Financial Policy at Apple 2013 (A) Harvard Case Solution & Analysis

Financial Policy at Apple 2013 (A) Case Study Solution

Payout alternate to pay its excess cash

Broadly, in the first quarter of the fiscal year 2013, the price of the Apple Incorporation’ common stock appears to be $450, and in case of assuming that the price earnings ratio is 10, then the earning per share of Apple Incorporation would be $45. In addition to this, it is to evaluate that in case the preferred stock would be issued by the company i.e. 5 preferred stock for each common stock is assumed at the purchase price of $50, and the dividend of $2 per year is given on such preferred stock then the total value of the share of Apple Incorporation would most probably be of $600, $150 gain would most likely be unlocked in valuation by the company in case 5 preferred stock is issued for each common stock outstanding. The total value of the share of company and the effect of the preferred share on the common stock are summarized in table provided below:

Starting point iPref share
Common stock Preferred stock Total product
Price 450 350 250 600
EPS 45 35 10 45
PE 10 10 25

If the company issues one iPref for each common share to its shareholders, it would most likely be unlocking a lot of value on immediate basis. Also, by separating the dividends from the common shares, the investors would have an option to choose for themselves on whether to sell iPref in the open market and reinvest in the Apple stock or to keep the Ipref.

Recommendations to Cook and Oppenheimer

To sum up, it is recommended to Cook and Oppenheimer that they should focus on formulating the effective strategy of providing the excess amount of cash to the shareholders, this in turn would increase the value of the shareholders. In addition to this, they should also formulate the investment plan by exploiting or capturing the market opportunities as well as driving an innovative plan for the product development so that it would allow the company to cope with the customers ‘expectations related to brand that the company is concerted its efforts in providing the value added and innovative products to its customers. As a result, it is recommended that Cook and Oppenheimer should introduce the investment plan in order to retain the value of the company by utilizing the excess cash flow,which is retained by the company, or they can either issue preferred shares in case the company is not able to find the feasible investment plan that could be invested in through excess cash. The investment planning would allow the company to derive the maximum benefits from its investments. The effective investment plan or growth strategy would allow the company to remain the market leader, accelerate longterm growth, maximize the market share and improve the performance, beat head-to-head competition and gain popularity.......


This is just a sample partical work. Please place the order on the website to get your own originally done case solution.

Share This


Save Up To




Register now and save up to 30%.