Final Project Submission: Global Expansion Proposal

Anonymous
timer Asked: Jun 29th, 2018
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Question description

Instructions

Submit your final report documenting your company’s global expansion proposal, analyzing the risks, hedging, and financing, and provide an overall executive summary.

Be sure to review your Milestones One through Three completed in Modules Three, Five, and Seven. Incorporate all the feedback you received from your instructor and address all the feedback for this final project submission.

Also, complete and add Section 3, Part D: Repatriation of Funds and the executive summary.

Refer to the module resources, other course materials, and your own research to support your responses.

To complete this assignment, review the Final Project Guidelines and Rubric document.


My requirements:

I just post my milestone one, two and three as attachments with rubric. I got bad grades about them, respectively. But, actually I also get the feedback from my instructor. I hope you can help me to make big adjustment about the final milestone, using my three milestone because they are the main body of final one. I do not wish you just easily copy and put my three parts together without any correction because there are lots of mistakes I made. By the way, I will keep the right to refund and I also would like to give you more tips if you can solve them in good way. Thanks for understanding.

Please do modify and write the final following the points in rubric, including the words, APA style and other requirements. Specially, there is a template and I also upload it. The final milestone need to be in this template format.

Thanks and Best.


Tips: I upload my three milestone. In the end of them, there is the feedback from my instructor and his requirements. Please do make adjustment following his instructions. Thanks.

