Foreign Exchange Service of Bank Asia Limited Essay

1. Introduction The banking sector in Bangladesh comprises of four categories of scheduled banks. These are, nationalized commercial banks (NCBs), government owned development finance institutions (DFIs), private commercial banks (PCBs) and foreign commercial banks (FCBs). Performance of these banking sectors under CAMEL framework, which involves analysis, and evaluation of the five crucial dimensions of banking operations, the five indicators used in the rating system are (I) Capital adequacy (ii) Asset quality (iii) Management soundness (iv) Earnings and (v) Liquidity. In addition, foreign Exchange Service is one of the major considering factors regarding these indicators. The bank acts as a media for the system of foreign exchange policy. The principles of foreign exchange service involve the entire system, the media used, and the monetary unit. According to Mr. H.E. EVITT † Foreign Exchange is that section of economic science which deals with the means and methods by which right to wealth in one country’s currency is converted into rights to wealth in terms of another country’s currency.† So bank should be aware about this section for the overall development of the economy. 2. Background of the study An internship program’s necessity is originated for implementing the theoretical knowledge in particle field. Therefore, internship program is included in BBA program. The goal of this report is to identify the contribution and the effect of foreign exchange service in Bank’s net profit. 1.3 Rational Of the Study The rational of the study is to know more about the course in practical life. This study also helped me to know the banking system. From this study I learned about the different functions in the bank like offering online banking, pay order, foreign remittance, foreign trade, investment etc. I also learned how the banks perform these functions, what problems they face, and their benefit in offering different services to their clients. Then I was assigned in foreign trade department, so I have learned about L/C Files, register and over all L/C mechanism. In this section, how they provide their services to the clients I have also learned about it. As a student of Finance, it is very important for me to acquire proper knowledge in this course to get better result in the future. 1.4 Objectives of the Study 1) The prime objective of the study is to understand various functions of Banks. I tried to evaluate the present condition of the banks. 2) To know about various products & services of this bank, and to know about the banking terms as well as habituate with banking environment. 3) To know how they find out the risk of the foreign trade. 4) To know how they identify these types of risk and minimize them. 1.5 Methodology of the study For preparing the report, I followed the following steps: âž ¢ Primary Information: First, I collected data about the Foreign – Exchange Service in Bank Asia ltd. MCB Dikusha Branch by tenting to personnel working in the bank. âž ¢ Secondary Information: Then in the second stage, I analyzed the collected data, working in Foreign Trade Department. Again, †¢ Personal Observation †¢ File Finding †¢ Annual Reports of BAL †¢ Articles of BIOM helped to prepare this report. 1.6 Limitations of the Study Not all the information of a Bank can be disclosed. It is very much essential for a bank to provide security to the customer. So the perfect information might not be shown in all places. The Employees of the Bank are also very busy. Therefore, the employees of the bank do not have enough time to provide me help regarding preparing report. Therefore, it was very hard for me to collect the data and bring out the proper information in order to make report look good. I had to go through many obstacles in order to make it presentable. 1.7 Scope of the Report The scopes of the report are as follows: †¢ The report would help the top management to identify the key areas of weakness and strength in foreign exchange service. †¢ The scope of the study is based on brief description of BAL has been furnished. †¢ The study may help top management in planning and decision making regarding foreign exchange service. CHAPTER 2: AN OVERVIEW OF THE PRINCIPAL ACTIVITIES OF â€Å"BANK ASIA LIMITED† 2.1 OVER VIEW OF BANK ASIA LIMITED: ‘Bank Asia Limited (Ltd) has been launched by a group of successful entrepreneurs with recognized standing in the society. The paid up capital of the Bank is 1395 million. The management of the Bank consists of a team led by senior bankers with decades of experience in national and international markets. The senior management team is ably supported by a group of professionals many of whom have exposure in the international market. Bank Asia Limited is one of the third generation private commercial banks (PCBs), incorporated in Bangladesh on 28 September 1999 as a public limited company under the Companies Act 1994, and governed by the Banking Companies Act 1991. The Bank went for public issue of its shares on 23 September 2003 and its shares are listed with Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd. Bank Asia Limited acquired the business of Bank of Nova Scotia (incorporated in Canada), Dhaka, in the year 2001 and at the beginning of the year 2002, the Bank also acquired the Bangladesh operations of Muslim Commercial Bank Limited (MCBL), a bank incorporated in Pakistan, having two branches at Dhaka and Chittagong and one booth at Dhaka. In taking over the Bangladesh operations, all assets and certain specific liabilities of MCBL were taken over by Bank Asia Limited at book values. Within a short span of time Bank Asia Ltd has established itself as one of the fast growing local private banks. It has at present a network of Thirty three branches serving many of the leading corporate houses and is gradually moving towards retail banking. Another significant delivery channel is its own as well as shared ATM Network. Bank Asia has a network of 25 ATMs out of which 6 it owns. The other 19 ATMs are shared through ETN with eleven other banks. Since its humble beginning in 1999, it set milestone by acquiring the business operations of the Bank of Nova Scotia in Dhaka, first in the banking history of Bangladesh. It again repeated the performance by acquiring the Bangladesh operations of Muslim Commercial Bank Ltd. (MCB), a Pakistani bank. In the year 2003 the Bank again came to the limelight with oversubscription of the Initial Public Offering of the shares of the Bank, which was a record (55 times) in our capital market’s history and its shares commands respectable premium. The asset and liability growth has been remarkable. By Dec 2007 the total asset of the Bank grew to Tk 38436 million, increase of almost 26% comparing to 2006. As of Dec 2007 deposits increased to Tk 30004 million, an increase of 19% over that of 2006, and Loans & Advances reached Tk 28456 million, an increase of 28% over that of 2006. Bank Asia has been actively participating in the local money market as well as foreign currency market without exposing the Bank to vulnerable positions. The Bank’s investment in Treasury Bills and other securities went up noticeably opening up opportunities for enhancing income in the context of a regime of gradual interest rate decline. Bank Asia Ltd is maintaining its competitiveness by leveraging on its Online Banking Software and modern IT infrastructure. It is the pioneer amongst the local banks in introducing innovative products like SMS banking, and under the ATM Network the Stelar Online Banking software enables direct linking of a client’s account, without the requirement for a separate account. 2.2 VISION STATEMENT OF BANK ASIA LIMITED: Bank Asia’s vision is to have a poverty free Bangladesh in course of a generation in the new millennium, reflecting the national dream. Our vision is to build a society where human dignity and human rights receive the highest consideration along with reduction of poverty. 2.3 MISSION STATEMENT OF BANK ASIA LIMITED: To assist in bringing high quality service to our customers and to participate in the growth and expansion of our national economy. To set high standards of integrity and bring total satisfaction to our clients, shareholders and employees. To become the most sought after bank in the country, rendering technology driven innovative services by our dedicated team of professionals. 2.4 CAPITAL STRUCTURE: Banks generally do their business with other’s fund, so Bank Asia Ltd is not in exception. Bank Asia Ltd uses 24% equity and 75% Debt source of capital. The capital structure is following:

