On January 17, 2007, Apple, Inc. introduced the iPhone, which combines a mobile phone, an iPod, and Internet communications device. The phone’s Internet connection allows users to surf the Web over Wi-Fi, access e-mail, watch TV shows and videos, and use Google maps. A new interface allows the user to communicate by touching the screen with a finger. Another feature is that the screen will shift from portrait to landscape view when you simply rotate the device in your hand.

Apple managed to keep the details of the project secrets both from the public and its partner Cingular Wireless, now the wireless unit of AT&T. Several small teams within Cingular worked on the project, but each handled its own specific task without knowing what the other teams were up two. Cingular technical personnel tested the device to make sure that it would work on the carrier’s network but were not allowed to handle or see the actual phone. When it hit the market in mid-2007, the iPhone was sold exclusively by Apple and by AT&T.

Before developing the new phone Apple had to ensure the project’s economic viability. This involved estimating the cost of developing, manufacturing, and marketing the iPhone, as well as estimating the potential revenue. Apple expects to sell 10,000,000 iPhones to 2008, with price tags of $499 and $599 for two different models. This estimate gives the firm’s finance personnel some dollar figures, but there is no guarantee that the sales estimates are accurate.

Estimating development and marketing expenses is more difficult. There is virtually no way to precisely predict the worker-hours that will be sunk into the project. The iPhone development team mushroomed into hundreds of people and involved all levels of the Company. One method of estimating development costs is to make reasonable estimates based on similar past projects. In Apple’s case, it most likely used information from its development of the iPod several years earlier.

In addition to the revenues directly provided by the sale of the new iPhone, what other benefits might be relevant to evaluating the iPhone project? These are not elements which would appear in the cash figures used in the valuation models. Another way to incorporate nonfinancial considerations into capital project evaluation is to take into account the likely effect of decisions on non-shareholder parties or stakeholders-employees, customers, the local community and suppliers. What impact might be iPhone have on the stakeholders, in your opinion?