WACC Project - Apple - DJordan.docx - Apple Inc Weighted...

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Apple, Inc. Weighted Average Cost of Capital Project (WACC) Project Desiree Jordan BUS5440: Financial Management August 16, 2020
APPLE, INC - Weighted Average Cost of Capital Project Table of Contents Introduction/Background ............................................................................................................... 3 Cost of Equity (Common Stock) ................................................................................................ 5 Cost of Preferred Stock ............................................................................................................... 5 Cost of Debt ............................................................................................................................... 5 Market Value of Debt .................................................................................................................. 5 Market Value of Equity .............................................................................................................. 5 Market Value of Preferred Stock ............................................................................................... 6 Value of Firm ............................................................................................................................. 6 Apple’s Tax Rate ......................................................................................................................... 6 Weight for Equity ........................................................................................................................ 6 Weight for Preferred Stock ......................................................................................................... 6 Weight for Debt .......................................................................................................................... 6 WACC (Weighted Average Cost of Capital) ............................................................................... 6 Conclusion ................................................................................................................................... 7 Assumptions .................................................................................................................................... 8 Appendix ......................................................................................................................................... 9 References ..................................................................................................................................... 11 2 | P a g e
APPLE, INC - Weighted Average Cost of Capital Project Introduction/Background Apple manufactures a large range of electronic devices including smartphones, tablets, PCs, smartwatches, and television boxes, among others. The iPhone makes up most of Apple’s total revenue. Additionally, Apple offers its customers a variety of services like Apple Music, iCloud, Apple Care, Apple TV, and Apple Pay, among others. In April 1976, Steve Jobs, Steve Wozniak, and Ronald Wayne founded Apple. The company is a popular brand known for delivering leading technology via their devices. Apple was primarily a manufacturer of personal computers, however, they encountered unsteady sales during 1990’s. Apple has put more focus on integration and initiative over the last decade, with their release of the iPod in 2001 and iTunes Music Store in 2003. They quickly became the top leader in the market for music streaming and playing. This led Apple to remove “Computer” from their company name in 2007. Later that year, they emerged into the telecom / cellular market with the iPhone. Apple created and manages their own iOS system for their smart phones, media player and tablet. The company continually upgrades their products and release new products often, keeping consumers interested in their brand. In 2019, Apple was #1 on Forbes list for top digital companies in the world. Apple’s innovation with technology and devices have rocketed them into the lead in the technology market. Apple is one of many highly successful corporations established in the 1970’s who opposed the traditional concepts of corporate culture. Even after Apple, Inc. became a Fortune 500 company, CEO and founder Steve Jobs was frequently spotted walking around the office barefoot. By the time of the 1984 release of the Macintosh computer, Apple's casual culture has become a vital characteristic that distinguished them from their competitors.

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