China’s 1998 Summer Flood Disaster on the Tangtze

Jethro LeRoy Gibbs Ms. Shepherd Honors English 10 24 March 2013 Mighty Hell from the Yangtze China’s 1998 summer floods killed thousands of people, affected billions of people across the globe, left millions homeless, destroyed or damaged millions of homes, affected millions acres of land, and killed billions of dollars in their economic status.One unfortunate factor that played a huge role in the strengthening of the summer floods that China faced and suffered was human neglect (â€Å"Bad Planning†). However, one of the many significant factors that are highly crucial in flood control is the world’s largest power station (â€Å"Three Gorges†) also known as the Three Gorges Dam. Without the Three Gorges Dam capability of controlling the river floods, each summer poses a great threat to those who dwell near the Yangtze and its tributaries.But despite the complications concerning with the yearly river floods, the Yangtze played a significant role in establis hing many trade routes for many centuries (Wakeman 492). However, since the early dawn of civilization, the Yangtze River proved to contain some of the deadly summer floods that China will ever experience. The Yangtze is naturally located in the Eastern Lowlands, which also contains most of China’s best farmland.In 1998, a collection of floods of the Yangtze River caused by deforestation, overpopulation, location, and failure to learn past mistakes all resulted in a high number of deaths, millions of homeless people, life-threatening water borne diseases, and the suffrage in the industrial and agricultural status; however, the aid and support of China’s government, the United Nations, China’s army and military, and the unification within the people of China eventually brought a better realization on how the repetition of its summer floods could have been avoided in the first place.In other words, the chaos and suffrage that was endured by the many that were affe cted by China’s repetition of its collection of summer floods made the government, United Nations and supporting countries, army and the military, and the people much stronger than before, helping China to correct its past mistakes in order to prevent further trouble socially and economically. One crucial fact that one must observed was that the numerous human errors that occurred before the year 1998 and the failure to correct them took part in the summer flood disaster.Deforestation was the first recognizable human error, especially and specifically in the Eastern Lowlands where the valley of the Yangtze River was geologically located (Wakeman 492). Deforestation brought many environmental problems which aided the summer floods of the Yangtze to increase its size and the risk of damage (Lang). This happened due to soil erosion (Lang) and the removal of top soil (Gittings) which resulted from the lack of trees (Lang). Another environmental problem was the lack of firm top so il due to the lack of trees which can create water run-off, especially near a river (Gittings).The bottom line was that deforestation caused the rich top soil to disappear or disperse creating water run-off which in return encouraged floods to increase its damage capabilities (Lang). The growing population of China also contributes to the deforestation of China because people needed land to live on. The second major human error was overpopulation. Overpopulation in cities or areas prone to deadly natural disasters is more likely to result in higher number of deaths and causalities (Gittings). More people mean a higher demand in food, land, and crops (Gittings) which helped caused deforestation in many areas along the Yangtze.The third major human error was the location in which they built their vast cities and homes. Where there is a river, there is the potential risk or threat of a river flood. Throughout the summer flood disaster, tens of thousands of people were force to either f lee or evacuate their homes as entire villages were wiped out and crops sustained heavy damage (Ansfield). Flooding was always a negative factor to many cities, towns, and industries which were built relatively close to the Yangtze River in the Eastern Lowlands throughout the 18th, 19th, and 20th centuries (Wakeman 492).Finally, the fourth major human error was failure to improve after many flood disasters before the year 1998. The government did not have enough resources to initiate a complete plan to avoid summer flooding’s and disasters that follows it (Gittings). The government lacked on the money, funds, labor, and support according to this quote during the 1998 summer floods, where many Chinese flood victims answered a question to who to blame saying, â€Å"There was nothing to be done. China was too poor. China has too many people† (Gittings).Thus, many victims advocated for improvement yet failed because political power and complete social unification with the rest of the country was out of their league (Gittings). The bottom line was that human errors not only set up the devastating Yangtze summer flood disaster, but also encouraged it to happen. There were severe flood consequences following China’s summer disaster. First, the disaster negatively impacted socially, where panic and chaos ensured in many of the flooded streets (Watson).But chaos wasn’t the only thing on flooded streets. Damages took place in many commercial businesses, which were either damaged or destroyed by the floods putting thousands out of work (â€Å"YouTube†). According to a video recording the disaster, the entire streets and major roadways were completely flooded, only leaving sewage and unsanitary debris behind (â€Å"YouTube†). The second consequence was unsanitary drinking water. Even flooding as a natural disaster can tamper with the public drinking water making it harder to have access to safe water (Watson).People who drink unsa fe water can risk getting diseases and illnesses, such as diarrheal (Watson). This only put more negative pressure on the victims who were striving to survive the disaster. The third consequence was structural damage complications. Collapsed or damaged structures can create havoc and add more problems to the picture as shown in a video where it showed flood waters surrounding underneath a damaged bridge, full of trapped survivors who were waiting to be rescued (â€Å"YouTube†).Another example of structural damage was the breakthrough of many dikes and levees along the Yangtze River holding back heavy flood waters to protect nearby cities and industrial centers (Hutzler). Many dikes were placed in areas prone to flooding especially near the industrial centers and oil fields in order to protect them and keep them from affecting their economic status (Kurtenbach). The condition and strength of the many dikes literally was a death and life situation for not only the government, b ut for the population as well.Lastly, the fourth consequence was the rise in health issues. An example was the extreme scarcity of safe drinking water. Drinking unsafe water can increase the risk of getting diarrheal disease which exactly happened in many cities affected by the Yangtze floods (Watson). Also, many hospitals and clinics were damaged, destroyed, or completely submerged under water which caused a shortage in medicine and medical equipment for the many flood victims (Hutzler).As the flood waters affected millions, negative health factors such as colds, stomach illnesses, dysentery, hepatitis, and diseases carried by waterborne parasites all threatened the flood victims and those nearby to which health Minister Zhang Wenkang himself tried to warn that these factors were on the rise (Hutzler). The many flood consequences radically brought devastating damages to China and immediately alerted the people and the government that changes and solutions in its society was needed to prevent further flood catastrophes.Agricultural, economic, and industrial damages were dealt with throughout the summer disaster. Fact: â€Å"Flooding across vast areas of China that began in June of 1998 had affected more than 140 million people, destroyed 2. 9 million houses and ruined nine million hectares of crops by July 15† (â€Å"China Moves†). In agriculture, about 21 million hectares of land were underwater which disrupted successful farming and the growth of crops (Harding). The grain production of 1998 was difficult to accomplish for the flooding’s cut back some 11 million tons of summer grain harvest (Harding).Also, cotton wheat and rice got hit the worst (Harding). Economically, losses were estimated around 85. 6 billion Yuan. Agriculture and the economy were extremely associated with each other. For example, the cotton industry was highly affected by the Yangtze summer floods (Harding). Even though it still had enough cotton to produce for the u se of China, flooding still damaged some cotton fields thus forcing a decrease in its cotton exports (Harding). In other words, the reduction of cotton exports and imports greatly damaged its economic shipping.Thus, agricultural had a strong mutual bond with the economy, a bond where one can become affected and overwhelmingly impact the other. But that wasn’t the only complication, for billions of money was spent by the government (â€Å"1998†) to provide food, water, and shelter to the flood victims as well as spending money to clean up and rebuild the affected cities and lands (Ansfield). One example that can be examined was a quote from the mayor of Qiqihar, â€Å"We need about three years to make up for the heavy losses caused by the floods† (Gittings).When a natural disaster hits so suddenly, the damages can be so severe and restoration of anything takes time and patience. Finally, the floods damaged the industry of China. A total of 335 oilfields were subm erged underwater or affected by the floods at Daqing (Kurtenbach). But according to Xinhua, China’s oil production still continued, even though 282 oil wells were shut down and 1443 oil wells were overwhelmed with flood waters (Hutzler).Despite the amount of damages sustained during the disaster, China eventually received much needed help and support by its government, the United Nations, army and military, and the people. The 1998 summer disaster created problems that changed China economically, socially, and politically. But most problems eventually were solved, mostly by the reactions and responses of China and other helpful nations. There were four recognizable reactionaries and responses. The first was government involvement.During the summer flood disasters, the government helped in supplying the thousands with medical supplies, food, water, and shelter (Kurtenbach). Even President Jiang Zemin urged relief workers to ensure social order and guard against the spread of d iseases (Kurtenbach). The government also built the world’s largest powerhouse dam, the Three Gorges Dam (â€Å"Three Gorges†), in order to control flooding and provide an eco-friendly power source for its cities and people (â€Å"China Moves†).Deforestation was a major cause and problem of the 1998 summer floods, thus the government devised a plan in which they will replant thousands of trees to regain rich top soil especially near the Yangtze and its rivers (Lang). In order to complete this major task, the government received help from the Sloping Land Conversion Program or SLCP which will devise a plan to turn some 37 million acres of land back into forests or grasslands (Hance). The government orders some of the dikes to be destroyed to flood plains and farms in order to save the many industrial cities and centers from being flooded (â€Å"Background†).Most importantly, the government banned all logging activities in the headwaters of the Yangtze and in the Sichuan province, stopping the lumber jacks from cutting down trees to planting new trees (Gittings). The second reaction and response was the help from the United Nations. The World Food Programme or W. F. P. officially got involved and helped China and its people by sending and distributing food and water to the flood victims (â€Å"Chinese Agency†). The W. E. P. Deputy Executive Director Namanga Nyongi stated, â€Å"The aim of W. F.P. ’s emergency operation is to provide food and to help these people rebuild their homes and the local infrastructure which were destroyed by the floods† (â€Å"Chinese Agency†). This quote simply explains on how Nyongi spoke a reassurance statement in which help was on the way and that the Chinese flood victims will not be abandoned. The United States also helped by sending in a shipment of humanitarian relief equipment (Harding) and dispatched some cargo planes carrying essential supplies vital to the flood victims (â€Å"Background†).The third reaction and responses was from China’s army and military. Countless Chinese troops are sent in to complete search and rescue missions, reinforce weak dikes, clean up the wreckage of the many cities, and secure public safety and provide protection (â€Å"YouTube†). More than two million people including most military personal all helped reinforce the weak and outdated dikes holding some or most of the flood waters back (Harding). Lastly, the unification of the people of China was a significant reaction and response to the summer floods.It took millions of helpful people of all social classes and society to work as a team to reinforce the poor dikes and drain flooded roads as well as replanting drowned crops (Ansfield). Teamwork in rescue missions was crucial especially when dealing with a crisis that involved victims in a dangerous situation (â€Å"YouTube†). Another example of unity and teamwork was the millions of hands wi llingly sacrificing their time and efforts in the moving of earth and sand to avoid greater disasters (Gittings).The fact that President Jiang Zemin encouraged the country and nation to team up with one another in the struggle of the 1998 summer floods also helped in unifying the people. The 1998 summer flood disaster in China devastated both the government and the people caused by major human errors such as deforestation, overpopulation, location, and past failures only to be later resolved by its reactions and responses to improve its status with the Yangtze and avoid future, major complications. Human errors were most to blame since the government and the people did not learn from their past disaster mistakes and continued to lose countless lives.Deforestation, overpopulation, location, and all of the failures could have been recognized and solved by the people of China thus preventing such high deaths and leaving millions homeless or affected. But despite the complications, ther e were some changes that were made to help them correct their past mistakes, and the government, people, and the United Nations all did their best to help China succeed. The restoration of thousands of trees and the facility of the Three Gorges Dam was to both play a crucial role in controlling the river floods or to prevent soil erosion, as well as protecting those living along the Yangtze.Despite the complications and solutions, natural disasters can change and shape countries, people, governments, and society. But it is the reactions and responses to the disasters that determines whether the outcome is a success or a failure based on learning from the mistakes and correcting them. Works Cited â€Å"1998 Yangtze River Floods. † Wikipedia. Wikimedia Foundation, 03 May 2013. Web. 18 Mar. 2013. Ansfield, Jonathan. â€Å"China Rebuilds in Wake of Flooding: 540 Reported Deaths. † National Post [Don Mills, Ont] 25 June 2002, Toronto ed. , Sports sec. : S10. ProQuest Newsst and. Web. 19 Mar. 2013. . â€Å"Background: The Yangtze's Wrath. † Interview by Elizabeth Farnsworth, Phil Ponce, and Woman. PBS. PBS, n. d. Web. 28 Feb. 2013. . â€Å"Bad Planning Made Flood Damage Worse. † The Daily Yomiuri [Tokyo] 14 Sept. 1998: 1. ProQuest Newsstand. Web. 28 Feb. 2013. . â€Å"China Moves 132,000 as Floods Approach Three Gorges Region: Flood Season Has Killed 1,000, and Officials Tell Residents to Brace for Massive Crest of Water Expected on the Yangtze. The Vancouver Sun [Vancouver] 20 July 1998, Final ed. , News sec. : A5. ProQuest Newsstand. Web. 28 Feb. 2013. ;http://search. proquest. com/docview/242848508? accountid=3785;. â€Å"Chinese Agency Reports UN Food-aid Programme Launched in Flood Aftermath. † BBC Monitoring Asia Pacific – Political [London] 19 Sept. 1998: 1. ProQuest Newsstand. Web. 28 Feb. 2013. ;http://search. proquest. com/docview/450127178? accountid=3785;. Gittings, John. â€Å"Environment: High and Dry The Floo ding of the Yangtze River Has Devastated the Lives of Millions. Now China Is Claiming It Can

At&T Wireless: Text Messaging Essay

1. Describe the cost behavior in the wireless industry. What are the implications of this cost behavior for cost-volume-profit (CVP) relationships? The term cost behavior is used to describe whether a cost changes as output changes. In this case the costs are tightly shielded. In order to describe the cost behavior of the industry, we have to study the process that results in cost incurrence. Based on the information in the AT&T case, the industry features a high proportion of fixed costs in relation to acquiring spectrum and building a network. Variable costs are relatively low and, in the case of text messages, are very low. The cost structure in the wireless industry is dominated by fixed costs, so the contribution margin ratio is high. The high fixed costs and large contribution margin ratio result in a relatively high percentage increase in profit. The greater the proportion of fixed costs in a firm’s cost structure, the greater the impact on profit will be from a given percentage change in sales. The wireless industry has high operating leverage, because of high fixed costs and low variable costs. Therefore, the industry has a high ability to generate an increase in net income when sales revenue increases. â€Å"Text messages did not use any extra spectrum – once the carrier had paid the cost of the underlying infrastructure and storage equipment. Any revenue received by the provider on incremental text message usage is almost pure profit†. So, we can assume that, the cost does not change as the output changes. As far as I understand, the costs are incurred when the message is actually sent, and all these cost are very low. 2. What are the key cost drivers? Can a cost driver be used to continually raise prices? Cost drivers 1. Number of text messages per minute 2. Number of cell towers per area covered 3. Number of databases needed for a certain volume of messages 4. Number of customers 5. Number of cell phone plans 6. Number of terabytes 7. Number of devices The choice of the cost driver in this industry is not obvious, and the cost behavior pattern can depend on the cost driver selected. In this case the key cost driver is the number of text messages sent/received per minute. Yes and No. It depends on the cost behavior of the business. If the business has high variable costs and low fixed costs then the organization is more effected by a change in the volume. If the business, like in AT&T’s case, has a high rate of fixed costs with minimal variable costs (we assume that they are at the low end of the range of volume per fixed costs because their profit margin is high) then a change in volume will have little to no effect on the actual costs incurred. 3. What does it cost AT&T to send a text message?[Consider costs of the channel, billing cost, storage cost] Based on this cost, what is AT&T’s profit margin as a percentage of its text messaging business? [Consider per-use pricing and package pricing]How strong a relationship should exist? In Plan Channel cost$.0008641 (.07/81) = using voice messages as a reference which cost $.07 cents a minute. There are 81 text messages/minute transmitted per channel. Billing cost .0017283 (.0008641 x 2) = assume billing costs are twice as much as wireless costs Data base cost.0002857 (10M/35B) = AT&T would carry approximately 1% of worldwide text traffic of 3.5 trillion (35B) in their database which costs ~ 10 million dollars Storage cost .0000003837 (13,430/35B) = Worldwide text storage is 1,343 terabytes. AT&T would carry 1% of this storage =  13.43 terabytes. Cost of storage is $1,000 x 13.43 = $13,430. To get the per text cost divide this by 35B. Total cost per text$.002878 Gross Profit Margin = Gross Profit divided by total revenue $.20 per messageplan of $5 for 200 messagesplan of $15 for 1500 messages (.20 – .00278)/.20(.025-.002878)/.025 (.01 – .002878)/.01 =99%= 88%= 71% 4. How strong a relationship should exist between the prices charged to a customer for a good or service and the cost of providing that good or service? We think that companies should calculate their break-even point for their goods and services and to charge the prices according to that figure. This way, they can make sure that their price covers their expenses. In case of AT&T’s text messaging they are charging much more than the cost. But because there are only four national carriers in United States and they control 90 percent of the market, and text messaging had become widely popular, they can afford high prices. They are considering the demand of the service and pricing the product according to demand and supply. 5. Why is the price that AT&T charges to transmit a kilobyte of data via text message so much higher than the price charged to transmit a kilobyte of data via a Smartphone? The fastest growing wireless industry is text messaging. This also reflects the earlier comment that demand for messaging far exceeds supply, therefore driving prices up. Even though it costs less to transmit a text message than data, it is still seen as a very low cost to the average customer. The customer feels like they are getting a good deal because they are using the text messaging more than the data messaging. Part of the wireless industries revenue is from the sale of the devices. Even the cheapest cell phones have the capability to send text messages. Since the company is not making as much of a profit off of the device (cell phone), they are making up the difference in charging more for the text messages. In addition, since voice  messaging is being replaced by data messaging, both text and email, almost all cell phone chains are developing their own version of an IPhone or smart phone. To compete with these other chains, AT&T must charge the lowest price possible for their data to entice customers to buy their products over the competitors. 6. As we move to a service economy, can we expect to have more or fewer businesses with cost behaviors similar to those in the text messaging sector? Explain. I would assume we would see more businesses with cost behaviors similar to the text messaging sector. The reason being is the service industry tends to have more fixed costs that don’t increase linearly with the increase in service. The fixed costs tend to be step-fixed costs, whereas they can maintain services within a certain range up to a point in which they have to increase the fixed costs. The variable costs tend to be minimal since they often don’t have the manufacturing costs of direct materials and direct labor. After a service industry covers the basic operations, less money is needed as sales rise. Once the fixed costs are paid, the expense of processing additional sales is so little that the profits will grow faster than the revenues. The precedence has already been set in multiple service organizations, particularly internet companies. They have shown that once you achieve the hurdle of covering your basic fixed costs, the increased volume of service is very profitable. 7. What should management of wireless firms seek to do now? AT&T should invest in improving the company‘s wireless broadband coverage and its performance. They can improve network coverage by adding cell towers, laying faster fiber-optic cabling, adding capacity to cell sites and upgrading current cell sites to improve internet speeds. By enhancing the network, they can carry a larger volume of data traffic. This will allow them to accommodate more customers and therefore increase their profits.

Impressionism and Naturalism by Robert Herbert Essay

Impressionism and Naturalism by Robert Herbert - Essay Example Manet, according to Herbert was a different sort of flaneur. He was obtuse in reproducing the flaneur's experience of destruction, transformation, and desolation because he was an active observer. His work The Street Singer (1862) and The Balloon (1862) were examples of the artist's silent commentary in the upheaval of the city and its people (Herbert 36). He exemplified realism through artifice and caricature. Flaneurs were keen in capturing the moment of life in its pure form which was why later works offered glimpses of contemporary urban life not through detailed oil paints but caricatures speedily drawn and executed as in Manet's Rue Mosnier Decorated with Flags and Degas's Martelli. Flaneurs, therefore, were inventors and responsible for innovation in art during the 19th century. Flaneurs were also investigators of history for they were keen observers of urban life, noting spectators, daily occupations, behaviors, professions, and intimate and domestic life of that time. Degas's Women on a Cafe Terrace, Evening and Manet's Railroad which the artists investigated to the extent of scientific naturalism could be said to denote this aspect of flaneurs. Flaneurs were also observers of domestic manners. Their detachment from the public and private arena offered them the advantage of narrating emotions and feelings without romantic interference. This could be observed in Cassatt's Cup of Tea (1880) and Morisot's Interior both depicted the artist's detachment yet interactivity with domestic life.