INT 620 Final Project Guidelines and Rubric Overview The final project for this course is the creation of a global expansion proposal for a corporation. The project represents an authentic demonstration of competency because considering global expansion is a conversation many growing companies have, involving financial managers and other stakeholders in the corporation. The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Three, Five, and Seven. The final product will be submitted in Module Nine. In this assignment, you will demonstrate your mastery of the following course outcomes: • • • • INT-620-01: Analyze the impact of microeconomic and macroeconomic fundamentals on international financial markets to examine the economic climate for corporate expansion INT-620-02: Examine the influence exchange rate systems and exchange rate movement have on international corporations and international markets in determining financial risks INT-620-03: Propose appropriate international capital budgeting strategies for managing multinational corporations’ international monetary relationships INT-620-04: Recommend financial risk mitigation strategies for a corporation expanding to a global market Prompt For this project, you are taking on the role of a financial advisor to a company considering global expansion. You will choose a publicly traded U.S. company and a country into which that company can expand its business. Your job is to research the country from an economic standpoint to determine the feasibility of the expansion. This will include investigating the microeconomic and macroeconomic environments, exchange rates, and risk factors. Additionally, you need to propose a funding source and foreign currency financing strategies as well as how to repatriate the expected profits. You will prepare an executive summary for the board of directors, with each of the sections below as supporting details based on your research. Specifically, you must address the critical elements listed below. Most of the critical elements align with a particular course outcome (shown in brackets). • Introduction: This section of the analysis paper is an opportunity to add context about the company and country you selected to make the focus of this paper. You may explain a specific product that is being launched or relaunched in the global market; that information would also be included in this section. A. Justify your company selection, with sufficient detail. B. Justify the country into which your company will expand, with sufficient detail. 1 • Section 1: Broad Strokes of the Expansion Plan. In this section of the paper, you will be explaining the impact a variety of factors have on a company when expanding into global markets. Explaining these factors will prepare you to address the risk factors they create. A. Describe the microeconomic and macroeconomic factors in the domestic market. [INT-620-01] B. Describe the microeconomic and macroeconomic factors in the prospective global market. [INT-620-01] C. Analyze the exchange rate regime in both domestic and prospective global markets. [INT-620-02] D. Explain how changes in economic factors impact exchange rates. [INT-620-02] E. Analyze the financial impact of exchange rate movements on a corporation. [INT-620-02] F. Explain the main risks and benefits of the proposed expansion. [INT-620-01] • Section 2: Risk Mitigation Strategies A. Determine current financial and strategic impacts of international risks to inform risk mitigation strategies. [INT-620-04] B. Explain how to mitigate foreign exchange rate risk. [INT-620-02] C. Justify the tools the company is currently using to mitigate its foreign exchange risk. [INT-620-04] D. Analyze the financial impacts of international foreign exchange risk to inform risk mitigation strategies. [INT-620-04] E. Propose future mitigation strategies based on the prospective market for your corporation including addressing risks that are not currently being efficiently mitigated for your corporation. [INT-620-04] • Section 3: Global Expansion Funding A. Analyze the current capital structure of the parent company. [INT-620-03] B. Determine the funding source your corporation should secure for this expansion into a global market. For example, you need to determine if the company will finance its expansion by using debt, issuing new stock, or using retained earnings of its expansion. Look at the current capital structure and use it as a guide for the subsidiary structure. [INT-620-03] C. Propose a financing strategy of the new expansion. Consider financial requirements and how foreign currency will be acquired. Since the company will need to have foreign currency (currency of the country it is expanding into) on hand from day one of the company operations, determine how it will obtain the foreign currency. What are the options of local financing and any regulations on local currency reserves? [INT620-03] D. Repatriation of Funds: Once the subsidiary starts earning profits, the money needs to be repatriated back to the parent company. Examine the laws and regulations of the global market pertaining to repatriation. Identify any encumbrances on the repatriation of funds such as restrictions, specific fund limits, repatriation intervals, etc. [INT-620-03] • Executive Summary A. Summarize your final recommendations on the expansion. [INT-620-04] B. Describe ethical considerations inherent in the expansion proposal. [INT-620-04] 2 Milestones Milestone One: Introduction and Broad Strokes of the Expansion Plan In Module Three, you will submit your first milestone, addressing the introduction of your company and the expansion plan. This milestone will be graded with the Milestone One Rubric. Milestone Two: Risk Mitigation Strategies In Module Five, you will submit your second milestone, addressing the company’s current and proposed risk mitigation strategies. This milestone will be graded with the Milestone Two Rubric. Milestone Three: Global Expansion Financing In Module Seven, you will submit your third milestone, addressing capital