AC70043E Corporate Financial Management

AC70043E Corporate Financial Management

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Introduction

This report helps to analyse a Dragon’s Den episode including a £125,000 pitch that verified the negotiation and valuation skills of both the entrepreneur and Dragon. This pitch is considered one of the toughest negotiations which were faced by the Dragons, showcasing multifaceted dynamics in the valuation and negotiation policies of Dragon. The principal focus is to assess the negotiation tactics and the valuation methods of Dragons working, by seeing factors such as market potential and scalability. As well, this report will deliver an independent valuation from the perspective of Apple Inc., highlighting the company’s strategic synergies may lead to a diverse valuation associated with the Dragons.

Valuation Approach by the Dragons

Valuation Process of Dragons: The Dragons, which are experienced shareholders, reflect a mixture of financial analysis, market possibility, and the ability of the entrepreneur to implement the business strategy. This specific pitch, possibility evaluated the current financial performance, future growth prospects, and scalability of the business. Main factors for example possible return on investment (ROI) and associated risks of the company were weighed contrary to the asking price by the entrepreneur as per Martin, (2022).

Financial vs. Emotional Valuation: However the Dragons largely depend on financial measures, emotional features, for example, passion designed for the product and certainty in the entrepreneur that can influence their business decisions. This balance between financial consistency and emotional commitment formed their final proposals.

Key Negotiation Minutes: As defined by Temie Laleye (2022), the negotiation was strong and tough, the Dragons originally provided lower valuations because of observed risks in the business. On the other hand, the entrepreneur’s firm posture and presentation of the unique market position of the business controlled the Dragons to increase their proposals. Their review provides reflected a reconsideration of the financials and a competitive want to secure this deal for Dragon.

Valuation Approaches: the methods used by Dragons such as comparable company analysis, where comparison of the business to its competitors. They may have also measured market potential, mainly if the product had sturdy scalability or a unique application. Revenue multiples and cash flow forecasts will likely have been working to evaluate the ability of the investment to be recouped, particularly if the business had a high possibility of growth but uncertain earnings as per Martin, (2022).

Year	Sales (£)	Gross Profit (£)	Net P&L (£)	R&D Costs (£)	R&D Growth Rate (%)	CF (£)	Discount Rate (%)	Discounted CF (£)
0	0	0	0	0	-	-	-	-
1	1,800,000	540,000	360,000	0	0%	360,000	20%	300,000
2	2,160,000	648,000	432,000	0	0%	432,000	20%	300,000
3	2,592,000	777,600	518,400	0	0%	518,400	20%	300,000
4	3,110,400	933,120	622,080	0	0%	622,080	20%	300,000
5	3,732,480	1,119,744	746,496	0	0%	746,496	20%	300,000

This table displays a financial projection over five financial years; with sales increasing progressively, reaching £3,732,480 by the end of year 5. Both gross profit and net profit grow proportionately, as it suggest for effective cost management. Notwithstanding no additional R&D costs or growth, cash flow rises yearly. The discount rate leftovers at 20%, although discounted cash flow (DCF) is fixed at £300,000 yearly, as indicated for a basic valuation approach. This analysis proposes a stable financial forecast, but the constant DCF model implies possible underestimation of long-term growth possible, by way of no adjustments prepared for increasing cash flows out there the discount rate.

Independent Valuation for Apple Inc.

As per Apple Inc.'s perspective by way of a strategic investor, the valuation of the Apple Inc. pitched on Dragon’s Den would go further than standard financial measures. Apple would assess the possibility of synergies, for example, product integration in the ecology of Apple Inc., increasing distribution networks, and selecting in the global market reach of Apple. It would outcome in a possibly higher valuation associated to the Dragons.

Valuation Models: it is one of the primary approaches that Apple may use is the market capitalisation method for valuation, which evaluates the number of shares at the end of the financial year and the closing price of shares what the market value of Apple. The investing company frequently usages of market capitalization value to rank businesses and are helpful for comparison of relative sizes in a specific industry or sector. To decide a company’s market cap of the company, it simply takes its current market share price of the business and multiplies the figure by the total quantity of shares outstanding as appears in the financial statement (Team, 2024).

Market Capitalization: as per Yahoo.com, (2024), the latest market capitalization of the company (Apple Inc) is $3.432 trillion as of October 2024 since the books of Apple are close on 30th Sept.,

It shows how the strategic interests of Apple for example technology integration and market leverage could lead to a meaningfully greater valuation than the Dragons.

Assumptions in Valuation for Apple Inc.

