Problems of the Country an Example by

Problems of the Country by Expert Marvellous | 22 Dec 2016 1. One of the problems facing the US today is that of illegal migration. According to the estimates of the INS (currently CIS), in January 2000, the total population of illegal migrants in the US comprised 7 million people (CIS 2003). Out of those, 32% lived in California, and largest increases in the numbers of illegal aliens were also posted in Texas, Arizona, Illinois, Georgia, and North Carolina (CIS 2003). Need essay sample on "Problems of the Country" topic? We will write a custom essay sample specifically for you Proceed The estimates of the Census Bureau show an even higher number, 8 million illegal aliens living in the US as of 2000. The Center for Immigration Studies finds that the two "magnets" which attract illegal aliens are jobs and family connections. Discrepancy in salaries between American workers and those in developing nations drive people across the border. The result is illegal networks that help channel new entrants across the border. Despite measures taken to combat the problem, the flow does not abate. Angela Kelley, deputy director of the National Immigration Forum, states that the continued growth of that population simply shows that current immigration policy "is broken" (Moreno 2005:A02). One way to combat illegal migration is to supply all legal entrants as well as citizens with some sort of ID that will be required in virtually all establishments: banks, supermarkets, stores etc. The lack of such identification will become instant proof of illegal status or indication of need to perform a background check for the police or other law enforcement bodies. Another serious problem that emerged only recently is the incumbent Administrations crackdown on free exchange of information. Especially worrisome is White House's directive that allows the NSA to monitor the calls and e-mails of Americans without court approval (Arlen Specter to Dick Cheney: Butt Out on Wiretap Probe). The initiative is assumed to violate the constitutional rights of Americans. Yet it is presented as an important tool in combating terrorism and was labelled by the President as a terrorist surveillance program (Bush Defends). It seems necessary in this respect to introduce additional legislation that will protect civil liberties in the face of the stepped up efforts in the fight against terrorism. The new acts have to outlaw any indiscriminate tapping of phones or e-mails, subjecting them to the court approval. 2. One of the future problems that have attracted a lot of debate is the projected shortfall in Social Security. Washington Posts editorial No Social Security 'Crisis' cites the projections of a gap of $3.7 trillion in the next 75 years. The solutions are delayed because politicians do not risk voting for unpopular measures that may alienate voters. Some politicians even question the very existence of the crisis. Thus, R-Calif. Bill Thomas insisted that lawmakers have to reach a consensus on the level of urgency and the magnitude of the problem (Lawrence 2005). However, independent analysts arrived at the conclusion that the Trustees' projections for productivity, labor force growth, and longevity show the projections to be reasonable and perhaps even optimistic (Biggs 2000). Slow growth of the economy combined with aging of the population is bound to result in shortfall in Social Security. While it is clear that seniors may have to work longer in order to provide for themselves, it makes sense to start a program creating special senior jobs. These jobs can be offered to people over 65 who are still willing to put in a few hours a day. Either corporations or special entities can find ways to utilize the expertise and experience accumulated by seniors without straining their fragile health. Another problem that will surface in the nearest future is the need to accommodate soldiers returning from Iraq. Many soldiers discovered that homecoming proved a far more complicated, even conflicted, experience than it seemed it would be back in Iraq when they thought of little else (Myers 2003). The soldiers often encounter the so-called Vietnam syndrome manifested in alienation, depression and a range of psychological disorders (Satel 2004). Even if they feel more or less sound psychologically, there is a new problem: many veterans are struggling with finding work as their long absence from the workforce and psychological problems make them less attractive to employers (Reserve soldiers at a loss for jobs). The solution for soldiers problems can come from soldiers unions, but should be facilitated by the government. Thus, the federal government can offer an incentive plan to businesses that want to hire soldiers returning from the war. Incentives can be offered in the form of tax breaks or additional guarantees for loans taken out by businesses that hire 3 or more Iraqi veterans. 