Apple Inc. Financial Analysis and Stock Valuation

Apple Inc. Financial Analysis and Stock Valuation

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Apple Inc. Financial Analysis and Stock Valuation

Payback Period. The payback period method is popular because it is easy to calculate. The payback period estimates how long it takes to get the original investment back. Net Present Value. Unlike the payback method, the net present value approach does consider the time value of money for as long as the projects generate cash flow.

The net present value method uses the investor’s required rate of return to calculate the present value of future cash flow from the project. Internal Rate of Return. The internal rate of return method is a simpler variation of the net present value method. The internal rate of return method uses a discount rate that equals zero present value of future cash flows. This approach gives a way of comparing the attractiveness of several projects. (Woodruff, 2019).

For example, companies like Apple Inc. Apple Inc. can capitalize on Software development over the software running successfully in operations. On the other hand, a failed project related to software development is expensed. Thus, before capitalization, a project is required to be finalized. Software development in its product will define the success of their products like iPhone, iPad, macs, etc. Therefore, the investment (outflow) made in software can be estimated more quickly than the cash inflow generated from such investments in the future.

Apple’s financial statement states that capitalized costs relating to the internal-use software are amortized over the asset’s estimated useful life on a straight-line basis. Therefore, investment in the land, building, and property by any company can quickly provide the benefited gains in terms of future inflows by estimating the revenue generated by that building or store, the customer’s footfall in the store, or the number of customers visiting the store, profit generated in comparison to the targeted output by that building and many more.

For example, investments in land and building of Apple Inc. increased from $13,587 million in 2017 to $16,216 million in 2018. Thus, the benefits generated by making the capital investment into such properties can be determined easily compared to estimating the cash inflows by investing in intellectual property, software development, etc. (www.investopedia.com). Likewise, the cash inflows by investing in such property can be determined by the revenue generated from that building or store, products sold, production, customer footfall, etc. Thus, the company can judge whether the land is providing benefits in terms of output and profits.

References

Apple Inc. (NASDAQ:AAPL): Financial Analysis and Stock Valuation. Stock Analysis on Net. (n.d.). Retrieved June 28, 2022, from https://www.stock-analysis-on.net/NASDAQ/Company/Apple-Inc

Team, T. I. (2022, February 16). How to read Apple’s balance sheet. Investopedia. Retrieved June 28, 2022, from https://www.investopedia.com/stock-analysis/021015/understanding-apples-balance-sheet-appl.aspx

Woodruff, J. (2019, March 6). Three primary methods used to make capital budgeting decisions. Small Business – Chron.com. Retrieved June 28, 2022, from https://smallbusiness.chron.com/three-primary-methods-used-make-capital-budgeting-decisions-11570.html

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