structure, funding, and financing. This milestone will be graded with the Milestone Three Rubric. Final Submission: Global Expansion Proposal In Module Nine, you will submit your final project. It should be a complete, polished artifact containing all of the critical elements of the final product. It should reflect the incorporation of feedback gained throughout the course. This submission will be graded with the Final Project Rubric. Deliverables Milestone One Two Three Deliverable Module Due Grading Introduction and Broad Strokes of the Expansion Plan Risk Mitigation Strategies Three Graded separately; Milestone One Rubric Five Graded separately; Milestone Two Rubric Global Expansion Financing Seven Graded separately; Milestone Three Rubric Final Submission: Global Expansion Proposal Nine Graded separately; Final Project Rubric 3 Final Project Rubric Guidelines for Submission: Using the Final Project Template, your proposal should be 10–12 pages in length (2–3 pages for the executive summary, 8–9 pages of supporting details, plus a cover page and a reference page). Use double spacing, 12-point Times New Roman font, and one-inch margins. Include at least three references cited in APA format. Critical Elements Introduction: Company Selection Exemplary (100%) Meets all “Proficient” criteria, plus reasons are more complex and demonstrate nuanced considerations in company selection Meets all “Proficient” criteria, plus reasons for the expansion are more nuanced Proficient (90%) Justifies company selection with sufficient detail Needs Improvement (70%) Justifies company selection, but reasons are incomplete or unclear Not Evident (0%) Does not justify company selection Justifies the country into which the company will expand, with sufficient detail Does not justify the country into which the company will expand 5 Meets all “Proficient” criteria, plus description demonstrates understanding of more complex microeconomic and macroeconomic factors Meets all “Proficient” criteria, plus description demonstrates understanding of more complex microeconomic and macroeconomic factors Describes the microeconomic and macroeconomic factors in the domestic market Does not describe the microeconomic and macroeconomic factors in the domestic market 5 Does not describe the microeconomic and macroeconomic factors in the prospective global market 5 Section 1: Exchange Rate Regime [INT-620-02] Meets all “Proficient” criteria, plus analysis demonstrates nuanced understanding of the exchange rate regimes Analyzes the exchange rate regime in both domestic and prospective global markets Does not analyze the exchange rate regime in both domestic and prospective global markets 5 Section 1: Changes Impact Exchange Rates [INT-620-02] Meets all “Proficient” criteria, plus explanation includes the impact of more nuanced changes on exchange rates Explains how changes in economic factors impact exchange rates Justifies the country into which the company will expand, but reasons do not actually support the expansion or are stated incompletely or unclearly Describes the microeconomic and macroeconomic factors in the domestic market in a cursory, incomplete, or unclear manner Describes the microeconomic and macroeconomic factors in the prospective global market, but the factors described are not the most important ones to consider, or description is incomplete or unclear Analyzes the exchange rate regime in both domestic and prospective global markets, but analysis is cursory, incomplete, or unclear Explains how changes in economic factors impact exchange rates, but explanation is cursory, incomplete, or unclear Does not explain how changes in economic factors impact exchange rates 5 Introduction: Country Section 1: Factors in the Domestic Market [INT-620-01] Section 1: Factors in the Prospective Global Market [INT-620-01] Describes the microeconomic and macroeconomic factors in the prospective global market 4 Value 5 Section 1: Financial Impact [INT-620-02] Meets all “Proficient” criteria, plus response includes analysis of more complex financial impacts the rate movements have on a corporation Analyzes financial impact of exchange rate movements on a corporation Section 1: Risks and Benefits [INT-620-01] Meets all “Proficient” criteria, plus explanation shows keen insight into expansion risks and benefits Explains the main risks and benefits of the proposed expansion Section 2: Current Impacts [INT-620-04] Meets all “Proficient” criteria, plus response elaborates on less common impacts to inform risk mitigation strategies Determines current financial and strategic impacts of international risks to inform risk mitigation strategies Section 2: Mitigate Foreign Exchange Rate Risk [INT-620-02] Section 2: Tools [INT-620-04] Meets all “Proficient” criteria, plus response includes nuanced explanation of mitigation options Meets all “Proficient” criteria, plus response includes nuanced reasons the tools were chosen Explains how to mitigate foreign exchange rate risk Section 2: Financial Impacts [INT-620-04] Meets all “Proficient” criteria, plus analysis includes consideration of complex financial impacts Analyzes financial impacts of international foreign exchange risk to support risk mitigation strategies Meets all “Proficient” criteria, plus response includes complex strategies to address nuanced risks Proposes future mitigation strategies based on the prospective market for the corporation including addressing risks that are not currently being efficiently mitigated for the corporation Section 2: Future Mitigation Strategies [INT-620-04] Justifies the tools the company is currently using to mitigate foreign exchange rate risk 5 Analyzes financial impact of exchange rate movements on a corporation, but analysis does not include the most important impacts or is otherwise unclear or incomplete Explains the main risks and benefits of the proposed expansion, but explanation does not include all the main risks and benefits or is otherwise incomplete or unclear Determines current financial and strategic impacts of international risks to inform