In leading an independent valuation intended for Apple Inc. as a strategic investor, there an several key assumptions that support this analysis:

Market Capitalization (Mkt. Cap.): The usage of valuation of the market capitalization method, which accepts that the stock price of Apple Inc., will maintain its mounting trajectory. In accordance with Yahoo Finance (2024), the market capitalization of Apple Inc., stands at around $3.432 trillion as of October 2024, as it indicates a strong investor assurance according to Annualreports.com, (2023).

Risk Factor: This valuation assumes a lower risk profile intended for Apple likened to smaller investors such as the Dragons, modifying an inferior discount rate forecasting of cash flow.

Growth Rate: The predictable yearly growth rate is fixed at 5%-10%, as it reflects the historic performance and possible revenue growth of Apple through product integration and market development according to Annualreports.com, (2023).

Competitive Gain: It is understood that the Dragons may undervalue the long-term value of technological synergies and supply abilities of Apple, as it focuses as an alternative on instant financial returns of the company.

Synergies: there is an assumption which is made that integrating the products of Pitched Company into the ecosystem of Apple will produce significant revenue rises by way of cross-selling and improved customer appointments.

Strategic Offer Comparison

Once compare strategic offer by Apple to the Dragons' proposals, numerous variances in valuation rise caused by the single position of Apple by way of a worldwide tech massive. The Dragons are probable as per their proposals on instant financial returns and perceived risks of the company, which lead it to offer lower valuations with demands for greater equity risks. Its main focus would be on the market attendance, current financials, and future profitability of the company, but it lacks the leverage of large-scale delivery or technical mixture according to Nguyen et al., (2019).

On the other hand, Apple Inc. can see superior strategic value, which is particularly in increasing its product ecology or improving its technology offerings by Dragon. Such as, Apple has a vast distribution network that can meaningfully cut costs and increase sales revenue, mitigating a greater valuation. In addition, Apple can mix the technology of the company into its personal product lines, an additional motivation for future profitability.

According to these above advantages, Apple would probably bid for a better deal compare to the Dragons. However the Dragons may demand more equity for its risk, Apple can pay for and offer a greater valuation along with a lesser equity share, banking on the long-term strategic welfares and synergies that others can't have right of entry. This makes offer of Apple more competitive in the long run in the market as per Nguyen et al., (2019).

Conclusion

To put it briefly, this analysis highlights that the strategic valuation of Apple goes away from financial metrics, as it incorporates synergies such as a mixture of technology and global supply that can lead to a higher valuation compared to the Dragons. Even though Dragons emphasises immediate returns and risk easing, strategic shareholders such as Apple classify the possibility of Long-term, as it sees that there is a greater value in synergies and future scalability. This variance in approach affects the investment decision, by way of Apple can propose a better deal because of the ability of the company to make the most of the growth and profitability of the business for time, as it makes more competitive and appreciated shareholders.

References

?Annualreports.com. (2023). Apple Inc. [online] Available at: https://www.annualreports.com/Company/apple-inc [Accessed 9 Oct. 2024].

?Martin, E. (2022). How would you value your business if you went on Dragons’ Den? - mgr. [online] mgr. Available at: https://www.mgr.co.uk/how-would-you-value-your-business-if-you-went-on-dragons-den/ [Accessed 9 Oct. 2024].

?Nguyen, H., Tien, Van Thoi, B., Thi, D., Chi, P., Chi, H., City, M., Correspondence, V., Nguyen, D., Tien, H., Tien, B., Thoi, D., Thi, P. and Chi (2019). Comparative analysis of international marketing strategies of apple and Oppo. ~ 51 ~ International Journal of Research in Marketing Management and Sales, [online] 1(2), pp.51–56. Available at: https://www.marketingjournal.net/article/view/17/1-2-8.

?Team, C. (2024). Market Capitalization. [online] Corporate Finance Institute. Available at: https://corporatefinanceinstitute.com/resources/valuation/what-is-market-capitalization/ [Accessed 9 Oct. 2024].

?Temie Laleye (2022). Dragons’ Den cast blown away by pitch for £125,000 - ‘My toughest negotiation in the Den’. [online] Express.co.uk. Available at: https://www.express.co.uk/finance/personalfinance/1657700/dragons-den-cast-investors-tough-negotiations [Accessed 9 Oct. 2024].

Yahoo.com. (2024). Apple Inc. (AAPL) Stock Historical Prices & Data - Yahoo Finance. [online] Available at: https://finance.yahoo.com/quote/AAPL/history/ [Accessed 9 Oct. 2024].

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