3. I do hope that the US can address its problems with due effort. Throughout the centuries, this nation faced a variety of challenges, yet each time emerged vigorous and able to protect itself from future challenges. The strong civil institutions including non-governmental organizations and independent press are a powerful means of identifying problems. The mechanisms for their resolution do not always prove effective, but they reflect ultimately the evils of society that is not always capable of adequate action. Our country does not face the serious challenges that confront developing nations such as access to fresh water, basic sanitation etc. However, the problem of the US is that it is already a great power with much to lose. It takes effective and imminent action to remedy the problems in order to continue as a great power. References Bush Defends NSA Electronic Surveillance Program. Tech Law Journal. 12 Jun. 06 http://www.techlawjournal.com/alert/2006/01/24.asp>. Center for Immigration Studies. Illegal Immigration. 12 Jun. 06 . Drum, Kevin. Bush and the Separation of Powers. Washington Monthly 18 December 2005. 12 Jun. 06 . Lawrence, J. (2005, January 23). Social Security 'crisis' questioned. USA TODAY 23 January 2005. 12 Jun. 06 . Moreno, Sylvia. Flow of Illegal Immigrants to U.S. Unabated: Mexicans Make Up Largest Group; D.C. Area Numbers Up 70 Percent Since 2000. Washington Post 22 March 2005, A02. Myers, Steven Lee. The Struggle for Iraq: With the Third pision; Returning From Iraq War Not So Simple for Soldiers. New York Times 12 September 2003. 12 Jun. 06 . No Social Security 'Crisis'. Washington Post 1 February 2005, A16. Reserve soldiers at a loss for jobs. Washington Times 1 July 2005. 12 Jun. 06 . Satel, Sally. Returning From Iraq, Still Fighting Vietnam. New York Times 5 March 2005. 12 Jun. 06 . U.S. Citizenship and Immigration Services (CIS). Executive Summary: Estimates of the Unauthorized Immigrant Population Residing in the United States: 1990 to 2000. January 2003. 12 Jun. 06 .

Marrying Homosexuals essays

Marrying Homosexuals essays Homosexuals should be allowed to marry because the disallowance of it violates their constitutional rights. Marriage is an institution long recognized by our government under the right to pursue happiness, and denying that right to any couple, regardless of gender, is unconstitutional. This argument, though, is not disputed. In fact, none of the arguments raised in opposition to the allowance of homosexual marriages takes into account the constitutional rights afforded to all humans. The arguments are only in relation to the possible repercussions (real or imagined) of granting these rights. Our nation was built and has always been based on the fundamental principles of freedom expressed in the Declaration of Independence and through our Constitution. The opponents of homosexual marriage need to remember what freedom means to America, and understand the significance of setting a precedent that denies that freedom. The Supreme Court has long recognized that the institution of marriage is one of the rights guaranteed to all Americans by our Constitution. On the Internet, you can find the full text of the following Supreme Court cases. In the case of Loving v. Virginia, the Supreme Court said, The freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men. In the case of Cleveland Board of Education v. LaFleur, the Supreme Court said, This Court has long recognized that freedom of personal choice in matters of marriage and family life is one of the liberties protected by the Due Process Clause of the Fourteenth Amendment. At this time, however, marriage is only granted to heterosexual couples. Although homosexuals live under the same constitution, they are not afforded the same rights as heterosexuals. The reasons presented against the allowance of homosexual marriage are flimsy, and have nothing to do with the constitutio...