risk mitigation strategies but is missing key ideas Explains how to mitigate foreign exchange rate risk, but explanation is incomplete or unclear Justifies the tools the company is currently using to mitigate foreign exchange rate risk, but reasons provided are minor, incomplete, or unclear Analyzes financial impacts of international foreign exchange risk to support risk mitigation strategies in a way that is incomplete or unclear Proposes future mitigation strategies based on the prospective market for the corporation, but proposal does not include risks that are not currently being efficiently mitigated Does not analyze financial impact of exchange rate movements on a corporation 5 Does not explain the main risks and benefits of the proposed expansion 5 Does not determine current financial and strategic impacts of international risks to inform risk mitigation strategies 5 Does not explain how to mitigate foreign exchange rate risk 5 Does not justify the tools the company is currently using to mitigate foreign exchange rate risk 5 Does not analyze financial impacts of international foreign exchange risk to support risk mitigation strategies 5 Does not propose future mitigation strategies based on the prospective market for the corporation 5 Section 3: Capital Structure [INT-620-03] Meets all “Proficient” criteria and demonstrates in-depth knowledge of capital structure Analyzes the current capital structure of the parent company Section 3: Funding Source [INT-620-03] Meets all “Proficient” criteria and exhibits keen insight into funding possibilities Determines the funding source the corporation should secure for this expansion into a global market Proposes a financing strategy for the new expansion Section 3: Repatriation of Funds [INT-620-03] Executive Summary: Final Recommendations [INT-620-04] Meets all “Proficient” criteria, and proposal exhibits keen insight into financing possibilities Meets all “Proficient” criteria and demonstrates in-depth knowledge of fund repatriation restrictions Meets all “Proficient” criteria, and summary expertly presents concise, compelling case for expansion Executive Summary: Ethical Considerations [INT-620-04] Meets all “Proficient” criteria, and deftly presents ethical considerations as win-win proposition Describes ethical considerations inherent in the expansion proposal Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-to-read format Submission has no major errors related to citations, grammar, spelling, syntax, or organization Section 3: Financing Strategy [INT-620-03] Articulation of Response Identifies any encumbrances on the repatriation of funds Summarizes final recommendations on the expansion Analyzes the current capital structure of the parent company, but analysis is cursory or lacks important details Determines the funding source the corporation should secure for this expansion, but response is cursory or lacks important details Proposes a financing strategy for the new expansion, but proposal is cursory or lacks important details Identifies any encumbrances on the repatriation of funds, but response is cursory or lacks important elements Summarizes final recommendations on the expansion, but summary is cursory or lacks important elements Describes ethical considerations inherent in the expansion proposal, but response is cursory or lacks important elements Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Does not analyze the current capital structure of the parent company 5 Does not determine the funding source the corporation should secure for this expansion 5 Does not propose a financing strategy for the new expansion 5 Does not identify any encumbrances on the repatriation of funds 5 Does not summarize final recommendations on the expansion 5 Does not describe ethical considerations inherent in the expansion proposal 5 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 5 Total 6 100%
Global Expansion Proposal INT 620 Final Project 1 Contents Final Project Milestone One (Module Three) .................................................................................. 3 Introduction: Company Proposal and Background...................................................................... 3 Introduction: Subsidiary Expansion ............................................................................................ 3 Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in Domestic Market ......................................................................................................................... 3 Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in Prospective Global Market .......................................................................................................... 3 Broad Strokes of the Expansion Plan: Exchange Rate Regime in Domestic and Prospective Global Markets ............................................................................................................................ 4 Broad Strokes of the Expansion Plan: Impacts of Economic Factors on Exchange Rates .......... 5 Broad Strokes of the Expansion Plan: Financial Impacts of Exchange Rate Movements on a Corporation .................................................................................................................................. 5 Broad Strokes of the Expansion Plan: Main Risks and Main Benefits of the Proposed Expansion .................................................................................................................................... 6 Final Project Milestone Two (Module Five) ................................................................................... 7 Risk Mitigation Strategies: Current Financial and Strategic Impacts of International Risks ...... 7 Risk Mitigation Strategies: Mitigating Foreign Exchange Rate Risk and Justifying Tools ........ 7 Risk Mitigation Strategies: Analyze Financial Impacts of Foreign Exchange Risks to Inform Risk Mitigation Strategies ........................................................................................................... 