Analysis on Race (Black) and Representation in Media Essay

Analysis on Race (Black) and Representation in Media - Essay Example While the society has made giant strides towards toppling black discrimination and segregation, significant barriers still remain, reinforced by perceptions created in the media. This paper will look at how these perceptions are perpetuated, especially in music videos in the mass media. The video begins at what looks like Lil Wayne’s residence, and features static Major as his house guest. They seem to be preparing for a night out and are sprucing themselves up in front of a mirror, adjusting their gleaming jewellery and enquiring from each other on how they look. After they are done with their preparations, they leave the house and board an International TXT limousine. They are ushered into the limousine by a scantily clad woman who gives them a secretive glance. Once in the limousine, they seem surprised to find it filled with seemingly intoxicated and similarly scantily clad women. They proceed to make themselves comfortable among the women, who seem to be taken in by the t wo men, with Lil Wayne rapping along and miming to the song’s lyrics. They drive through Las Vegas and Lil Wayne also climbs to the top of the car to play a guitar. Stereotyping of black males in videos acts to serve various purposes, especially motivational and cognitive (Park et al. 159). A desire for the justification of the status quo acts to give life to activation and formation of stereotypes. Stereotyping in the media industry is as a result of the need to give information on the featured characters and to show the audience what to expect of the actions of the character. The media portrayal of black males, especially in music videos, creates an impression of what the society associate them with. In Lil Wayne’s Lollipop video, he is seen dressed in expensive clothing with overly extravagant jewellery. The image created from this video plays on the stereotype of black, ignorant characters, which Lil Wayne seems to enjoy portraying and thus creates an impression th at he is that stereotype. This, in turn, creates an impression in society that all rich black males live in that manner. Society at large then expects this same characterization, in real life, and this becomes a handicap to African Americans since they will be gauged using these same stereotypes, in job interviews and elective posts. It is not uncommon to see covertly racist media adverts, which play on these stereotypes, during elections, since this stereotype has already been endorsed, by powerful rappers, who have a lot of influence, in the African American society. African Americans are, therefore, not treated as seriously as other candidates in elections, and job interviews, where the interviewers may not have had close contact with African Americans, thus have their opinions formed by the stereotypes depicted in the videos. Representation of black males in music videos consists of exaggerated racial portrayals identifiable as parodies of stereotypes (Park et al. 161). Most mus ic videos will have black males from the ghetto wearing gang colours and flashing gang signs. While this is possible, gang affiliations are a crime in America and thus this can be misinterpreted to show African American young men as violent and unrepentant of the pain caused by gang wars. The media industry is flooded with representations of black males as members of

Anthropology of Marxists, Marxians, and Marxish Essay

Anthropology of Marxists, Marxians, and Marxish - Essay Example The Hegelian system formulated the idea of self-consciousness that derived secular terms such as ‘the man’. This term created religious conceptions that characterized what would be a moral man whose basis drew from moral, political, theological among a list of other traits. In this text, Rosas as Marxian criticizes the way in which people along the Mexican border cannot be free to roam around their nation because of the intensified border patrols mounted by the USA in this territory. Essentially, when Rosas speaks to some Mexicans they tell him that they are only free when they live in the sewer lines that connect the USA and Mexico, which is basically an effect of capitalism. In most cases, those that seek to go to the USA to seek better opportunities opt to use the sewer line that connects the states of Sonora and Arizona, for the fear of being subjected to humiliating checks at the border (Rosas 2). Most of them attract the stereotype that they could be drug peddlers, which most might not be the case hence making it hard for them to access or receive US citizenship, which is a social conflict that Rosas seeks to address. Here, Foucault argues that subjects that fell under an individual in power had no option but to put their lives at risk for this person because what mattered was him to maintain his authority without caring about what would happen to them. Foucault criticizes ‘the right under the power of life and death’ because this meant those in power had the authority to take life as well as this was the law. The argument embedded here is that the western powers have borrowed from this archaic law that was applicable especially in Rome by introducing ‘deduction’, which encompasses incitement, bossing around, control and optimization among a list of other traits as elements of being in power (Foucault Michel 79).

Methods for Increasing Employee Motivation Research Proposal

Methods for Increasing Employee Motivation - Research Proposal Example The discussion will attempt to address the primary question framed as follows: What programs may be suitable to increase employee productivity and revenue? Taking into account that General Trading has expanded across global boundaries. This problem regarding employee productivity, if remains unsolved may damage the reputation of the company, which has built over the years. It may even lead to compromise the efficiency of the company, which may lead to increased customer dissatisfaction. So a proper analysis of the situation and probable solutions to increase the employee productivity is very vital in this scenario. General Trading is a wholesale food distributor organization with clients abroad to whom they export their product offerings across the borders. For them, maintaining a healthy motivation level among the employees and thereby increasing the productivity is very crucial to the development and flourishing of the company. In order to increase the motivation level among the em ployees, an employee incentive program is very much essential for the company. In today’s world, employees are the biggest assets to an organization. Companies are paying competitive salaries to the employees as compared to other companies, in order to keep them motivated, as well as to retain them. Most of them have already moved towards an ‘Employee Incentive Program’, which is itself a part of performance appraisal. It has also been found out in a study that employee engagement which mainly comprises of commitment to work, as well as employee’s job satisfaction with the company increases through a host of performance appraisal system that happens in a company from time to time. (Scott, â€Å"Introduction†). Employee Incentive Programs has been employed by many companies and is considered as a highly valuable tool to keep the employees in an organization motivated by offering various kinds of incentives on the basis of their performance in the org anization or in similar grounds. Implementing an employee incentive program in the organization has also lead to solutions that exists between the company’s top management and its employees on the production front. It also leads to identification of the most efficient and effective employees in the organization, who can further be moved up in the hierarchy and can be groomed for possible leadership roles in the organization. As a result, it leads to identification of talent within the organization without hunting for the right candidate in the open market.

Bitcoins Essay Example | Topics and Well Written Essays - 2500 words

Bitcoins - Essay Example These bitcoins serve as money for all types of payments and receipts on the web. Individuals can maintain their own bitcoin wallet, where these bitcoins are debited or credited. Since this is a peer-to-peer currency, it does not require any central authority to issue currency or track transactions (The Economic Times, 2014). The concept of bitcoins was first published in a newspaper in 2008. However, it was only in 2009 that the first online wallet software for transacting bitcoins was released. It was called Bitcoin-Qt. Nonetheless, this software initially was poorly developed and many of its features were exploited to create more and more bitcoins. Later on, a team of core developers and experts of software were employed to monitor, develop and enhance the bitcoin way of transacting. Since then, use of bitcoins has rapidly increased. Also, there have been considerable fluctuations in the price of bitcoins. The price of bitcoins had reached its peak in 2013, during the Cypriot financial crisis. From the initial days of inception, the bitcoin system has suffered plenty of glitches with respect to technology and software system that it was based on. This was largely due to lack of proper governance and management of the software. The system was found to crash multiple times. So, individuals were not real ly eager to use it as a system of online money. Bitcoins were largely used in online gaming versions, where individuals on winning points were credited with bitcoins. Hence, only youngsters and teenagers were found to take interest in this system. Soon as greater regulations were incorporated in this sector, bitcoin exchanges were regulated whereby they were required to submit reports of bitcoin transfers. Gradually, more and more business firms and non-profit groups started to accept this form of exchange. Currently, BTC China, which is a Chinese bitcoin exchange, is the largest bitcoin exchange in the world by virtue of trade volume.

NYC HOMELESS POLICY Research Paper Example | Topics and Well Written Essays - 750 words

NYC HOMELESS POLICY - Research Paper Example Main reasons and causes for homelessness as written by many reports and studies include; poverty (that is caused by many factors like unemployment), war, abuse by the government or people with power, lack of affordable housing among others. This paper will focus on the temporary shelter policy for New York Homeless people. There has been a lot of criticism and debate on the temporary shelters policy for some time now. The coalition for the homeless says that the mayor’s tact relies on short-term emergency interventions, at the expense of long term federally funded options like housing programs that have had promising results in the past. During an interview with WCBS 880’s reporter Paul Murnane, the coalition’s executive director, Mary Brosnahan said, â€Å"sadly this year, the state for the homeless in New York City has never been worse, today for the first time in New York history, we have 50,000 sleeping each night in our shelter system and that includes over 21,000 homeless kids†. The Homeless Service Commissioner Seth Diamond said the numbers of the homeless entering the system are falling. On the same issue, the mayor, Bloomberg on his part said â€Å"that the coalition is not a reputable organization. He blamed the increase in the number of homeless in the shelters on Albany and Washington. ... The temporary shelters are better than nothing at. This is because they keep the homeless people off the street as the shelters are located in designated areas. Because of this reason, they need to be maintained until a more permanent solution can be found. This can be done in a number of ways one being identifying the fakes from the genuine homeless people. According to a report in the New York Times, more than one out of four families in shelters, 28 percent, include at least one employed adult, city figures show, and 16 percent of single adults in shelters hold jobs. This means that the City of New York is paying to run shelters for people who are employed. If this continues, there will be an overflow of people in the shelters leading to disease outbreak, congestion and worse living conditions. The mayor’s administration should stop this exploitation by the people able to rent cheap housing for themselves; so that they can have an accurate number of the city’s homele ss for effective planning and maintenance. It would also be difficult to maintain the shelters because of the increasing number of the homeless population. This refers to the homeless families that have been living in shelters for years and have increased the number of children in their families. This means that they will require more tents to fit the number of people in the family for privacy and a little bit of comfort. The maintenance money will also have to increase because there are more mouths to feed than the original number. The children of the homeless are more often than not faced with the same fate as their parents and part from growing up in shelters, they end up living in them when they grow up thus the shelter dilemma becomes a vicious cycle. Poverty is another

Longitudinal Strategic Development Study Virgin Essay

Longitudinal Strategic Development Study Virgin - Essay Example In order to understand the strategic development history of Virgin, it would be necessary to refer to the context of strategy, as a key criterion for the success of business operations. In accordance with Waters (2006) the term corporate strategy ‘contains all the strategic decisions that affect the whole diversified corporation’ . In the above context, corporate strategy refers to a series of organizational problems, such as the following ones: a) which part/ sector of the organization is of more importance for the organization’s growth, b) at what level integration should become one of the organization’s activities, c) how the growth of the organization can be secured – especially in the long term, d) in which way the organization’s mission could be achieved, e) how the strategies of the organization’s different sectors can be combined so that organizational culture is secured, and so on. In other words, the corporate strategic history shows the methods used by the organization for promoting its culture and achieving its goals; these methods can be differentiated across organizations – in accordance with the conditions in the internal and external environment but also the aims and the values of each organization. It is clear that the strategic development history of successful corporations, like Virgin, can be identified in the practices these firms used not just for entering the global market but also for securing a long term growth – as proved through the organization’s current performance, analyzed in the section that follows. The strategy of Virgin has been considered as unique – mostly in terms of its structure and operational processes. As already explained above, the group includes a

Relationship Marketing Through a Number of Pathways Research Paper

Relationship Marketing Through a Number of Pathways - Research Paper Example Citigroup’s relationship managers have realized that the Company met all these three aspects. First of all, the Company offers both investment and commercial services which means that clients have a lot of services at their disposal. Some of them include; Mortgages, priority banking for high net worth clients, loans, investment banking, telephone banking and card products. Secondly, clients in the banking sector are in continuous need of these services. Lastly, those customers who decide to do business with the Company normally select one service or product. In the case of Citigroup, some customers strictly come to obtain loans, some would like to save their money there but access it conveniently when the need arises (commercial services and care facilities). The organization has implemented relationship marketing through consumer tracking. Since Citigroup is B2B backed, then it was able to use a comprehensive database to analyze what consumer tastes and preferences are. It ha s been a leader in business communication with the client. Citigroup has been asking its clients about their thoughts on the institution. It found that certain services were preferred over others. It also realized that consumer kept coming back for certain products during definite seasons. It was able to establish a pattern and focused its energies on products that gave them maximum returns. This was also topped up by improving services that clients were dissatisfied with. One such service was the provision of housing loans. The Company found out that many clients were happy with their rate of loan processing.

Homework and Paper Activities Essay Example for Free

Homework and Paper Activities Essay As a teacher, I will implement a strict rule regarding homework and other paperwork. Home works are strictly to be done at home and should be immediately passed as soon as the student arrives in the classroom, The purpose of this is to avoid cheating among the students and to encourage them more to do things all by themselves. However, students are allowed to discuss the task among themselves during breaks. This is to promote learning by free discussion of ideas and thoughts. Paper activities such as laboratory works should only be passed during the designated class hours. Papers that are to be done by pairs may be similar but they should not be a total replicate of each other. Lastly, any late submission of the papers will automatically be subjected to deduction to teach the students to pass on time and obey rules. As my general protocol, the class will start 5 minutes after the designated time. This is to allow students to sign the attendance sheet and prepare the things needed for the class which I will post on the board. I will also implement an energizer activity to introduce the topic to class and to get the class’ attention for the topic. A lecture with interactive discussion will follow after that and an evaluation activity such as a quiz will be done to assess the students learning. Any activities during the class such as going to restroom or clinic should be subjected for my permission. I will only allow 10 minutes for restroom activities to avoid cutting classes of students. If the next class is to be conducted to another classroom, I will dismiss the class 5 minutes before the time to allow them to prepare for the next class. Students are required to pick up any litter found in the floor. Desks are also to be organized and the group assigned for the day should erase the board upon my permission. After all the things are done, a single file will be formed before going to another classroom to keep the students organized. Rules, consequences and rewards are very important in managing the classroom. These three things along with the set of teaching strategies are helpful in maintaining balance and preserving harmony between the teacher and the students. If the rules, consequences and rewards are well planned, established and informed to the students, then any misunderstanding or conflicts will be avoided (Laslett and Smith 1984). Below are my established rules, consequences and rewards which I based from Kohlberg’s stages of moral development.