Economics of exchange rates Essay Example | Topics and Well Written Essays - 1000 words

Economics of exchange rates - Essay Example Operating under such a business scenario is too risky for any business. This is because, regardless of how much sales a business makes, and regardless of how much a business tries to minimize its costs and expenditures, it will always find itself on the receiving end, where its performance is not dependent on its efficiency or effectiveness but rather on the behavior of the foreign exchange markets (Sarno & Taylor, 2005, p. 83). XJP receives virtually all its supplies directly from J&J Ltd, which, in turn, invoices all the costs and expenditures in Euros. On the contrary, XJP makes its sales in Chinese Renminbi. Therefore, it has to convert the income made from the sales from the Chinese currency into the Euros so that it can submit its payment to J&J Ltd. This means that the amount XJP pays to J&J is not solely dependent on the value of the supplies it receives from this company, but also on the rate at which the Chinese currency exchanges for the Euro.... However, if the foreign currency gains over the local currency, XJP will be forced to pay the cost of supplies at higher costs. This will in turn reduce its profit margin (Moffett, Stonehill & Eiteman, 2008, p. 254). Therefore, system through which XJP and J&J structure and manage their currency exposure is not suitable for the business, since it influences their performance and growth negatively. This is because, even when they apply suitable strategies to grow their business and increase their profitability, it is not possible to achieve their targets, since the target will always depend on the exchange rates (Sarno & Taylor, 2005, p. 90). Therefore, the most suitable way for them to structure their business is employ a system that allows XJP to purchase and pay for its supplies using the local currency. This will serve to remove the uncertainty involved in the operation of the foreign currency markets, making it possible for the business to Strategize on improving its profitabilit y and consequently achieving the desired growth (Coyle, 2000, p. 41). Case Question 2: The situation in which XJP finds itself is very different from that of other foreign subsidiaries owned by J&J worldwide. This is because, while the other foreign subsidiaries are decentralized, allowing them to take responsibility of their own structure from top to bottom, the case is different for XJP. The organizational structure of XJP is characterized by a lot of control from its parent company. Thus, XJP is not capable for planning and procuring its own supplies, inclusive of the raw material, but instead depends on J&J to supply it accordingly (Moffett, Stonehill & Eiteman, 2008, p. 255). This arrangement might be beneficial for enhancing

The National Plan of Action for the Garment Industry of Bangladesh Essay - 145

The National Plan of Action for the Garment Industry of Bangladesh - Essay Example The two incidences triggered protest that facilitated the implementation of the Multi-stakeholder Accord on Fire and Building to boost the corporate environment and offered new dimensions in the occupational safety, health, and environmental reporting of the firms in Bangladesh. Besides, the disasters enabled the adoption of the National Tripartite Plan of Action (NTPA) at the local, regional, and international platforms (Khan and Wichterich 11). The Accord and NTPA offered the platform for collaboration of the stakeholders towards enhancing the safety of the workers. It is in this regards that Khan and Wichterich aimed to assess the level of implementation, achievements, and possible hindrances towards the realization of the objectives. Immediately, the NTPA and the Accord attracted public admiration, and the implementers strived to attain the goals. Some of the primary initiatives comprised corrective action plans, capacity building, and inspection of the facilities. Despite the advantages of the strategies and great anticipation, the strategies have no noticeable impacts. The findings indicate the presence of the gendered prejudice and the associated mishandling of the workers according to their genders. It also shows that the labor power and collective bargain is in the preliminary phase. However, the findings evidence significant progress to advance the occupational health and safety. Predominantly, the findings indicate a clash of power negotiations in the global apparel chains with a particular focus on the RMG accumulation (Khan and Wichterich 36). Given the magnitude of the responsibility and public expectations, the study realized minimal advancement that raises issues about the seriousness of the target ag ency and stakeholders. The responsible institutions and stakeholders lost focus and the associated power structures hinder the realization of the goals.