7 Risk Mitigation Strategies: Future Mitigation Strategies Based on Prospective Market ............ 7 Final Project Milestone Three (Module Seven)............................................................................... 8 Global Expansion Financing: Capital Structure .......................................................................... 8 Global Expansion Financing: Funding ........................................................................................ 8 Global Expansion Financing: Financing ..................................................................................... 8 Final Project Submission (Module Nine) ........................................................................................ 9 Repatriation of Funds .................................................................................................................. 9 Executive Summary ..................................................................................................................... 9 References...................................................................................................................................... 10 Appendix........................................................................................................................................ 11 INT 620 Final Project 2 Note: Throughout this template, the items that are enclosed in angle brackets have been provided to guide your responses. In your submissions, please delete these items. Remember to update the title page and the footer. Final Project Milestone One (Module Three) Introduction: Company Proposal and Background Introduction: Subsidiary Expansion Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in Domestic Market Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in Prospective Global Market INT 620 Final Project 3 Macroeconomics Microeconomics Big picture: Macroeconomics is concerned Little picture: Microeconomics is concerned with how the overall economy works. The with how supply and demand interact in government is a major object of analysis in individual markets for goods and services. macroeconomics. The foundation of macroeconomics is Microeconomics consists of individual entities, microeconomics, for example, how all markets for example, whether price rises in the interact to generate big phenomena that automobile or oil industries are driven by economists call aggregate variables. supply or demand changes. Output and income (GDP), unemployment, Preference relations, supply and demand, inflation and deflation. opportunity cost. Used to determine an economy’s overall Used to determine methods of improvement for health, standard of living, and needs for individual business entities. improvement. Reference: http://www.imf.org/external/pubs/ft/fandd/basics/bigsmall.htm Broad Strokes of the Expansion Plan: Exchange Rate Regime in Domestic and Prospective Global Markets INT 620 Final Project 4 Broad Strokes of the Expansion Plan: Impacts of Economic Factors on Exchange Rates Broad Strokes of the Expansion Plan: Financial Impacts of Exchange Rate Movements on a Corporation INT 620 Final Project 5 Broad Strokes of the Expansion Plan: Main Risks and Main Benefits of the Proposed Expansion INT 620 Final Project 6 Final Project Milestone Two (Module Five) |Risk Mitigation Strategies: Current Financial and Strategic Impacts of International Risks Every business venture is one time or another faced with various risks. Apple incorporation is not an exception to this either. According to the 10-K form (2018), it is very clear that there are several risks which include the uncertainty of current global economic conditions that could decrease the demand of company’s products and services which would be brought about by decreased income, shift in preference of the product, tighter credit policy, high unemployment levels, financial reports that may reflect a possibility of depreciation of asset values. Also, increase of fuel costs among other macroeconomic factors that may influence the way consumers spend. The other factors that may come to play is the regulations that are place in other countries in regard to the mobile communications and software security requirements which mostly lead to adjustments leading to an increase in operating costs. On the same also some regulations may call for barrier of entry of the same products. Finally, the tax policies of different countries can affect the tax risk for Apple. The material choice may also affect the pricing because they outsource the materials from manufacturers in case there is limited supply of the material the product plan will in most cases be affected. Also the quality of the product maybe affected from time to time and this may lead to decreased sales and operating margin and this may lead to company’s reputation being ruined. The interest rates in other countries may affect the company’s cash, securities, and costs related to the foreign hedges. Also, there is possibility of competition from other areas of its business. Finally, Apple Corporation maybe faced with the inventory risk because of the huge sales across the globe. INT 620 Final Project 7 Risk Mitigation Strategies: Mitigating Foreign Exchange Rate Risk and Justifying Tools Apple Corporation has made sure that they have reviewed their foreign exchange forward and options and interest rate swaps. In order to mitigate interest rates the company has come up with invest policy and strategy are always focused on the preservation of company’s investment portfolio and liquidity requirements. Secondly, the company has entered into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with existing assets and liabilities. The company has also employed revenue recognition whereby they recognize the revenue when persuasive evidence of an arrangement exists, delivery has occurred and the sale price is fixed or determinable and collection is probable. Finally, they have mitigated foreign risk by the use of hedging techniques whereby they are trying to avoid investing in countries where risk is high. Risk Mitigation