return plus the beta of the asset *(expected return of the market minus risk-free rate of return).
= 2.86%+1.28*6%
=10.54%
| Year | 2019 | 2020 | 2021 |
| Weighted cost of | 7.69% | 8.06% | 8.88% |
| capital (WACC) |
Source: Gurufocus (2022)
Apples 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 |
| Fewer expenses | (70,000) | (70,000) | (70,000) |
| Net revenues | 350,000 | 380,000 | 400,000 |
Assumption 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
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 
You, as the business manager, need to be able to determine larger sources of funding by creating a financial plan to help reduce duplication of resources, identify requirements and risks, and determine various financing options. Completing this planning is an important step for all businesses to take if they want to succeed. Larger companies may delegate this process to financial managers, financial analysts, or operations managers.
Apple Inc Financial Plan
You decide to create a financial plan for your company to help distinguish between sources, requirements, and risks associated with various types of long- and short-term financing capital structures that your company can potentially use in the future.
Assessment Deliverable
Draft a 3- to 4-page financial plan for your company. This plan should include sections for a business case and profit-and-loss statements. Include the following items:
- A business case that includes a description, type of business, and sources of funding
- Note: Use your Wk 5 Assessment Prep: Business Case Research assignment and feedback.
- A profit-and-loss statement for a 3-year period
- Project revenue. State realistic assumptions, such as growth per year, in your projections.
- Estimate direct costs, including capital, marketing, labor, and supply costs.
- A conclusion that includes an explanation of what working through a financial plan can do for a larger company
Cite references to support your assessment according to APA guidelines.
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