Religious Freedom and the US Constitution

Religious Freedom and the US Constitution In America, one of the greatest civil rights we have is that of religious freedom. This, along with several others are granted to all citizens no matter where in the country they live, what country they are originally from or what religion they chose to practice. In light of the attacks on America, in September 2011 there are those who have claimed that they are no longer allowed to freely practice their religion freely; that they are persecuted by those who are supposed to uphold the laws, however there is no concrete proof to back up these claims. What has happened, whether due to these claims or not are laws being passed to solve a problem that actually doesnt exist (Asam Uddin). When reading the U.S. Constitution, the First Amendment reads Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances How does this affect federalism? The question that comes to mind is: does federalism truly support religious freedom for all and if so what impact does it have? For this, Id like to use the case of county clerk Kim Davis, of Rowan County, KY who refused to sign marriage certificates for same sex couples and sighted her own religious beliefs as a reason. Miss Davis was sued by many couples who she refused to give a license to and in Miller v Davis, (ACLU, 2017) she was ordered to issue the licenses and when she defied that order was jailed for five days. Miss Davis asked that her name be removed from the license and a law was passed that allowed for a marri age certificate with no clerks signature. This case made huge headlines and since it was also during the 2016 presidential campaign was made an even bigger issue, in the end Miss Davis won her battle, if it can be called a battle, against having to issue marriage certificates with her name and names of other clerks in the Kentucky county clerk office to couple of the same sex. The debate that followed Miss Davis refusal to issue marriage certificates ran the gamut on both sides. For many years same sex couples have been seeking to be recognized as legal unions with the same benefits and protections offered to the traditional male, female union, According to Corvin and Gallagher, 2012, for the first time in May of 2011, the gallop poll showed a small majority of Americans favored legalizing same sex marriage, with 53% for and 45% against. What is hotly contested is that marriage is between a man and a woman, however in this book; both authors have differing views with Corvin for same sex marriage and Gallagher firmly against. The negative impact of religious freedom in this case is that because of where miss Davis and others like her work, or even other businesses who now must service openly gay people, is that they are forced to go against their own beliefs and issue same sex marriage licenses or provide service to same sex couples. This impacts people all across this country even if they are not as vocal as Miss Davis was. Most cannot afford to lose their jobs so they remain silent hoping that somehow things will change. Unfortunately the change those people are hoping for may not come to fruition unless they themselves take a stand and then live with whatever the outcome is. The positive impact of this case is the ruling that a bill was passed where one single marriage license form is used for all couples, heterosexual and gays, the county clerks names are no longer on the licenses and those applying can check bride, groom or spouse. Also, unless one volunteers to sign as a notary public, that is not a requirement either. This satisfies both the request for a marriage license by gays and no names being required on the licenses for people such as Miss Davis. In this case, all concerned can still work without infringing on their own religious freedoms while doing so. The most significant impact in this case is the compromise that was reached. Society has taught us that marriage is traditionally between a man and a woman and although now the issue of same sex marriage is out in the open, for decades couples have lived together as an unrecognized marital unit. Some lived in fear because that lifestyle was frowned upon and others just simply lived together and if asked claimed the person as a family member. Is it right to have to live in fear? The answer any sane person would give is no, yet that is exactly how many gay couples have lived. With the event of legalizing same sex marriage and offering the same benefits and protections as a man and woman couple, many have finally chosen to come out in the open. They now faced other challenges such as the one in Kentucky where they