Strategies: Analyze Financial Impacts of Foreign Exchange Risks to Inform Risk Mitigation Strategies Scenario 1: % of % of % of Subsidiary Subsidiar Subsidiary Subsidiar Subsidiary Subsidiar Overall Subsidiar 1 Rev in y Subsidiar 2 Rev in y Subsidiar 3 Rev in y YEA Revenu y 1 Rev USD After Revenue y 2 Rev USD After Revenue y 3 Rev USD After Revenue e in in Local 5% From in Local 5% From in Local 5% From R USD Curr Appreciatio Total Curr Appreciatio Total Curr Appreciatio Total n Revenue n Revenue n Revenue (USD) (USD) (USD) Jul17 49144 48351 433.571 20.645 63956 570.23 27.153 47567 426.502 20.308 Jul16 70228 45687 409.682 19.51 590.256 28.107 46666 418.462 19.927 65324 INT 620 Final Project 8 Jul15 48733 53394 560.637 26.697 81266 853.293 40.633 51967 545.653 25.983 Scenario 2: % of % of % of Subsidiar Subsidiar subsidiar Subsidiar Overal subsidiar Subsidiary y 1 Rev in Subsidiar y 2 Rev in y Subsidiar y 3 Rev in l Subsidiar y revenue Revenue USD y 2 Rev in USD After revenue y 3 Rev USD after from From YEAR Reven y 1 Rev in After 5% Local 5% from in Local 5% ue in Local Curr Total Total Depreciat Curr Depreciat Total Curr Depreciat USD Revenue Revenue ion ion Revenue ion (USD) (USD) (USD) Jul-17 49144 48351 392.28 Jul-16 70228 45687 Jul-15 48733 53394 20.645 63956 515.924 27.153 47567 385.886 20.308 370.663 19.51 65324 534.042 28.107 46666 378.608 19.927 507.243 26.697 81266 772.027 40.633 51967 493.687 25.983 Conclusion: In scenario one the revenue from subsidiary, decreases in USD when we appreciate the dollar by 5%, the reason for this is that profits earned in foreign subsidiaries translate into fewer dollars depending with the strength of the dollar. In scenario two the revenue from subsidiary decreases in USD, when we appreciate the dollar by 5% this is because returns reduce when converted into dollars because it translates into fewer dollars depending with the strength of the dollar. (See the Appendix about the index.) Risk Mitigation Strategies: Future Mitigation Strategies Based on Prospective Market Apple Corporation has been crafting intermediaries, regulatory systems and contract enforcing systems to fill in the institutional voids that are hindering or causing a company to be skeptical when it comes to penetrating a specific market. The corporation is also planning on looking for the best recruiting agency so that they can get the best teams to work for them INT 620 Final Project 9 when they venture abroad this will help risks that are experienced because of getting incompetent staff. They are also planning to lower costs by making sure they conduct portfolio analysis. Also, they are planning to have consultative meetings with the country’s leadership so that they can come on board. This will ensure that we get the support needed. They also looking into how they can modify their business model to suit those in the countries they are operating in. INT 620 Final Project 10 Final Project Milestone Three (Module Seven) Global Expansion Financing: Capital Structure Global Expansion Financing: Funding Global Expansion Financing: Financing INT 620 Final Project 11 Final Project Submission (Module Nine) Repatriation of Funds Executive Summary INT 620 Final Project 12 References Apple Financials. (2018). Retrieved from http://investor.apple.com/financials.cfm Apple Corporation. (https://www.ft.com/topics/organisations/Apple_Inc 2018). Retrieved from https://www.ft.com/topics/organisations/Apple_Inc INT 620 Final Project 13 Appendix Revenue Table: 2017 2016 2015 Overall Company Revenue Subsidiary 1 Revenue 48,351.00 45,687.00 53,394.00 Subsidiary 2 Revenue 63,596.00 65,824.00 81,266.00 Subsidiary 3 Revenue 47,567.00 46,666.00 51,967.00 AVERAGE YEARLY EXCHANGE RATE: Subsidiary 1 Local Curr YEAR USD Jul-17 1.17103 49144 Jul-16 1.17094 70228 Jul-15 1 48733 CALCULATE IMPACTS OF SUBSIDIARY REVENUE ON TOTAL REVENUE: % of % of % of Subsidiar Subsidiar Subsidiar y y y Overall Subsidiar Subsidiar Subsidiar Subsidiar Subsidiar Subsidiar YEA Revenue Revenue Revenue Revenu y 1 Rev in y 1 Rev in y 2 Rev in y 2 Rev in y 3 Rev in y 3 Rev in From From From R e in USD Local Curr USD Local Curr USD Local Curr USD Total Total Total Revenue Revenue Revenue (USD) (USD) (USD) Jul17 49144 48351 412.925 20.645 63956 570.23 INT 620 Final Project 27.153 47567 426.502 20.308 14 Jul16 70228 45687 390.173 19.51 65324 590.256 28.107 46666 418.462 19.927 Jul15 48733 53394 533.94 81266 853.293 40.633 51967 545.653 25.983 26.697 Rubric Name: INT 620 Milestone Two Rubric: Risk Mitigation Strategies INT 620 Final Project 15 Instructor Feedback Section 2: Financial Impacts: These last two segments need expansion with specific details Section 2: Future Mitigation Strategies: I see the start of addressing this area. Expansion needed. Articulation of Response: I see a lot of statements about the firm's activities that need citations. INT 620 Final Project 16
Running Head: GLOBAL EXPANSION PROPOSAL Global Expansion Proposal Apple Incorporation 1 GLOBAL EXPANSION PROPOSAL 2 Capital Structure According to Shahzad, Nazir, and Amin (2017), a capital structure of a firm is how it is able to meet its financial obligations for daily operations and expansion using different sources of funds. Debt and equity are the two common sources of funding to a firm and are part of the overall capital structure. Shahzad, et al. (2017) note that debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Prior to raising funds through any of these means, the firm must consider the overall cost of capital. Moonsoo, Wei, and Ying (2018) define the cost of capital as the opportunity cost of making a specific investment. Equity Capitalization Apple’s 10-K from September 2017 shows that its total stockholder’s equity was $ 134,047 million. This comprises of common stock at par value and additional paid-in capital ($ 35,867 million), and retained earnings ($ 98,330 million), deducting accumulated other comprehensive income ($ (150) million). Since 2014, the company has purchased over 48,000 common stocks through privately negotiated and/or open market