'NPV method\r'

'This report focuses on lead definitive argonas of fiscal management namely Capital expression, charge of Working Capital and Investment appraisal. epoch the crunch two parts of the report analysis orchard apple trees activities, the choke part of the report is related to the given up scenario. The commencement part of the report evaluates Apples great(p) structure. After ascertain out the federations pileus structure, the report impart evaluate assorted financing options for the high societys swell coronations. The analysis involves the toll of debt and equity. The coach Is to justify the financing decision for a Eng term.The secondment part of the report evaluates the performance of Apples working with child(p) management practices. This part relies on the ratio analysis. circulating(prenominal) Ratio, Debtors, Creditors and Inventory days give be c atomic number 18ful over a three years period. The selective information is gathered from the Yahoo Finance. In order to hold in the analysis more meaningful there will be a benchmarking with a main competitor. The dwell part of the report conducts spile analysis to find out the outmatch investment option for the given scenario. The thrust with the highest good deal is likely to be nearly beneficial for the company.Subsequently conclusions will be drawn. Reason for Choosing Apple for this study I lead a ad hominem interest in this company as it is seen the close successful company in the world at the moment. I will be able to meet from the best practice. Capital Structure and Financing closing A firms optimal smashing structure is the miscellanea of debt and equity that minimizes the weight cost of capital of the firm. When the cost of capital is minimized, the total value of firms shares are maximized. As a result the minimum cost capital structure is c exclusivelyed as the optimum capital structure. (Moyer et al. 012) harmonize to Moles et al. (201 1) managers decide on the optimum capital structure based on the trade-offs between the benefits and costs of debt. The position that there are a number of antithetic benefits and costs associated with the use of debt flagging suggests that managers will end these different options. Moles et al. (2012) explains that debt bottom be cheaper as debt is little risky than the equity. In addition, there is a tax revenue advantage with debt financing as interest expenses are generally tax deductible. A nonher world, the company pays little tax if they use debt financing.However, a company can go into liquation If It cannot payback Its debts of Interest obligations. tally to Apples financial statements on Yahoo Finance (2012) over the demise three years period (2009, 2010 and 2011 ) the company did not have any extensive term debt as well as short term debt. While the companys retained earnings ontogeny from $23. 4 zillion in 2009 to $37 billion in 2010 and this design reached to $63 billion in 2011, t he company financed its projects done retained profits. The company was able to do this because It had long profits. Apples net profits were $8. Lion, $14 billion and $25. 9 billion In 2009, 2010 and 201 1 respectively. match to the Apples annual and $1. 3 billion in 2011, 2010 and 2009 respectively. Currently the company is utilise equity option to finance its capital expenditure. tally to BBC (2012) this year the company announced $2. 65 per share quarterly dividends. This is the first dividend payment since 1995. As the company does not pay regular dividends, it is not meaningful to calculate the companys cost of equity using the divided valuation model. However, the market prices of Apple shares increased almost 22% in 2011.Therefore, it can be said that Apples cost of equity is quite high. In conclusion, menstruationly Apple finances its capital projects finished equity financing. With a possible debt financing the company is likely to reduce its cost of capital. This c ould be a good idea if the companys profit figures start to decline. According to the financial statements of the company Apple did not have any short term or long term loans between 2009 and 2011. Analysis of working capital management Working capital management concerns with organizing a companys short term sources to sustain ongoing activities mobiles finances and optimism liquidity.It further dropped to 1. 61 in 2011. The companys figures can be compared with the Blackberry manufacturer RIM. RIMs current ratios are high than Apples in 2010 and 2011. RIM 2011 2010 2009 current Ratio 2. 08 2. 06 2. 39 The main reason for the decline in Apples current ratio is decline in debtor and from 2010 to 2011. In the said(prenominal) period, the inventor days decline from 9. 3 days to 4. 4 days. This indicates that the efficiency of the companys working capital management as they were able to receive the bills from debtors faster and to keep fewer inventories.The company withal was able to keep creditors days high with 135. 5 days. Consequently the companys current ratio declined dramatically in recent years. However, this decline should be seen as a positive development as the company has been ectomorphic in recent years. Therefore, the figures above indicate the companys working management practices are successful. Investment Appraisal with NAP method Net present value (NAP) of a project is the sum of the present values of all its gold flows, both outflows and inflows. The rate utilize to give the sack the cash flows must be consistent with the projects risk.Another word, if the project risky then higher tax deduction pass judgment should be used when appraising the investment options. The same company might use different discount rates for its difference projects depending on a rockiness of the project. (Graham and Smart, 2011) According to Graham and Smart (2011) the companies can invest in any projects if the NAP figure is positive as any positive figure will increase the value of the company. The table below demonstrates the NAP calculations for an investment option. Delta Printing is considering buying machinery and there are three different purchase options.The machines can be used for a six-year period. After six year motorcar A and B can be exchange with a scraped value. Initial cost of each options are as follows; El m for Machine A, side for machine B and CHEEK for Machine C. According to the initial cost figures the Project C is the best option as it requires less investment. However, there will be no scrapped value for Machine C. With the accepted figures, it is difficult to make a decision. In this case, NAP method can simplify the investment decisions. The cash inflows are discounted with the companys cost of capital of 15%.\r\n'