The key factors of scientific management

The key factors of scientific management Scientific management is the study of a job and identifying the best way to do the job. Appropriate workers are selected and training are provided to them, so that the performance of individual worker is enhanced, leading to improved efficiency of the firm (Davidson, P., Griffic, R.W Erica, F. 2003). Frederic W. Taylor did the first study of scientific management. He is known as the father of scientific management for his findings in the field of management. Scientific management emerged in 19th century, but still today, large number of companies practice scientific management. Scientific management is widely used in assembly lines and in fast food outlets (Davidson, P. and Griffic, R.W. 2003). In the following essay I have analyzed the how scientific management is applied in the New Zealand based Fletcher Building limited. The company is one of the largest commercial employers of (200,000 workers world wide, with 9000 New Zealand workers) the New Zealand, the organizations operatio ns range from construction, manufacturing and sales of products related to construction. Fletcher building not only operates in New Zealand but also in other countries (Fletchers Building, 2008). The key factors of scientific management are discussed one by one in the following paragraphs with examples for each of key points from Fletcher Building. Followed by the conclusion. The first step of scientific management is to find a standardized method to do a particular job. This involves dividing a complex task into large number of small tasks, each task done by an individual (Samson, D Daft, R.L., 2005). Individual jobs are scientifically analyzed and the best way to the job is identified. As a result, the old rule of thumb is replaced by a more efficient method. However, workers are treated more like robots. Uniformity and repetition of the same task leads to boredom and frustration among workers. In addition to that, skills of labour are lost as multi skilled employees are forced to do only a small part of a complex job; leading to lose of pride in the work, they do. Another set back of scientific management is individual ideas of workers are ignored (Davidson, P., Griffic, R.W Erica, F. 2003). Fletcher Building also successfully implemented standardization in their business activities. All the workers are given specific jobs. Due to this, employees of the company have more understanding in one particular field. This can be seen all over the company. For example, machine operators in Pacific Steel division (New Zealand Steel maker) or a truck driver who works on construction sites of the company. They specialize in their own field, which leads to improvement in the output in all areas of the company. Identifying the best practice for a task is the first step of scientific management. Followed by selecting workers who are appropriate to do the job (Robbins, Belgman, Staga Coultec 2003). In the past workers are selected to jobs without considering whether their skills and abilities. The right person for the right job is needed. Each and every worker tends to have different skills and interests. Under scientific management, suitable workers who match their skills to the task are selected (Samson, D Daft, R.L., 2005). It is the managers job to find the right person with the matching abilities and skill to a particular job. Or else if an inappropriate worker were selected the efficiency and effectives of the company and the rest of workers, whose work are related with the inefficient worker will fall. In Fletchers Building, applicants for a job under-go various procedures to check whether their skills and experience are at the level to perform the task associated with the job. As a result, the most suitable workers are selected for various jobs of the company. The third stage of scientific management is to train workers to their job (Samson, D Daft, R.L., 2005). Employees are trained in the accordance with the best way to do the job. The worker may have knowledge of how to perform the task that s/he was selected for. Previously workers select their own ways to do the job. However, the company needs to train them according to their findings in step one, which is the efficient way to do that task. This training must be ongoing if the managers find a better way to do the job than the previous one. It is the managers duty to keep the training up to date (Davidson, P., Griffic, R.W Erica, F. 2003). Training workers is one of the priorities of Fletcher Building limited. Training is brought down from the top of the companys hierarchy as an important part to be the market leader in todays competitive market (Jayne V. 2007 July). New employees are given training to teach them how to perform the task according to the companys procedure. In scienti fic management, workers are trained only in one way to do the job. However in Fletcher Building Limited workers are trained in according to the need of the company, not only in a simple task. This not only helps to react to the consumer needs, but also this enables the company to face competition in the dynamic market. A well-trained work force is more flexible to adjust to new ways. The next key factor of scientific management is providing support to workers and helping them to plan their work so that interruptions are eliminations or minimized (Samson, D Daft, R.L., 2005). Taylor considered that its managers duty to plan the work and to eliminate any bottle necks in the work. Workers and managers are equal at work. Managers plan and organize work so that interruptions and bottlenecks are eliminated, while workers are the person who actually does the work (Davidson, P., Griffic, R.W Erica, F. 2003). In Fletcher Building, workers are encouraged to discuss any problems associated in their work with higher ups. Moreover, employees are free to submit any ideas to the company. This helps managers to identify any difficulties associated with the work. One of the key factors in supporting the employees is motivating them in the work. Fletcher Building has various schemes to motivate the workers. For example, they have gym facilities in some of the company work sites and provide discount card for those workers who work in a site which doesnt have a gym facility (Leveson, V 2008). This enable worker to be more involved in their jobs and motivates them. The last character of scientific management is performance based wage incentive. Earlier workers tend to work at a slower pace as they get the same salary as others (Samson, D Daft, R.L., 2005). In scientific management, workers are paid according to the output they produce. This led to employees increasing their output to earn more money. As a result, the worker who is efficient produces and earns more. Money is one of the key factors, which attract workers to work more. In piece rate system or performance, based payment workers who produce more are paid extra and those who meet a certain level of output get a bonus. However, this approach tends to treat workers as they are only motivated by money. This approach ignores social and higher requirements of workforce (Samson, D Daft, R.L., 2005). On the other hand, in Fletcher Building Limited workers are paid a set value of wage. However not the only benefit which they get from working for the company .In order to further motivate th e workers, the company provides various benefits. For example discounts cards for workers on their wide range of products (Leveson, V 2008) The main focus of this essay is the implementation of five elements of scientific management in Fletcher Building Limited. The five elements are one best way of doing the job, selecting appropriate workers, providing training according to the best way to do the job, supporting workers to eliminate bottlenecks and paying a performance based wage to boost their performance. Fletcher Building limited implemented most of the factors of scientific management to some extent. Some factors of scientific management have been applied more than others have. Scientific management has played a major role in the running of Fletcher Building Limited and it will continue in the future. Scientific management not only affected the operations of Fletcher Building limited but also in many organizations all over the world. Even though this was established in 19th century still many companies use scientific management in their business day-to-day tasks.

Shakespeares Language in his Works Essay -- essays research papers

Shakespeare's plays are full of references to what is now obscure- classical myth, falconry, astrology, or the theory of 'humors' that were thought to determine personality within so many of his characters (?S??Far?). Shakespeare wrote about themes and events we can relate to even now nearly 500 years later. 'He wrote about us-you and me, our friends, our families, the people we work with and play with and argue with and go to bed with, the characters we see on the evening news and elect to public office' often times comparisons are often scary (Seder iii). Shakespeare also liked to make fun of many of his characters. His plays show that he can be funny and has a humorous personality, often times even in his tragedies in which tears would flow from not only depression but from laughter. 'Shakespeare is full of humor, not only the broad clowning of the likes of Falstaff, but the deft little jabs and needles, sly and subtle jests' found in his vocabulary (Seder iv). The meanings of words Shakespeare used have changed and some have totally disappeared. The word ?bootless to Shakespeare did not mean lacking footwear, but useless or meaningless? (?So?..Far?). In our time we use expressions like LOL and IDK that stand for ?laugh out loud? and ?I don?t know or understand? when writing text messages or instant messages. If these expressions were during Shakespeare?s time the people would not have understood their meaning. Another such expressions could be ?Cool beans!? that basically means ?this is neat.? Terms that Shakespeare used have either fallen out of use or have different meanings, thus confusing the reader if he or she is not familiar with the Shakespearean style of writing. A great example of a word meaning chan... ...iting letters or messages and sometimes you will hear a person say ?tis?. It is amazing to look at the influence that he has contributed to our world and language today. He even has influence on current plays and movies and even poems. Shakespeare also uses themes in his plays. For example the main themes in Romeo and Juliet would be love and fate. Most people have at least heard of Romeo and Juliet and know it is a love story. Women and girls think Romeo is the perfect man or husband, so today girls are looking for their Romeo. In Romeo and Juliet fate just would not let them be together. There were problems arising all through the play with the fighting families and the tragic deaths of Romeo and Juliet. We knew there were going to be problems or death in the beginning when they say "A pair of star-crossed lovers take their life" (Glencoe McGraw-Hill).

Schizophrenia :: essays research papers

One of the major disorders in the psychology field is schizophrenia, a serious brain disorder. It is a disease that makes it difficult for a person to tell the difference between real and unreal experiences. The word traces back to Greek terms for â€Å"split† and for â€Å"mental functions.†   Ã‚  Ã‚  Ã‚  Ã‚  There are two different types of schizophrenia. One is reactive schizophrenia, which is characterized by the symptoms that are sudden and easily identified. The second type is called process schizophrenia, which develops gradually over a person’s life. The cause of schizophrenia is so puzzling even experts sometimes don’t know what causes the disease. One possible cause for schizophrenia is from heredity. The disease can be passed down from one generation to another. Some researchers also state that it might be caused from the events in a person’s life. The dopamine hypothesis states that schizophrenia may be caused by an excess of certain neurotransmitters in the brain. There are so many possibilities of how schizophrenia is developed that’s why it makes it so impossible to come up with one answer.   Ã‚  Ã‚  Ã‚  Ã‚  A person who has schizophrenia experiences schizophrenia goes through speech disorder, the person will talk and make no sense but will use proper grammar and sentence structure. They also go through hallucinations and delusions, which the person hears voices that, convey instructions about what to think, feel, and do. For example, my uncle suffers from schizophrenia. During the day he will just stare at the sun. When someone asks him why he is staring at the sun he will say, â€Å"They tell me to stare at the sun. It will give you power.† He thinks he is normal but he isn’t. People with schizophrenia don’t realize they have a brain disease. They think they are normal like others around them.   Ã‚  Ã‚  Ã‚  Ã‚   There is no cure for schizophrenia today, but proper treatment can usually control the symptoms of schizophrenia.

Working for the Public Sector versus the Private Sector Essay -- essay

As with most choices, especially in the work world, there are benefits and consequences of working for both public and private sectors. There are different sets of needs to be met in each criterion but they may slightly relate to each other as well. The public sector mostly relate to Government work. There are special exams a person has to take whenever they apply for any work with the government. There are some very strict rules and requirements to meet in every branch of the government and for every position within that branch. And the private sector is mainly based on the idea of profit. When a person applies for a position in a private sector, they require a certain amount of education, experience, training or skills. But the rules and requirements are not as strict as the public sector. The public sector is not based on the idea of profit. Workers of public sector benefit high job securities and health care and other personal benefits. In the private sector, health care benefits and other personal benefits are quite poorer than in the public sector. They're more based on w...

Puerto peincesa Essay

This Case Study is about Puerto Princesa, Palawan nature based attraction. The case study is being made for having a broader knowledge about their weaknesses, strengths, community, sustainable place, and any other terms relating to tourism. Come up with a hypothesis, methodology, results, analysis and conclusion. Resolve or give suggestion, recommendation for the negative results that will be shown in this case study. Introduction: A tour and research has been done for this case study. Experiencing their place, to feel their place for the case study to be more realistic and having a wider knowledge about Puerto Princesa, Palawan to come up with a possible reccomendation. PUERTO PRINCESA, PALAWAN â€Å"The last frontier of Southeast asia† Puerto Princesa City, a tropical paradise with a bustling urban center perfect for business with leisure trips. Lush rainforests and white sand beaches are simply hours away from the city proper, where a banking and commercial boom has made life easier for workaholics who can never run away from the office. Puerto Princesa, which forms part of the Philippine’s last frontier, is a City rich in natural resources. It is the country’s largest City with a total land area of 253,982 hectares. A chain of mountain ranges runs through the entire length of the City, dividing it into two distinct areas – the East and the West Coast. The eastern side, which is facing the Sulu Sea is characterized by thin strand lines bordered by swamplands, following a series of flat plains to hilly terrain. The West Coast has fewer plains with mountain ranges close to the China Sea, thus giving the City a unique yet fragile ecology. Puerto Princesa’s pride is easily the Puerto Princesa Subterranean River (or Underground River), a UNESCO World Heritage Site and one of the New 7 Wonders of Nature. The 8.2-kilometer river, said to be the longest navigable underground river in the world, winds its way underneath a mountain range, through the St. Paul Underground River Cave, and then goes out into the South China Sea. The journey through the cave system alone is 24 kilometers long. The entire area where the Underground River is located is actually a national park and a model of biodiversity. More than 800 plant species, including almost 300 trees, 195 bird species, 30 mammals, 19 reptiles, and eight bat species call this area home. Economic growth: Hypothesis:

Path Goal Theory

Path Goal Theory In order to encourage, support and motivate their followers, Path Goal Theory requires a leader to take into account situational factors when adapting a leadership style. Successful integration of situational factors with a leadership style can lead to maximized satisfaction and effort from the follower. The Path Goal Theory states leaders must: †¢Forge a path for followers to obtain their goal through coaching and direction †¢Remove roadblocks and obstacles that are preventing followers from accomplishing goal †¢Increase rewards and incentives along the way 1.Subordinate Factors (Follower Characteristics) A. Ability: A follower’s self-efficacy and self perception of competence in performing tasks to achieve goals. B. Authoritarianism: is defined as the degree to which the followers seek structure and task clarity. C. Experience: Knowledge of or skill in achieving a goal. D. Locus of control: How one perceives how much they can control events th at affect their goal achievement. Those with low internal locus of control seek to participate and engage in decision making. On the contrary, those with a strong external locus of control like to be directed and provided structure.Coach Lengyel has a diverse group of followers with a variety of contrasting personal characteristics. Due to their lack of experience, youth and general â€Å"rag-tag† composition, the players on the team lack confidence, ability, cohesion and self efficacy. Given these characteristics, these players have a high external locus of control and yearn for task clarity and guidance. In contrast, Coach Red Dawson and Interim President Donald Dedmon have more autonomy and have established themselves more in their respected roles.Lengyel adjust to the varying characteristics of these followers by engaging them more in the decision-making process and seeking their advice on certain issues that arise. 2. Environmental Factors: A. Task structure: A leader ne eds to analyze the elements and nature of a task a follower is responsible for and identify and remove any difficulties it could pose to the follower. B. Formal authority: is the power position of the leader which can affect the satisfaction of a follower. If directive leadership and a highly formal authority system are in place, the redundancy can cause follower dissatisfaction.C. Work group: Group dynamics and relationship among followers. In situations where team cohesiveness is low, followers need supportive leadership. Where a group is more established and talented, a directive or achievement oriented style is more optimal. The players face significant environmental challenges in both their task structure and work group dynamics. First, the vast majority of the team consists of freshmen or students who have never played organized football. Learning the complex play schemes and the intricacies of the competitive collegiate game in such a short period is certainly daunting.Moreov er, positions players such as the punter do not fully comprehend everything their roles entail. Since almost all the players haven’t played with each other, the team lacks the camaraderie and cohesion of their competitors. The confluence of these factors and the physically demanding tolls of the game have created significant roadblock in accomplishing their goals. The fear of embarrassing the community and university with poor performance on the field and the stress of the tragedy compounds the challenges the team face and weighs on them greatly.As a result, the players are more sensitive and an overbearing and authoritarian leader will only exacerbate the situation. Similarly, the stress of the tragedy is also weighing significantly on both Coach Dawson and Interim President Dedmon. After losing colleagues and players he coached and recruited from the tragedy, Dawson has significant doubts about whether he can be around the game anymore. The drastic changes with Dawsonâ€⠄¢s workgroup and formal authority figure are daily reminders of the tragedy that occurred with the team.The tragedy wears on him and he has a significant effect on his confidence and motivation to fulfill and execute the tasks associated with the assistant coaching job. With Dedmon, the opposition by some in the community to rebuild the football program has made Interim President insecure and timid when approaching tasks with the job. Furthermore, Dedmon’s confidence erodes initially when numerous coaches around the country turn down the offer to coach the Marshall team due seemingly insurmountable challenges facing the program. Dedmon has to adjust o a changing environment surrounding the university and to Coach Lyngel’s energetic and enthusiastic style which contrasts greatly with his own. 3. Leader Behavior: A. Supportive leadership: Consider the needs of the follower, showing concern for their welfare, being approachable as a leader and creating a friendly working environment. This approach is best when the work is stressful, ambiguous and or hazardous. B. Directive leadership: Telling and providing leaders with structure, task clarity while giving appropriate guidance along the way.The leader sets clear standards of performance in order to decrease role ambiguity. This form of leadership can be helpful when the follower is inexperienced. C. Participative leadership: Effective when followers are autonomous. This form involves consulting with followers and making them an integral part of the decision process. This approach is most effective with followers who are knowledgeable and skilled and have a high internal locus of control. D. Achievement-oriented leadership: Setting challenges goals, both in their work and in self-improvement.The leader establishes high standard of excellence and leader shows confidence in the capabilities of the follower to succeed. This approach is best when the task is complex. Lengyel has to question whether the f amous sports tenet, â€Å"Winning isn’t everything; it’s the only thing† is applicable to the season Marshall is about to embark on. His predecessor, like a majority of other coaches led with predominately directive and achievement-oriented styles. Due to the nature of the sport and the intolerance of role ambiguity in the game, Coach Lengyel also exhibits a directive style of leadership in some scenarios.The players’ perceptions of their abilities are relatively low and Lengyel helps them by clarifying and directing them how to do their tasks. For instance, this directive style of leadership is evident when Lengyel instructs and clarifies the position players like the punter and offensive lineman how to do everything that their role entails. Given the players desire for task clarity and guidance, the directive style would most likely be the most effective leadership style with inexperienced players in most scenarios.The most important factor however that impacts the follower characteristics and environmental factors is the stress and pressure resulting from the tragedy. Realizing the enormity of the tragedy, Lengyel utilizes a supportive style that provides psychological support and concern to his followers by their acknowledging the pain and frustration. Knowing that Dawson is in a sensitive emotional and mental state, Lengyel isn’t too aggressive in his pursuit to have him on the coaching staff and always carefully listens and assesses Dawson’s objections and feelings.Lengyel’s pregame speech at the resting spot of six of the players from the Marshall team also exemplifies his exceptional ability to collectively assess both characteristics of his subordinates and the environmental factors when trying to motivate and instill confidence in his team. In the speech he addresses the tragedy of the past, the current team’s shortcomings and even mentions how the team they’re facing has more ability and talent. He declares if they give maximum effort they will not lose and will reach their goals of honoring the memory of the teammates killed in the plane crash and making the community proud.Lengyel realizes that due to the circumstances, that leading with the directive and achievement oriented styles isn’t the most conducive approach. To motivate the players on the team, Lengyel has to utilize a Supportive style that taps into and emphasizes with the emotions of the players and tries to alleviate the stress and pressure of the situational factors. While some other leaders and his peers ultimately fail in certain circumstances for their stubbornness, Lengyel’s biggest leadership strength in contrast is his flexibility.As mentioned, with the players on the team Lengyel’s demonstrates mostly directive and supportive styles. In regards to followers with contrasting characteristics of the players, Lengyel is able to successfully adapt his leadership approach to eng age and accommodate them. After assessing that the players on the team do not have the ability to execute relatively complex offensive schemes and tasks, Lengyel realizes they need to simplify their playbook. In this instance, because the assistants have established themselves in their respected roles, Lengyel engages them in the decision-making process.Utilizing the Participative leadership style results in Coach Dawson coming up with the idea to use the simplified Veer Offense. In addition to building trust and satisfaction from the assistant coaches, the players also benefit as it reduces a significant roadblock for them 4. Outcome: A. Performance: Helps followers reach their peak performance. B. Satisfaction: Makes working to obtain goal more satisfying. By successfully adapting to both the characteristics of his subordinates and of the environment, Lengyel helps his followers exert maximum effort and gain satisfaction from obtaining their goals.Coach Lengyel was able to forge a path for his followers by taking into account the different strengths and weaknesses of his followers. As articulated in his speech the team’s main goal of honoring the memory of the team was to â€Å"lay it on the line† and provide maximum effort. Whether it was the players on the players on the field or even Interim President Dedmond aggressively petitioning the NCAA to let their freshmen play, Lengyel’s followers were clearly motivated by his leadership

Marketing Channels Essay

Suppliers should not deal with intermediaries who are more powerful than they are†. Debate this statement. If a supplier deals with strong intermediaries, they will probably exercise power over him. As they are able to provide him with more utilities (value, benefits and satisfaction). However, if there are many strong distributors in the market offering similar packages of benefits and utilities. Then there will be no harm for a supplier to deal with a more powerful distributor or intermediary as they will no longer be so special and powerful since they know the supplier can switch to a any other intermediary anytime (they are easily replaced). Therefore, the level of dependence of the supplier on the intermediaries will be lower. Another way is to excel in logistics when dealing with downstream channel members. Therefore increasing their rewards for doing business with the supplier and becoming difficult to imitate. In turn, channel members make markets and are the faces of their producer to those markets. Question 4: â€Å"We should not deal with powerful suppliers. They are sure to abuse us, after they use us†. Debate this statement, often heard in the meeting rooms of distributors and sales agents. As the usual channel conflict is a zero sum game where the gains of one party are the loss of the other. Many problems may arise between channel members till they actually reach a compromise where each party is satisfied and is able to see where he benefits from the relationship and cooperation.