transactions in a bid to strengthen shareholders value. This has seen equity funding in the company fall over the years, despite this being largely funded through debt. Apple has shares outstanding of 5,336.166 million and convertible securities of 34,450 million, resulting to a market cap of approximately $850,000 million, as of Sep. 30, 2017. The continued common stock repurchase program will see equity capitalization continue to fall, which will enhance the capability of the company to rely on equity capital in future. Debt Capitalization GLOBAL EXPANSION PROPOSAL 3 Apple’s 10-K from September 2017 indicates current liabilities of $ 100,814 million, comprising of accounts payable ($ 49,049 million), accrued expenses ($ 25,744 million), deferred revenue ($ 7,548 million), and commercial paper ($ 11,977 million). Current portion of long-term debt amount to $ 6,496 million, giving a total liabilities of $100,814 million, an increase from the past year (79,006 million). With the company’s common stock repurchase program largely being funded through debt, a significant rise in the debt-to-total asset suggest that the company has become more dependent on debt to fund its business. As of September 2017, Apple Inc.’s long-term debt to total asset ratio had risen to 0.28. Going to the future, this may make it impossible for the company to rely on debt to fund its operations. The increasing long-term debt to total asset ratio could indicate an inability of the company to pay back its longterm debts. Leverage Apple was able to underwrite a total debt of $64.46 million in 2013 by issuing bonds and notes vested on zero interest rate policy environment. The move was not driven by the need to raise capital but an opportunity to seize free money. Apple's capital structure has changed considerably due to the buildup of debt, increasing its risk of default. Apple’s quick ratios and current have been on the decline from 1.64 in 2013 to 1.23 in 2017 and 1.68 to 1.28 respectively, inhibiting Apple’s capability to service its short-term financial debts. Debt vs. Equity In 2013, Apple’s debt-to-equity ratio was 0.14. Over a four year period, the ratio has increased to 0.86, illustrating that the corporation has been vigorously financing its growth through debts, which can lead to volatile earnings. This could negatively impact the value of the GLOBAL EXPANSION PROPOSAL 4 company’s shares in the stock market as many investors could see the company as volatile and largely funded through debt. Funding Before expanding its operations to Poland, Apple should consider raising sufficient funds which can be used for the expansion drive. There are a number of funding options available to the company which should be evaluated before selecting an appropriate one. In May 2017, the company announced an improved capital return program. Key to the program was the repurchase of common shares. During the same year, the company spent $33 billion to repurchase shares of its common stock opting to issue $24.0 billion of U.S. dollar-denominated term debt, €2.5 billion of euro-denominated term debt and C$2.5 billion of Canadian dollar-denominated term debt during 2017. These moves are indicative of what the company would wish to fund its operations through other sources of funding rather than issue common stocks. In expanding to Poland, the company should consider one of the available forms of longterm debt other than issuing common stocks. Long-term debt is the debt which is due more than 12 months in the future. Going by the recent developments, Apple would either prefer to issue corporate bonds or fixed-rate notes. As such, its efforts to expand to Poland, Apple should raise funds by selling corporate bonds. Selling corporate bonds with varied maturity dates would enable the company to raise the needed capital to fund its operations going forward. Pursuing the bond alternative will see the company avoid impacting its equity capitalization, a trend the company has been pursuing through common shares repurchase program. However, the source of funding will increase the company’s debt capitalization. Since bonds are represented as a form of debt, using bonds to expand its operations will see its long-term debt increase. GLOBAL EXPANSION PROPOSAL 5 Financing The expected expansion of Apple Inc. into Poland will be funded through the capital raised by the bond issue. This money will cover the operations of the new branch in the country for the first five years. This will include setting up operations, renting out facilities, paying wages, and taxes. It is expected that within this period, the business will be in a position to fund its operations by selling Apple products and services. The company will open both a dollar account and a Poland zloty account with one of the local banks in Poland. The bank will convert the company currency from dollars to zloty whenever needed. The new company will ensure there will be sufficient funds to run for the first five years. If, after this period the company requires a new source of funding, loans with some of the local banks will be considered. With Poland operating under a free economy, it will be easy for the new company to access foreign exchange from the local banks. GLOBAL EXPANSION PROPOSAL 6 References Apple - Annual Report. Retrieved on 14 June 2018 from http://investor.apple.com/secfiling.cfm?filingid=320193-17-70&cik=320193 Nevitt, P. K. (2000). Project financing. Linnius. Moonsoo, K., Wei, W., & Ying, X. (2018). Market Imperfections, Macroeconomic Conditions, and Capital Structure Dynamics: A Cross-Country Study. Emerging Markets Finance & Trade, 54(1), 234-254. Shahzad, F., Nazir, M. R., & Amin, W. (2017). Does Ownership Structure Impact on Capital Structure? International Journal of Management, Accounting & Economics, 4(6), 629-639. Rubric Name: INT 620 Milestone Three Rubric: Global Expansion Financing GLOBAL EXPANSION PROPOSAL Overall Feedback We need a lot more specific detail about the company and it's capital structure and what these financial values mean for an expansion. 7