were unable to get married. The issue that most people believe was not taken into consideration was how others would react to legalizing same sex marriage. On the one hand it is good for those who felt as if they were living on the fringes of society, shunned for who and what they were and having no support. On the other hand, for the majority who feels that marriage is between a man and a woman, this posed a huge acceptance problem. Is it now fair for these very people to go against everything they have been taught since childhood and engrained in their very core that anything other than a man and a woman was wrong as a married couple is wrong? Now, at least in Kentucky, no longer will the county clerks have to worry about that particular issue. It has been settled by the bill that was signed by the governor. Still, there is the business side of things; however, businesses must make a profit to survive so they are working on that without involving the courts. No person should ever have to go against their own religious beliefs to appease someone else but we live in a world that is evolving and to survive, we too must evolve. Doesnt mean we must go again st our beliefs, it only means we must find ways to compromise without infringing on someone elses first amendment rights. In conclusion, when it comes to freedom of religion, we all have the inherent right to practice our religion without fear of retaliation against us. As with everything there are positive and negative aspects and impacts. No single person should feel persecuted or discriminated against because of their religious beliefs and no person should have to go against their religious beliefs to appease the masses. The issue discussed was same sex marriage and even though it is still not widely accepted by society, as a whole, society will have to learn to make compromises because without compromise, people in the LGBT community will find themselves being discriminated against whether it is intentional or unintentional and that in and of itself is a shame we all must live with. References Academic Freedom and the First Amendment in the Supreme Court. Retrieved from  scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1751context=facpubs Asma Uddin, The First Amendment: Religious Freedom for All, Including Muslims, 20 Wash.   Lee J. Civ. Rts. Soc. Just. 73 (). Available at: http://scholarlycommons.law.wlu.edu/crsj/vol20/iss1/9 John Corvino-Maggie Gallagher (2012). Debating Same-Sex Marriage. New York: Oxford  University Press. http://dailycaller.com/2016/04/14/kentucky-clerk-kim-davis-just-officially-won-the-same-sex-marriage-license-battle/ Miller v. Davis | American Civil Liberties Union ACLU. Retrieved February 19, 2017, from  https://www.aclu.org/cases/miller-v-davis

Cost of Capital, Capital Budgeting and Financial Planning

Assignment| Cost of Capital, Capital Budgeting and Financial Planning| Chapter(s)| 9, 10, 12| Group Name| | Student Name(s)| | Date| | Instructions: HW Assignments will be uploaded to Kean Blackboard and must be accessed from there. You must work in groups where assigned (or independently if not assigned to groups) on homework assignments. Points are noted against each question. You are required to submit Home Work assignments electronically on Kean Blackboard using MS-Office or other text editor. You are required to complete your assignments as per the due date indicated by the Professor.Total Points in Assignment: 100 (Points scored will be scaled down to a maximum of 15 towards the final grade) Assignment: Part I: Cost of Capital During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansio n program that has been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice-president. Your first task is to estimate Harry Davis’s cost of capital.Financial StatementsJones has provided you with the following data, which she believes may be relevant to your task: a) The firm's tax rate is 40%. b) The current price of Harry Davis’s 12% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153. 72. Harry Davis does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. c) The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116. 95. Harry Davis would incur flotation costs equal to 5% of the proceeds on a new issue. ) Harry Davis’s common stock is currently selling at $50 per share. Its last dividend (D0) was $3. 12, and dividends are expected to grow at a constant rate of 5. 8% in the foreseeable future. Harry Davis’s beta is 1. 2; the yield on T-bonds is 5. 6%; and the market risk premium is estimated to be 6%. For the over-own-bond-yield-plus-judgmental-risk-premium approach, the firm uses a 3. 