Financial Management Chapter 8 K

ey Chapter 8 Stocks and Their Valuation LEARNING OBJECTIVES After reading this chapter, students should be able to: †¢ Identify some of the more important rights that come with stock ownership and define the following terms: proxy, proxy fight, takeover, and preemptive right. †¢ Briefly explain why classified stock might be used by a corporation and what founders’ shares are. †¢ Differentiate between closely held and publicly owned corporations and list the three distinct types of stock market transactions. Determine the value of a share of common stock when: (1) dividends are expected to grow at some constant rate, (2) dividends are expected to remain constant, and (3) dividends are expected to grow at some super-normal, or nonconstant, growth rate. †¢ Calculate the expected rate of return on a constant growth stock. †¢ Apply the total company (corporate value) model to value a firm in situations when the firm does not pay dividends or is privately he ld. †¢ Explain why a stock’s intrinsic value might differ between the total company model and the dividend growth model. Explain the following terms: equilibrium, marginal investor, and Efficient Markets Hypothesis (EMH); distinguish among the three levels of market efficiency; briefly explain the implications of the EMH on financial decisions; and discuss the results of empirical studies on market efficiency and the implication of behavioral finance on those results. †¢ Read and understand the stock market page given in the daily newspaper. †¢ Explain the reasons for investing in international stocks and identify the â€Å"bets† an investor is making when he does invest overseas. Define preferred stock, determine the value of a share of preferred stock, or given its value, calculate its expected return. 1. LECTURE SUGGESTIONS This chapter provides important and useful information on common and preferred stocks. Moreover, the valuation of stocks reinforc es the concepts covered in both Chapters 6 and 7, so Chapter 8 extends and reinforces those chapters. We begin our lecture with a discussion of the characteristics of common stocks, after which we discuss how stocks are valued in the market and how stock prices are reported in the press. We conclude the lecture with a discussion of preferred stocks.The details of what we cover, and the way we cover it, can be seen by scanning Blueprints Chapter 8. For other suggestions about the lecture, please see the â€Å"Lecture Suggestions† in Chapter 2, where we describe how we conduct our classes. DAYS ON CHAPTER: 3 OF 58 DAYS (50-minute periods) ANSWERS TO END-OF-CHAPTER QUESTIONS 8-1True. The value of a share of stock is the PV of its expected future dividends. If the two investors expect the same future dividend stream, and they agree on the stock’s riskiness, then they should reach similar conclusions as to the stock’s value. -2A perpetual bond is similar to a no-grow th stock and to a share of preferred stock in the following ways: 1. All three derive their values from a series of cash inflows–coupon payments from the perpetual bond, and dividends from both types of stock. 2. All three are assumed to have indefinite lives with no maturity value (M) for the perpetual bond and no capital gains yield for the stocks. 8-3Yes. If a company decides to increase its payout ratio, then the dividend yield component will rise, but the expected long-term capital gains yield will decline. 8-4No. The correct equation has D1 in the numerator and a minus sign in the denominator. -5a. The average investor in a listed firm is not really interested in maintaining his proportionate share of ownership and control. If he wanted to increase his ownership, he could simply buy more stock on the open market. Consequently, most investors are not concerned with whether new shares are sold directly (at about market prices) or through rights offerings. However, if a ri ghts offering is being used to effect a stock split, or if it is being used to reduce the underwriting cost of an issue (by substantial underpricing), the preemptive right may well be beneficial to the firm and to its stockholders. . The preemptive right is clearly important to the stockholders of closely held firms whose owners are interested in maintaining their relative control positions. SOLUTIONS TO END-OF-CHAPTER PROBLEMS 8-1D0 = $1. 50; g1-3 = 5%; gn = 10%; D1 through D5 = ? D1 = D0(1 + g1) = $1. 50(1. 05) = $1. 5750. D2 = D0(1 + g1)(1 + g2) = $1. 50(1. 05)2 = $1. 6538. D3 = D0(1 + g1)(1 + g2)(1 + g3) = $1. 50(1. 05)3 = $1. 7364. D4 = D0(1 + g1)(1 + g2)(1 + g3)(1 + gn) = $1. 50(1. 05)3(1. 10) = $1. 9101. D5 = D0(1 + g1)(1 + g2)(1 + g3)(1 + gn)2 = $1. 50(1. 05)3(1. 10)2 = $2. 1011. 8-2D1 = $0. 50; g = 7%; ks = 15%; [pic] = ? [pic] -3P0 = $20; D0 = $1. 00; g = 10%; [pic] = ? ; ks = ? [pic] = P0(1 + g) = $20(1. 10) = $22. ks= [pic] + g = [pic] + 0. 10 = [pic] + 0. 10 = 15. 50%. ks = 15. 50%. 8-4Dp = $5. 00; Vp = $60; kp = ? kp = [pic] = [pic] = 8. 33%. 8-5a. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. b. 0 1 2 3 | | | | 1. 25 1. 50 1. 80 1. 89 37. 80 = [pic] The horizon, or terminal, value is the value at the horizon date of all dividends expected thereafter. In this problem it is calculated as follows: pic] c. The firm’s intrinsic value is calculated as the sum of the present value of all dividends during the supernormal growth period plus the present value of the terminal value. Using your financial calculator, enter the following inputs: CF0 = 0, CF1 = 1. 50, CF2 = 1. 80 + 37. 80 = 39. 60, I = 10, and then solve for NPV = $34. 09. 6. The firm’s free cash flow is expected to grow at a constant rate, hence we can apply a constant growth formula to determine the total value of the firm. Firm Value = FCF1/(WACC – g) Firm Value = $150,000,000/(0. 10 – 0. 05) F irm Value = $3,000,000,000.To find the value of an equity claim upon the company (share of stock), we must subtract out the market value of debt and preferred stock. This firm happens to be entirely equity funded, and this step is unnecessary. Hence, to find the value of a share of stock, we divide equity value (or in this case, firm value) by the number of shares outstanding. Equity Value per share = Equity Value/Shares outstanding Equity Value per share = $3,000,000,000/50,000,000 Equity Value per share = $60. Each share of common stock is worth $60, according to the corporate valuation model. 8-7a. 0 1 2 3 4 | | | | 3,000,000 6,000,000 10,000,000 15,000,000 Using a financial calculator, enter the following inputs: CF0 = 0; CF1 = 3000000; CF2 = 6000000; CF3 = 10000000; CF4 = 15000000; I = 12; and then solve for NPV = $24,112,308. b. The firm’s terminal value is calculated as follows: [pic] c. The firm’s total value is calculated as follows: 0 1 2 3 4 5 | | | | | | 3, 000,000 6,000,000 10,000,000 15,000,000 16,050,000PV = ? 321,000,000 = [pic] Using your financial calculator, enter the following inputs: CF0 = 0; CF1 = 3000000; CF2 = 6000000; CF3 = 10000000; CF4 = 15000000 + 321000000 = 336000000; I = 12; and then solve for NPV = $228,113,612. d. To find Barrett’s stock price, you need to first find the value of its equity. The value of Barrett’s equity is equal to the value of the total firm less the market value of its debt and preferred stock. Total firm value$228,113,612 Market value, debt + preferred 60,000,000 (given in problem) Market value of equity$168,113,612Barrett’s price per share is calculated as: [pic] 8-8FCF = EBIT(1 – T) + Depreciation – [pic] – ([pic] = $500,000,000 + $100,000,000 – $200,000,000 – $0 = $400,000,000. Firm value = [pic] = [pic] = [pic] = $10,000,000,000. This is the total firm value. Now find the market value of its equity. MVTotal= MVEquity + MVDebt $10,000,0 00,000= MVEquity + $3,000,000,000 MVEquity= $7,000,000,000. This is the market value of all the equity. Divide by the number of shares to find the price per share. $7,000,000,000/200,000,000 = $35. 00. 8-9a. Terminal value = [pic] = [pic]= $713. 33 million. . 0 1 2 3 4 | | | | | -20 30 40 42. 80 ($ 17. 70) 23. 49 522. 10 753. 33 $527. 89 Using a financial calculator, enter the following inputs: CF0 = 0; CF1 = -20; CF2 = 30; CF3 = 753. 33; I = 13; and then solve for NPV = $527. 89 million. c. Total valuet=0 = $527. 89 million. Value of common equity = $527. 89 – $100 = $427. 89 million. Price per share = [pic] = $42. 79. 8-10The problem asks you to determine the value of [pic], given the following facts: D1 = $2, b = 0. 9, kRF = 5. %, RPM = 6%, and P0 = $25. Proceed as follows: Step 1:Calculate the required rate of return: ks = kRF + (kM – kRF)b = 5. 6% + (6%)0. 9 = 11%. Step 2:Use the constant growth rate formula to calculate g: [pic] Step 3:Calculate [pic]: [pic] = P0 (1 + g)3 = $25(1. 03)3 = $27. 3182 ( $27. 32. Alternatively, you could calculate D4 and then use the constant growth rate formula to solve for [pic]: D4 = D1(1 + g)3 = $2. 00(1. 03)3 = $2. 1855. [pic] = $2. 1855/(0. 11 – 0. 03) = $27. 3182 ( $27. 32. 8-11Vp = Dp/kp; therefore, kp = Dp/Vp. a. kp = $8/$60 = 13. 3%. b. kp = $8/$80 = 10. 0%. c. p = $8/$100 = 8. 0%. d. kp = $8/$140 = 5. 7%. 8-12[pic] 8-13a. ki = kRF + (kM – kRF)bi. kC = 9% + (13% – 9%)0. 4 = 10. 6%. kD = 9% + (13% – 9%)(-0. 5) = 7%. Note that kD is below the risk-free rate. But since this stock is like an insurance policy because it â€Å"pays off† when something bad happens (the market falls), the low return is not unreasonable. b. In this situation, the expected rate of return is as follows: [pic] = D1/P0 + g = $1. 50/$25 + 4% = 10%. However, the required rate of return is 10. 6 percent. Investors will seek to sell the stock, dropping its price to the following: pic] At this point, [p ic], and the stock will be in equilibrium. 8-14Calculate the dividend cash flows and place them on a time line. Also, calculate the stock price at the end of the supernormal growth period, and include it, along with the dividend to be paid at t = 5, as CF5. Then, enter the cash flows as shown on the time line into the cash flow register, enter the required rate of return as I = 15, and then find the value of the stock using the NPV calculation. Be sure to enter CF0 = 0, or else your answer will be incorrect. D0 = 0; D1 = 0; D2 = 0; D3 = 1. 0; D4 = 1. 00(1. 5) = 1. 5; D5 = 1. 00(1. 5)2 = 2. 25; D6 = 1. 00(1. 5)2(1. 08) = $2. 43. [pic] = ? 0 1 2 3 4 5 6 | | | | | | | 1. 00 1. 50 2. 25 2. 43 0. 658 +34. 71 = 0. 858 18. 378 36. 96 $19. 894 = [pic] [pic] = D6/([pic] – g) = $2. 43/(0. 15 – 0. 08) = $34. 71. This is the stock price at the end of Year 5.CF0 = 0; CF1-2 = 0; CF3 = 1. 0; CF4 = 1. 5; CF5 = 36. 96; I = 15%. With these cash flows in the CFLO register, press NPV to g et the value of the stock today: NPV = $19. 89. 8-15a. The preferred stock pays $8 annually in dividends. Therefore, its nominal rate of return would be: Nominal rate of return = $8/$80 = 10%. Or alternatively, you could determine the security’s periodic return and multiply by 4. Periodic rate of return = $2/$80 = 2. 5%. Nominal rate of return = 2. 5% ( 4 = 10%. b. EAR = (1 + NOM/4)4 – 1 EAR = (1 + 0. 10/4)4 – 1 EAR = 0. 103813 = 10. 3813%. -16The value of any asset is the present value of all future cash flows expected to be generated from the asset. Hence, if we can find the present value of the dividends during the period preceding long-run constant growth and subtract that total from the current stock price, the remaining value would be the present value of the cash flows to be received during the period of long-run constant growth. D1 = $2. 00 ( (1. 25)1 = $2. 50PV(D1) = $2. 