Tutor Answer

MrMark
School: UIUC

Yes I'm done. Find attached.

Global Expansion Proposal

Apple Corporation

June 2018



INT 620 Final Project

1

Contents
Final Project Milestone One ............................................................................................................ 3
Introduction: Company Proposal and Background...................................................................... 3
Introduction: Subsidiary Expansion ............................................................................................ 3
Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in
Domestic Market ......................................................................................................................... 3
Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in
Prospective Global Market .......................................................................................................... 4
Broad Strokes of the Expansion Plan: Exchange Rate Regime in Domestic and Prospective
Global Markets ............................................................................................................................ 5
Broad Strokes of the Expansion Plan: Impacts of Economic Factors on Exchange Rates .......... 5
Broad Strokes of the Expansion Plan: Financial Impacts of Exchange Rate Movements on a
Corporation .................................................................................................................................. 6
Broad Strokes of the Expansion Plan: Main Risks and Main Benefits of the Proposed
Expansion .................................................................................................................................... 8
Risk Mitigation Strategies: Current Financial and Strategic Impacts of International Risks ...... 8
Risk Mitigation Strategies: Mitigating Foreign Exchange Rate Risk and Justifying Tools ...... 10
Risk Mitigation Strategies: Analyze Financial Impacts of Foreign Exchange Risks to Inform
Risk Mitigation Strategies ......................................................................................................... 11
Risk Mitigation Strategies: Future Mitigation Strategies Based on Prospective Market .......... 11
Final Project Milestone Three ....................................................................................................... 12
Global Expansion Financing: Capital Structure ........................................................................ 12
Global Expansion Financing: Funding ...................................................................................... 14
Global Expansion Financing: Financing ................................................................................... 14
Final Project Submission ............................................................................................................... 15
Repatriation of Funds ................................................................................................................ 15
Executive Summary ................................................................................................................... 16
References...................................................................................................................................... 18
Appendix 1..................................................................................................................................... 20



INT 620 Final Project

2

Final Project Milestone One
Introduction: Company Proposal and Background
Apple Technology Company is a multinational technology organization that primarily
deals with designing, developing and selling consumer electronics, online services, and computer
software. Apple Company is based in the United States of America, and it has its headquarters in
Cupertino in the state of California. The apple company operates in the telecommunication
industry, and some of the common famous products from the Apple Company include iPad,
iPhone, Apple Watch, macOS, iOS and Macintosh among other. The company does business in
many countries, and currently, it is the leading global information technology company by revenue.
Introduction: Subsidiary Expansion
The apple company wishes to expand its operation in Yemen which is one of the few
countries where it does not supply its products and services. Yemen is one of the largest countries
in Asian and will, therefore, provide a big market for the Apple products. Yemen population is
relatively big, and consequently, the introduction of the Apple products in the country may be of
significant advantage to the financial performance of the apple products. One of the products that
are expected to have significant demand in Yemen will be the iPhone 6 which is a product that is
much enjoyed by customers in other regions where Apple Company operates.
Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in
Domestic Market
The microeconomic and macroeconomic factors in the United States which are the
domestic market for the Apple products have significantly influenced the performance of the
company. Some of the micro-economic factors that have contributed to the success of the company


INT 620 Final Project

3

in the United States include the availability of customers for the Apple products, a highly skilled
workforce, perfect distribution channels, great infrastructure, and the positive publicity that the
company gets from the media and the general public. Some of the micro-economic factors that
have posed a challenge in the company's performance in the United States include stiff competition
from other companies in the industry.
In addition, the wage rate in the US market is high with a minimal of $7.25. There are also
efforts to increase the wage rate to $15 to help US citizen cope with the high cost of living in the
US. This would pose a great challenge to the companies such as Apple because their cost of
operation will increase leading to decline in their profitability. The macro environment factors
influencing the operations of apple in the United States include a high level of technology and
political stability in the country (Jorgenson, D., Gollop & Fraumeni, 2016). In addition, the US
market has a low inflation rate of 2% which means that it is less costly to finance its domestic
operation through the use of local finance institutions.
Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in
Prospective Global Market
The government of Yemen has little restriction and also charge an average 20% corporate
tax that does not discourage investors in the country. The political stability is shaky in the country
as a result of civil wars that are...

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