2%judgmental risk premium. e) Harry Davis’s target capital structure is 30% long-term debt, 10% preferred stock, and 60%common equity. To help you structure the task, Leigh Jones has asked you to answer the following questions. . What sources of capital should be included when you estimate Harry Davis’s weighted average cost of capital (WACC)? Should the component costs be figured on a before-tax or an after-tax basis? Should the costs be historical (embedded) costs or new (marginal) costs? (5 points) Sources of capital to be included to estimate WACC are * Long term debt – to be considered after tax * Preferred stock – to be considered before tax ( preferred stock is not tax deductible) * Common equity à ¢â‚¬â€œ to be considered before tax When it comes to corporate financing, most firms incorporate tax effects in the cost of capital.For this reason, component costs should be calculated on an after-tax basis. In financial management the WACC is used primarily to make investment decisions and these decisions hinge on projects expected future returns versus the cost of new or marginal capital that will be used to finance these projects. Thus the relevant cost it marginal cost of new debt to be raised during the planning period 2. What is the market interest rate on Harry Davis’s debt, and what is the component cost of this debt for WACC purposes? (3 points) Pre -Tax cost of Debt is the YTM in the case of a Bond.The current price of Harry Davis’s 12% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153. 72. We used the RATE function in Excel to calculate the YTM: n| 30| PV| -1153. 72| pmt| 60| FV| 1000| Rate (i)| 5%| =RATE(30,60,-115 3. 72,1000) = 5% Since this is a semiannual rate, we multiplied by 2 to find the annual rate, which is the pre-tax cost of debt. 5% x 2 = 10% = rd After tax component cost of debt = Interest Rate – Tax Savings = rd – rdT We calculated that the rd is 10%, and it is stated above that the tax rate is 40%. rd(1 – T) = 10. %(1 – 0. 40) = 10. 0%(0. 60) = 6. 0 = 6% component cost of debt, which is the after-tax cost of debt. 3. What is the firm's cost of preferred stock? (3 points) The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116. 95. Harry Davis would incur flotation costs equal to 5% of the proceeds on a new issue. The cost of preferred stock is simply the preferred dividend divided by the price the company will receive if it issues new preferred stock. No tax adjustment is necessary, as preferred dividends are not tax deductible.Dps is the Preferred dividend = . 10($100) = $10 Pps is the preferr ed stock price = $116. 95 F is the flotation cost as a percentage of proceeds = 5% rps = Dps / Pps(1-F) = $10 / 111. 10 = 0. 09 = 9% cost of preferred stock 4. Would you expect Harry Davis’s preferred stock to be more riskier or less riskier to investors than its debt? Compare the preferred stock yield to the yield to maturity on the debt and explain the risk/return trade-off between preferred stock and debt from an investor’s point of view. (3 points) Preferred stocks are riskier to investors than debt.Corporations own most preferred stock, because 70% of preferred dividends are non-taxable to corporations. Therefore, preferred stock often has a lower before-tax yield than the before-tax yield on debt. But, the after-tax costs to the issuer are higher on preferred stock than debt. This is consistent with the higher risks of preferred stock. 5. Harry Davis doesn’t plan to issue new shares of common stock. Using the CAPM approach, what is Harry Davis’s est imated cost of equity? (2 points) Harry Davis’s beta is 1. 2; the yield on T-bonds is 5. 6%; and the market risk premium is estimated to be 6%.Risk-free rate: 5. 6% Market risk premium: 6% Beta: 1. 2 rs = Risk-free rate + (Market risk premium) (Beta) rs = rRF + (RPM) bi rs = . 056 + (. 06)(1. 2) = 0. 128 = 12. 8% estimated cost of equity using CAPM approach 6. What is the estimated cost of equity using the discounted cash flow (DCF) approach? (2 points) Harry Davis’s common stock is currently selling at $50 per share. Its last dividend (D0) was $3. 12, and dividends are expected to grow at a constant rate of 5. 8% in the foreseeable future. P0 = $50 D0 = $3. 12 g = 5. 8% D1 = $3. 30 rs = D1/P0 + g D1= D0(1+g)= $3. 12(1+. 058) = $3. 30 s = ($3. 30/$50)+5. 8% = 6. 6% +5. 8% = 12. 4% estimated cost of equity using DCF approach 7. Suppose the firm has historically earned 15% on equity (ROE) and retained 62% of earnings, and investors expect this situation to continue in th e future. How could you use this information to estimate the future dividend growth rate, and what growth rate would you get? Is this consistent with the 5. 