50/(1. 12)1= $2. 2321 D2 = $2. 00 ( (1. 25)2 = $3. 125PV(D2) = $3. 125/(1. 12)2= $2 . 4913 D3 = $2. 00 ( (1. 25)3 = $3. 90625PV(D3) = $3. 0625/(1. 12)3= $2. 7804 ( PV(D1 to D3)= $7. 5038 Therefore, the PV of the remaining dividends is: $58. 8800 – $7. 5038 = $51. 3762. Compounding this value forward to Year 3, we find that the value of all dividends received during constant growth is $72. 18. [$51. 3762(1. 12)3 = $72. 18. ] Applying the constant growth formula, we can solve for the constant growth rate: [pic]= D3(1 + g)/(ks – g) $72. 1807= $3. 90625(1 + g)/(0. 12 – g) $8. 6616 – $72. 18g= $3. 90625 + $3. 90625g $4. 7554= $76. 08625g 0. 0625= g 6. 25%= g. 8-17First, solve for the current price. P0 = D1/(ks – g) P0 = $0. 50/(0. 2 – 0. 07) P0 = $10. 00. If the stock is in a constant growth state, the constant dividend growth rate is also the capital gains yield for the stock and the stock price growth rate. Hence, to find the price of the stock four years from today: [pic] = P0(1 + g)4 [pic] = $10. 00(1. 07)4 [pic] = $13. 1079 6 ? $13. 11. [pic] 8-18a. [pic] b. [pic] 8-19 0 1 2 3 4 | | | | | D0 = 2. 00 D1 D2 D3 D4 g = 5% [pic] a. D1 = $2(1. 05) = $2. 10; D2 = $2(1. 05)2 = $2. 21; D3 = $2(1. 5)3 = $2. 32. b. Financial Calculator Solution: Input 0, 2. 10, 2. 21, and 2. 32 into the cash flow register, input I = 12, PV = ? PV = $5. 29. c. Financial Calculator Solution: Input 0, 0, 0, and 34. 73 into the cash flow register, I = 12, PV = ? PV = $24. 72. d. $24. 72 + $5. 29 = $30. 01 = Maximum price you should pay for the stock. e. [pic] f. No. The value of the stock is not dependent upon the holding period. The value calculated in Parts a through d is the value for a 3-year holding period. It is equal to the value calculated in Part e except for a small rounding error.Any other holding period would produce the same value of [pic]; that is, [pic] = $30. 00. 8-20a. 1. [pic] 2. [pic] = $2/0. 15 = $13. 33. 3. [pic] 4. [pic] b. 1. [pic] = $2. 30/0 = Undefined. 2. [pic] = $2. 40/(-0. 05) = -$48, which is nonsense. Th ese results show that the formula does not make sense if the required rate of return is equal to or less than the expected growth rate. c. No. 8-21The answer depends on when one works the problem. We used the February 3, 2003, issue of The Wall Street Journal: a. $16. 81 to $36. 72. b. Current dividend = $0. 75. Dividend yield = $0. 75/$19. 8 ( 3. 9%. You might want to use ($0. 75)(1 + g)/$19. 48, with g estimated somehow. c. The $19. 48 close was up $0. 98 from the previous day’s close. d. The return on the stock consists of a dividend yield of about 3. 9 percent plus some capital gains yield. We would expect the total rate of return on stock to be in the 10 to 12 percent range. 8-22a. End of Year: 02 03 04 05 06 07 08 | | | | | | | D0 = 1. 75 D1 D2 D3 D4 D5 D6 Dt= D0(1 + g)t D2003= $1. 75(1. 15)1 = $2. 01. D2004= $1. 5(1. 15)2 = $1. 75(1. 3225) = $2. 31. D2005= $1. 75(1. 15)3 = $1. 75(1. 5209) = $2. 66. D2006= $1. 75(1. 15)4 = $1. 75(1. 7490) = $3. 06. D2007= $1. 75(1. 15)5 = $1. 75(2. 0114) = $3. 52. b. Step 1: PV of dividends = [pic]. PV D2003 = $2. 01/(1. 12)= $1. 79 PV D2004 = $2. 31/(1. 12)2= $1. 84 PV D2005 = $2. 66/(1. 12)3= $1. 89 PV D2006 = $3. 06/(1. 12)4= $1. 94 PV D2007 = $3. 52/(1. 12)5= $2. 00 PV of dividends= $9. 46 Step 2: [pic] This is the price of the stock 5 years from now. The PV of this price, discounted back 5 years, is as follows: PV of [pic] = $52. 80/(1. 12)5 = $29. 6. Step 3: The price of the stock today is as follows: [pic]= PV dividends Years 2003-2007 + PV of [pic] = $9. 46 + $29. 96 = $39. 42. This problem could also be solved by substituting the proper values into the following equation: [pic]. Calculator solution: Input 0, 2. 01, 2. 31, 2. 66, 3. 06, 56. 32 (3. 52 + 52. 80) into the cash flow register, input I = 12, PV = ? PV = $39. 43. c. 2003 D1/P0 = $2. 01/$39. 43= 5. 10% Capital gains yield= 6. 90* Expected total return= 12. 00% 2008 D6/P5 = $3. 70/$52. 80= 7. 00% Capital gains yield= 5. 00 Expected total return= 12 . 00% We know that ks is 12 percent, and the dividend yield is 5. 10 percent; therefore, the capital gains yield must be 6. 90 percent. The main points to note here are as follows: 1. The total yield is always 12 percent (except for rounding errors). 2. The capital gains yield starts relatively high, then declines as the supernormal growth period approaches its end. The dividend yield rises. 3. After 12/31/07, the stock will grow at a 5 percent rate. The dividend yield will equal 7 percent, the capital gains yield will equal 5 percent, and the total return will be 12 percent. d.People in high income tax brackets will be more inclined to purchase â€Å"growth† stocks to take the capital gains and thus delay the payment of taxes until a later date. The firm’s stock is â€Å"mature† at the end of 2007. e. Since the firm’s supernormal and normal growth rates are lower, the dividends and, hence, the present value of the stock price will be lower. The total ret urn from the stock will still be 12 percent, but the dividend yield will be larger and the capital gains yield will be smaller than they were with the original growth rates. This result occurs because we assume the same last dividend but a much lower current stock price. . As the required return increases, the price of the stock goes down, but both the capital gains and dividend yields increase initially. Of course, the long-term capital gains yield is still 4 percent, so the long-term dividend yield is 10 percent. 8-23a. Part 1: Graphical representation of the problem: Supernormal Normal growth growth 0 1 2 3 ( | | | | †¢Ã¢â‚¬ ¢Ã¢â‚¬ ¢ | D0 D1 (D2 + [pic]) D3 D( PVD1PVD2 [pic] P0 D1 = D0(1 + gs) = $1. 6(1. 20) = $1. 92. D2 = D0(1 + gs)2 = $1. 60(1. 20)2 = $2. 304. [pic] [pic]= PV(D1) + PV(D2) + PV([pic]) = [pic] = $1. 92/1. 10 + $2. 304/(1. 10)2 + $61. 06/(1. 10)2 = $54. 11. Financial Calculator solution: Input 0, 1. 92, 63. 364(2. 304 + 61. 06) into the cash flow register, in put I = 10, PV = ? PV = $54. 11. Part 2: Expected dividend yield: D1/P0 = $1. 92/$54. 11 = 3. 55%. Capital gains yield: First, find [pic], which equals the sum of the present values of D2 and [pic] discounted for one year. [pic] Financial Calculator solution: Input 0, 63. 364(2. 304 + 61. 6) into the cash flow register, input I = 10, PV = ? PV = $57. 60. Second, find the capital gains yield: [pic] Dividend yield = 3. 55% Capital gains yield = 6. 45 10. 00% = ks. b. Due to the longer period of supernormal growth, the value of the stock will be higher for each year. Although the total return will remain the same, ks = 10%, the distribution between dividend yield and capital gains yield will differ: The dividend yield will start off lower and the capital gains yield will start off higher for the 5-year supernormal growth condition, relative to the 2-year supernormal growth state.The dividend yield will increase and the capital gains yield will decline over the 5-year period until divid end yield = 4% and capital gains yield = 6%. c. Throughout the supernormal growth period, the total yield will be 10 percent, but the dividend yield is relatively low during the early years of the supernormal growth period and the capital gains yield is relatively high. As we near the end of the supernormal growth period, the capital gains yield declines and the dividend yield rises. After the supernormal growth period has ended, the capital gains yield will equal gn = 6%.The total yield must equal ks = 10%, so the dividend yield must equal 10% – 6% = 4%. d. Some investors need cash dividends (retired people), while others would prefer growth. Also, investors must pay taxes each year on the dividends received during the year, while taxes on capital gains can be delayed until the gain is actually realized. 8-24a. ks = kRF + (kM – kRF)b = 11% + (14% – 11%)1. 5 = 15. 5%. [pic] = D1/(ks – g) = $2. 25/(0. 155 – 0. 05) = $21. 43. b. ks = 9% + (12% â€⠀œ 9%)1. 5 = 13. 5%. [pic] = $2. 25/(0. 135 – 0. 05) = $26. 47. c. ks = 9% + (11% – 9%)1. 5 = 12. 0%. [pic] = $2. 25/(0. 12 – 0. 5) = $32. 14. d. New data given: kRF = 9%; kM = 11%; g = 6%, b = 1. 3. ks = kRF + (kM – kRF)b = 9% + (11% – 9%)1. 3 = 11. 6%. [pic] = D1/(ks – g) = $2. 27/(0. 116 – 0. 06) = $40. 54. 8-25a. Old ks = kRF + (kM – kRF)b = 9% + (3%)1. 2 = 12. 6%. New ks = 9% + (3%)0. 9 = 11. 7%. Old price: [pic] New price: [pic] Since the new price is lower than the old price, the expansion in consumer products should be rejected. The decrease in risk is not sufficient to offset the decline in profitability and the reduced growth rate. b. POld = $38. 21. PNew = [pic]. Solving for ks we have the following: $38. 1= [pic] $2. 10= $38. 21(ks) – $1. 9105 $4. 0105= $38. 21(ks) ks= 0. 10496. Solving for b: 10. 496% = 9% + 3%(b) 1. 496% = 3%(b) b = 0. 49865. Check: ks = 9% + (3%)0. 49865 = 10. 496%. [pic] = [pic] = $38. 21 . Therefore, only if management’s analysis concludes that risk can be lowered to b = 0. 49865, or approximately 0. 5, should the new policy be put into effect. SPREADSHEET PROBLEM 8-26The detailed solution for the spreadsheet problem is available both on the instructor’s resource CD-ROM and on the instructor’s side of South-Western’s web site, http://brigham. swlearning. com. INTEGRATED CASEMutual of Chicago Insurance Company Stock Valuation 8-27ROBERT BALIK AND CAROL KIEFER ARE SENIOR VICE-PRESIDENTS OF THE MUTUAL OF CHICAGO INSURANCE COMPANY. THEY ARE CO-DIRECTORS OF THE COMPANY’S PENSION FUND MANAGEMENT DIVISION, WITH BALIK HAVING RESPONSIBILITY FOR FIXED INCOME SECURITIES (PRIMARILY BONDS) AND KIEFER BEING RESPONSIBLE FOR EQUITY INVESTMENTS. A MAJOR NEW CLIENT, THE CALIFORNIA LEAGUE OF CITIES, HAS REQUESTED THAT MUTUAL OF CHICAGO PRESENT AN INVESTMENT SEMINAR TO THE MAYORS OF THE REPRESENTED CITIES, AND BALIK AND KIEFER, WHO WILL MAKE THE ACTUA L PRESENTATION, HAVE ASKED YOU TO HELP THEM.TO ILLUSTRATE THE COMMON STOCK VALUATION PROCESS, BALIK AND KIEFER HAVE ASKED YOU TO ANALYZE THE BON TEMPS COMPANY, AN EMPLOYMENT AGENCY THAT SUPPLIES WORD PROCESSOR OPERATORS AND COMPUTER PROGRAMMERS TO BUSINESSES WITH TEMPORARILY HEAVY WORKLOADS. YOU ARE TO ANSWER THE FOLLOWING QUESTIONS. A. DESCRIBE BRIEFLY THE LEGAL RIGHTS AND PRIVILEGES OF COMMON STOCKHOLDERS. ANSWER:[SHOW S8-1 THROUGH S8-5 HERE. ] THE COMMON STOCKHOLDERS ARE THE OWNERS OF A CORPORATION, AND AS SUCH THEY HAVE CERTAIN RIGHTS AND PRIVILEGES AS DESCRIBED BELOW. 1. OWNERSHIP IMPLIES CONTROL.THUS, A FIRM’S COMMON STOCKHOLDERS HAVE THE RIGHT TO ELECT ITS FIRM’S DIRECTORS, WHO IN TURN ELECT THE OFFICERS WHO MANAGE THE BUSINESS. 2. COMMON STOCKHOLDERS OFTEN HAVE THE RIGHT, CALLED THE PREEMPTIVE RIGHT, TO PURCHASE ANY ADDITIONAL SHARES SOLD BY THE FIRM. IN SOME STATES, THE PREEMPTIVE RIGHT IS AUTOMATICALLY INCLUDED IN EVERY CORPORATE CHARTER; IN OTHERS, IT IS NEC ESSARY TO INSERT IT SPECIFICALLY INTO THE CHARTER. B. 1. WRITE OUT A FORMULA THAT CAN BE USED TO VALUE ANY STOCK, REGARDLESS OF ITS DIVIDEND PATTERN. ANSWER:[SHOW S8-6 HERE. ] THE VALUE OF ANY STOCK IS THE PRESENT VALUE OF ITS EXPECTED DIVIDEND STREAM: [pic] = [pic]HOWEVER, SOME STOCKS HAVE DIVIDEND GROWTH PATTERNS THAT ALLOW THEM TO BE VALUED USING SHORT-CUT FORMULAS. B. 2. WHAT IS A CONSTANT GROWTH STOCK? HOW ARE CONSTANT GROWTH STOCKS VALUED? ANSWER:[SHOW S8-7 AND S8-8 HERE. ] A CONSTANT GROWTH STOCK IS ONE WHOSE DIVIDENDS ARE EXPECTED TO GROW AT A CONSTANT RATE FOREVER. â€Å"CONSTANT GROWTH† MEANS THAT THE BEST ESTIMATE OF THE FUTURE GROWTH RATE IS SOME CONSTANT NUMBER, NOT THAT WE REALLY EXPECT GROWTH TO BE THE SAME EACH AND EVERY YEAR. MANY COMPANIES HAVE DIVIDENDS THAT ARE EXPECTED TO GROW STEADILY INTO THE FORESEEABLE FUTURE, AND SUCH COMPANIES ARE VALUED AS CONSTANT GROWTH STOCKS.FOR A CONSTANT GROWTH STOCK: D1 = D0(1 + g), D2 = D1(1 + g) = D0(1 + g)2, AND SO ON. WI TH THIS REGULAR DIVIDEND PATTERN, THE GENERAL STOCK VALUATION MODEL CAN BE SIMPLIFIED TO THE FOLLOWING VERY IMPORTANT EQUATION: [pic] = [pic] = [pic]. THIS IS THE WELL-KNOWN â€Å"GORDON,† OR â€Å"CONSTANT-GROWTH† MODEL FOR VALUING STOCKS. HERE D1 IS THE NEXT EXPECTED DIVIDEND, WHICH IS ASSUMED TO BE PAID 1 YEAR FROM NOW, kS IS THE REQUIRED RATE OF RETURN ON THE STOCK, AND g IS THE CONSTANT GROWTH RATE. B. 3. WHAT HAPPENS IF A COMPANY HAS A CONSTANT g THAT EXCEEDS ITS ks? WILL MANY STOCKS HAVE EXPECTED g > ks IN THE SHORT RUN (THAT IS, FOR THE NEXT FEW YEARS)?IN THE LONG RUN (THAT IS, FOREVER)? ANSWER:[SHOW S8-9 HERE. ] THE MODEL IS DERIVED MATHEMATICALLY, AND THE DERIVATION REQUIRES THAT ks > g. IF g IS GREATER THAN ks, THE MODEL GIVES A NEGATIVE STOCK PRICE, WHICH IS NONSENSICAL. THE MODEL SIMPLY CANNOT BE USED UNLESS (1) ks > g, (2) g IS EXPECTED TO BE CONSTANT, AND (3) g CAN REASONABLY BE EXPECTED TO CONTINUE INDEFINITELY. STOCKS MAY HAVE PERIODS OF SUPERNORMAL GR OWTH, WHERE gS > ks; HOWEVER, THIS GROWTH RATE CANNOT BE SUSTAINED INDEFINITELY. IN THE LONG-RUN, g < ks. C. ASSUME THAT BON TEMPS HAS A BETA COEFFICIENT OF 1. , THAT THE RISK-FREE RATE (THE YIELD ON T-BONDS) IS 7 PERCENT, AND THAT THE REQUIRED RATE OF RETURN ON THE MARKET IS 12 PERCENT. WHAT IS THE REQUIRED RATE OF RETURN ON THE FIRM’S STOCK? ANSWER:[SHOW S8-10 HERE. ] HERE WE USE THE SML TO CALCULATE BON TEMPS’ REQUIRED RATE OF RETURN: ks= kRF + (kM – kRF)bBon Temps = 7% + (12% – 7%)(1. 2) = 7% + (5%)(1. 2) = 7% + 6% = 13%. D. ASSUME THAT BON TEMPS IS A CONSTANT GROWTH COMPANY WHOSE LAST DIVIDEND (D0, WHICH WAS PAID YESTERDAY) WAS $2. 00 AND WHOSE DIVIDEND IS EXPECTED TO GROW INDEFINITELY AT A 6 PERCENT RATE. 1.WHAT IS THE FIRM’S EXPECTED DIVIDEND STREAM OVER THE NEXT 3 YEARS? ANSWER:[SHOW S8-11 HERE. ] BON TEMPS IS A CONSTANT GROWTH STOCK, AND ITS DIVIDEND IS EXPECTED TO GROW AT A CONSTANT RATE OF 6 PERCENT PER YEAR. EXPRESSED AS A TIME LINE, WE HAVE THE FOLLOWING SETUP. JUST ENTER 2 IN YOUR CALCULATOR; THEN KEEP MULTIPLYING BY 1 + g = 1. 06 TO GET D1, D2, AND D3: 0 1 2 3 | | | | D0 = 2. 00 2. 12 2. 247 2. 382 1. 88 1. 76 1. 65 . . . D. 2. WHAT IS THE FIRM’S CURRENT STOCK PRICE? ANSWER:[SHOW S8-12 HERE. WE COULD EXTEND THE TIME LINE ON OUT FOREVER, FIND THE VALUE OF BON TEMPS’ DIVIDENDS FOR EVERY YEAR ON OUT INTO THE FUTURE, AND THEN THE PV OF EACH DIVIDEND DISCOUNTED AT k = 13%. FOR EXAMPLE, THE PV OF D1 IS $1. 8761; THE PV OF D2 IS $1. 7599; AND SO FORTH. NOTE THAT THE DIVIDEND PAYMENTS INCREASE WITH TIME, BUT AS LONG AS ks > g, THE PRESENT VALUES DECREASE WITH TIME. IF WE EXTENDED THE GRAPH ON OUT FOREVER AND THEN SUMMED THE PVs OF THE DIVIDENDS, WE WOULD HAVE THE VALUE OF THE STOCK. HOWEVER, SINCE THE STOCK IS GROWING AT A CONSTANT RATE, ITS VALUE CAN BE ESTIMATED USING THE CONSTANT GROWTH MODEL: pic] = [pic] = [pic] = [pic] = $30. 29. D. 3. WHAT IS THE STOCK’S EXPECTED VALUE ONE YEAR FROM NOW? ANS WER:[SHOW S8-13 HERE. ] AFTER ONE YEAR, D1 WILL HAVE BEEN PAID, SO THE EXPECTED DIVIDEND STREAM WILL THEN BE D2, D3, D4, AND SO ON. THUS, THE EXPECTED VALUE ONE YEAR FROM NOW IS $32. 10: [pic] = [pic] = [pic] = [pic] = $32. 10. D. 4. WHAT ARE THE EXPECTED DIVIDEND YIELD, THE CAPITAL GAINS YIELD, AND THE TOTAL RETURN DURING THE FIRST YEAR? ANSWER:[SHOW S8-14 HERE. ] THE EXPECTED DIVIDEND YIELD IN ANY YEAR n IS DIVIDEND YIELD = [pic], WHILE THE EXPECTED CAPITAL GAINS YIELD ISCAPITAL GAINS YIELD = [pic] = k – [pic]. THUS, THE DIVIDEND YIELD IN THE FIRST YEAR IS 7 PERCENT, WHILE THE CAPITAL GAINS YIELD IS 6 PERCENT: TOTAL RETURN = 13. 0% DIVIDEND YIELD = $2. 12/$30. 29 = 7. 0% CAPITAL GAINS YIELD = 6. 0% E. NOW ASSUME THAT THE STOCK IS CURRENTLY SELLING AT $30. 29. WHAT IS THE EXPECTED RATE OF RETURN ON THE STOCK? ANSWER:THE CONSTANT GROWTH MODEL CAN BE REARRANGED TO THIS FORM: [pic] = [pic]. HERE THE CURRENT PRICE OF THE STOCK IS KNOWN, AND WE SOLVE FOR THE EXPECTED RETURN. FOR BON TEMPS: pic] = $2. 12/$30. 29 + 0. 060 = 0. 070 + 0. 060 = 13%. F. WHAT WOULD THE STOCK PRICE BE IF ITS DIVIDENDS WERE EXPECTED TO HAVE ZERO GROWTH? ANSWER:[SHOW S8-15 HERE. ] IF BON TEMPS’ DIVIDENDS WERE NOT EXPECTED TO GROW AT ALL, THEN ITS DIVIDEND STREAM WOULD BE A PERPETUITY. PERPETUITIES ARE VALUED AS SHOWN BELOW: 0 1 2 3 | | | | 2. 00 2. 00 2. 00 1. 77 1. 57 1. 39 . . . P0 = 15. 38 P0 = D/kS = $2. 00/0. 13 = $15. 38. NOTE THAT IF A PREFERRED STOCK IS A PERPETUITY, IT MAY BE VALUED WITH THIS FORMULA. G.NOW ASSUME THAT BON TEMPS IS EXPECTED TO EXPERIENCE SUPERNORMAL GROWTH OF 30 PERCENT FOR THE NEXT 3 YEARS, THEN TO RETURN TO ITS LONG-RUN CONSTANT GROWTH RATE OF 6 PERCENT. WHAT IS THE STOCK’S VALUE UNDER THESE CONDITIONS? WHAT IS ITS EXPECTED DIVIDEND YIELD AND CAPITAL GAINS YIELD IN YEAR 1? YEAR 4? ANSWER:[SHOW S8-16 THROUGH S8-18 HERE. ] BON TEMPS IS NO LONGER A CONSTANT GROWTH STOCK, SO THE CONSTANT GROWTH MODEL IS NOT APPLICABLE. NOTE, HOWEVER, THAT THE STO CK IS EXPECTED TO BECOME A CONSTANT GROWTH STOCK IN 3 YEARS. THUS, IT HAS A NONCONSTANT GROWTH PERIOD FOLLOWED BY CONSTANT GROWTH.THE EASIEST WAY TO VALUE SUCH NONCONSTANT GROWTH STOCKS IS TO SET THE SITUATION UP ON A TIME LINE AS SHOWN BELOW: 0 1 2 3 4 | | | | | 2. 600 3. 380 4. 394 4. 65764 2. 301 2. 647 3. 045 46. 114 54. 107 SIMPLY ENTER $2 AND MULTIPLY BY (1. 30) TO GET D1 = $2. 60; MULTIPLY THAT RESULT BY 1. 3 TO GET D2 = $3. 38, AND SO FORTH. THEN RECOGNIZE THAT AFTER YEAR 3, BON TEMPS BECOMES A CONSTANT GROWTH STOCK, AND AT THAT POINT [pic] CAN BE FOUND USING THE CONSTANT GROWTH MODEL. pic] IS THE PRESENT VALUE AS OF t = 3 OF THE DIVIDENDS IN YEAR 4 AND BEYOND AND IS ALSO CALLED THE TERMINAL VALUE. WITH THE CASH FLOWS FOR D1, D2, D3, AND [pic] SHOWN ON THE TIME LINE, WE DISCOUNT EACH VALUE BACK TO YEAR 0, AND THE SUM OF THESE FOUR PVs IS THE VALUE OF THE STOCK TODAY, P0 = $54. 107. THE DIVIDEND YIELD IN YEAR 1 IS 4. 80 PERCENT, AND THE CAPITAL GAINS YIELD IS 8. 2 PERCENT: DI VIDEND YIELD = [pic] = 0. 0480 = 4. 8%. CAPITAL GAINS YIELD = 13. 00% – 4. 8% = 8. 2%. DURING THE NONCONSTANT GROWTH PERIOD, THE DIVIDEND YIELDS AND CAPITAL GAINS YIELDS ARE NOT CONSTANT, AND THE CAPITAL GAINS YIELD DOES NOT EQUAL g.HOWEVER, AFTER YEAR 3, THE STOCK BECOMES A CONSTANT GROWTH STOCK, WITH g = CAPITAL GAINS YIELD = 6. 0% AND DIVIDEND YIELD = 13. 0% – 6. 0% = 7. 0%. H. SUPPOSE BON TEMPS IS EXPECTED TO EXPERIENCE ZERO GROWTH DURING THE FIRST 3 YEARS AND THEN TO RESUME ITS STEADY-STATE GROWTH OF 6 PERCENT IN THE FOURTH YEAR. WHAT IS THE STOCK’S VALUE NOW? WHAT IS ITS EXPECTED DIVIDEND YIELD AND ITS CAPITAL GAINS YIELD IN YEAR 1? YEAR 4? ANSWER:[SHOW S8-19 AND S8-20 HERE. ] NOW WE HAVE THIS SITUATION: 0 1 2 3 4 | | | | | 2. 00 2. 0 2. 00 2. 00 2. 12 1. 77 1. 57 1. 39 20. 99 25. 72 = [pic] DURING YEAR 1: DIVIDEND YIELD = [pic] = 0. 0778 = 7. 78%. CAPITAL GAINS YIELD = 13. 00% – 7. 78% = 5. 22%. AGAIN, IN YEAR 4 BON TEMPS BECOMES A CONSTANT GROWTH STOCK; HENCE g = CAPITAL GAINS YIELD = 6. 0% AND DIVIDEND YIELD = 7. 0%. I. FINALLY, ASSUME THAT BON TEMPS’ EARNINGS AND DIVIDENDS ARE EXPECTED TO DECLINE BY A CONSTANT 6 PERCENT PER YEAR, THAT IS, g = -6%. WHY WOULD ANYONE BE WILLING TO BUY SUCH A STOCK, AND AT WHAT PRICE SHOULD IT SELL? WHAT WOULD BE THE DIVIDEND YIELD AND CAPITAL GAINS YIELD IN EACH YEAR?ANSWER:[SHOW S8-21 AND S8-22 HERE. ] THE COMPANY IS EARNING SOMETHING AND PAYING SOME DIVIDENDS, SO IT CLEARLY HAS A VALUE GREATER THAN ZERO. THAT VALUE CAN BE FOUND WITH THE CONSTANT GROWTH FORMULA, BUT WHERE g IS NEGATIVE: [pic] = [pic] = [pic] = [pic] = [pic] = $9. 89. SINCE IT IS A CONSTANT GROWTH STOCK: g = CAPITAL GAINS YIELD = -6. 0%, HENCE: DIVIDEND YIELD = 13. 0% – (-6. 0%) = 19. 0%. AS A CHECK: DIVIDEND YIELD = [pic] = 0. 190 = 19. 0%. THE DIVIDEND AND CAPITAL GAINS YIELDS ARE CONSTANT OVER TIME, BUT A HIGH (19. 0 PERCENT) DIVIDEND YIELD IS NEEDED TO OFFSET THE NEGATIVE CAPITAL GAINS YIELD.J. BON TEMPS EMB ARKS ON AN AGGRESSIVE EXPANSION THAT REQUIRES ADDITIONAL CAPITAL. MANAGEMENT DECIDES TO FINANCE THE EXPANSION BY BORROWING $40 MILLION AND BY HALTING DIVIDEND PAYMENTS TO INCREASE RETAINED EARNINGS. THE PROJECTED FREE CASH FLOWS FOR THE NEXT THREE YEARS ARE -$5 MILLION, $10 MILLION, AND $20 MILLION. AFTER THE THIRD YEAR, FREE CASH FLOW IS PROJECTED TO GROW AT A CONSTANT 6 PERCENT. THE OVERALL COST OF CAPITAL IS 10 PERCENT. WHAT IS BON TEMPS’ TOTAL VALUE? IF IT HAS 10 MILLION SHARES OF STOCK AND $40 MILLION TOTAL DEBT, WHAT IS THE PRICE PER SHARE? ANSWER:[SHOW S8-23 THROUGH S8-28 HERE. 0 1 2 3 4 | | | | | -5 10 20 21. 20 $ -4. 545 8. 264 15. 026 398. 197 $416. 942 = TOTAL VALUE VALUE OF EQUITY = TOTAL VALUE – DEBT = $416. 94 – $40 = $376. 94 MILLION. PRICE PER SHARE = $376. 94/10 = $37. 69. K. WHAT DOES MARKET EQUILIBRIUM MEAN? ANSWER:[SHOW S8-29 AND S8-30 HERE. ] EQUILIBRIUM MEANS STABLE, NO TENDENCY TO CHANGE. MARKET EQUILIBRIUM MEANS THAT PRICES ARE STABLEâ₠¬â€œAT ITS CURRENT PRICE, THERE IS NO GENERAL TENDENCY FOR PEOPLE TO WANT TO BUY OR TO SELL A SECURITY THAT IS IN EQUILIBRIUM.ALSO, WHEN EQUILIBRIUM EXISTS, THE EXPECTED RATE OF RETURN WILL BE EQUAL TO THE REQUIRED RATE OF RETURN: [pic] = D1/P0 + g = k = kRF + (kM – kRF)b. L. IF EQUILIBRIUM DOES NOT EXIST, HOW WILL IT BE ESTABLISHED? ANSWER:[SHOW S8-31 AND S8-32 HERE. ] SECURITIES WILL BE BOUGHT AND SOLD UNTIL THE EQUILIBRIUM PRICE IS ESTABLISHED. M. WHAT IS THE EFFICIENT MARKETS HYPOTHESIS, WHAT ARE ITS THREE FORMS, AND WHAT ARE ITS IMPLICATIONS? ANSWER:[SHOW S8-33 THROUGH S8-37 HERE. ] THE EMH IN GENERAL IS THE HYPOTHESIS THAT SECURITIES ARE NORMALLY IN EQUILIBRIUM AND ARE â€Å"PRICED FAIRLY,† MAKING IT IMPOSSIBLE TO â€Å"BEAT THE MARKET. WEAK-FORM EFFICIENCY SAYS THAT INVESTORS CANNOT PROFIT FROM LOOKING AT PAST MOVEMENTS IN STOCK PRICES–THE FACT THAT STOCKS WENT DOWN FOR THE LAST FEW DAYS IS NO REASON TO THINK THAT THEY WILL GO UP (OR DOWN) IN THE FUTURE. THIS FORM HAS BEEN PROVEN PRETTY WELL BY EMPIRICAL TESTS, EVEN THOUGH PEOPLE STILL EMPLOY â€Å"TECHNICAL ANALYSIS. † SEMISTRONG-FORM EFFICIENCY SAYS THAT ALL PUBLICLY AVAILABLE INFORMATION IS REFLECTED IN STOCK PRICES, HENCE THAT IT WON’T DO MUCH GOOD TO PORE OVER ANNUAL REPORTS TRYING TO FIND UNDERVALUED STOCKS.THIS ONE IS (WE THINK) LARGELY TRUE, BUT SUPERIOR ANALYSTS CAN STILL OBTAIN AND PROCESS NEW INFORMATION FAST ENOUGH TO GAIN A SMALL ADVANTAGE. STRONG-FORM EFFICIENCY SAYS THAT ALL INFORMATION, EVEN INSIDE INFORMATION, IS EMBEDDED IN STOCK PRICES. THIS FORM DOES NOT HOLD–INSIDERS KNOW MORE, AND COULD TAKE ADVANTAGE OF THAT INFORMATION TO MAKE ABNORMAL PROFITS IN THE MARKETS. TRADING ON THE BASIS OF INSIDER INFORMATION IS ILLEGAL. N. PHYFE COMPANY RECENTLY ISSUED PREFERRED STOCK. IT PAYS AN ANNUAL DIVIDEND OF $5, AND THE ISSUE PRICE WAS $50 PER SHARE. WHAT IS THE EXPECTED RETURN TO AN INVESTOR ON THIS PREFERRED STOCK?ANSWER:[SHOW S8-38 AND S8-39 HERE. ] [pic]= [pic] = [pic] = 10%. ———————– ks = 15% gn = 6% ( 1/(1. 15)3 ( 1/(1. 13)3 ( 1/(1. 13)2 ( 1/1. 13 gs = 50% gn = 8% [pic] ks = 12% gs = 15% gn = 5% WACC = 10% [pic] = 30. 29 = [pic] g = 0% g = 0% g = 0% gn = 6% ks = 13% [pic] = $66. 54 = [pic] gs = 30% gs = 30% gs = 30% gn = 6% ks = 13% g = 0% ks = 13% g = 6% ks = 13% ks = 10% gs = 20% gs = 20% gn = 5% WACC = 12% WACC = 12% gn = 7% [pic] WACC = 13% gn = 7% 530 = [pic] ( 1/(1. 15)4 ( 1/(1. 15)5 ks = 12% ( 1/1. 13 ( 1/(1. 13)2 ( 1/(1. 13)3 ( 1/(1. 13)2 ( 1/(1. 13)2 ( 1/1. 13 ( 1/(1. 13)2 ( 1/(1. 13)3 ( 1/(1. 13)3 ( 1/1. 13 ( 1/1. 13 (%89