8% growth rate provided by Jones? (2 points) Payout rate = 100% – 62% = 38% ROE = 15% Growth from earnings retention model: g = (Retention rate)(ROE) g = (1 – Payout rate)(ROE) g = (1 – 0. 38)(15%) = 9. %. Using the Earnings Retention Model, the estimated future dividend growth rate is 9. 3%, which is almost twice the growth rate provided by Jones, and hence inconsistent. Note that the earning retention model assumes the retention and payout rate will remain constant, as will the ROE on new investments. Under these assumptions, the earnings growth and dividends growth rate will also be constant. 8. What is the cost of equity based on the bond-yield-plus-judgmental-risk-premium method? (2 points) For the over-own-bond-yield-plus-judgmental-risk-premium approach, the firm uses a 3. %judgmental risk premium. We calculated earlier that the company’s bond yield is 10%. rs= rd + Judgmental risk premium rs= 10. 0% + 3. 2% = 13. 2% cost of equity based on bond-yield-plus-judgmental-risk-premium method 9. What is your final estimate for the cost of equity, rs? (2 points) CAPMrs = 12. 8% DCF rs= 12. 4% Bond-yield-plus-judgmental-risk-premium risk rs = 13. 2% Average rs= 12. 8% Final estimate for the cost of equity, rs = 12. 8% 10. What is Harry Davis’s weighted average cost of capital (WACC)? (2 points) The firm's tax rate is 40%.Harry Davis’s target capital structure is 30% long-term debt, 10% preferred stock, and 60%common equity. We calculated earlier that the pre-tax cost of debt, rd is 10%, the cost of preferred stock, rps is 9% and the cost of equity, rs is 12. 8%. Wd = 30% rd = 10% T = 40% Wps = 10% rps = 9% Ws = 60% rs = 12. 8% WACC= wdrd(1 – T) + wpsrps + wsrs WACC= 0. 30(. 10)(1 ? 0. 40) + 0. 10(. 09) + 0. 60(. 128) = . 1038 = 10. 38% weighted average cost o f capital 11. What four common mistakes in estimating the WACC should Harry Davis avoid? (2 points) Four common mistakes that are to be avoided are 1.Using current cost of debt (instead of historical cost of debt) 2. Mixing current and historical measures to calculate MRP 3. Using book weights to estimate the weight for capital structure (instead of market weights) 4. Misidentifying the capital component sources Part II: Capital Budgeting You have just graduated from the MBA program of a large university, and one of your favorite courses was â€Å"Today’s Entrepreneurs. † In fact, you enjoyed it so much you have decided you want to â€Å"be your own boss. † While you were in the master’s program, your grandfather died and left you $1 million to do with as you please.You are not an inventor and you do not have a trade skill that you can market; however, you have decided that you would like to purchase at least one established franchise in the fast-foods ar ea, maybe two (if profitable). The problem is that you have never been one to stay with any project for too long, so you figure that your time frame is three years. After three years you will sell off your investment and go on to something else. You have narrowed your selection down to two choices; (1) Franchise L, Lisa’s Soups, Salads, ; Stuff and (2) Franchise S, Sam’s Fabulous Fried Chicken.The net cash flows shown below include the price you would receive for selling the franchise in Year 3 and the forecast of how each franchise will do over the three-year period. Franchise L’s cash flows will start off slowly but will increase rather quickly as people become more health conscious, while Franchise S’s cash flows will start off high but will trail off as other chicken competitors enter the marketplace and as people become more health conscious and avoid fried foods. Franchise L serves breakfast and lunch, while Franchise S serves only dinner, so it is possible for you to invest in both franchises.You see these franchises as perfect complements to one another: You could attract both the lunch and dinner crowds and the health conscious and not so health conscious crowds without the franchises directly competing against one another. Here are the net cash flows (in thousands of dollars): Depreciation, salvage values, net working capital requirements, and tax effects are all included in these cash flows. You also have made subjective risk assessments of each franchise, and concluded that both franchises have risk characteristics that require a return of 10%. You must now determine whether one or both of the franchises should be accepted. . What is the difference between independent and mutually exclusive projects? (2 points) Independent projects are those projects whose cash flows are not affected by other projects. If Costco is considering opening a new store in Los Angeles and another one in New York, they would be independent. Mutu ally exclusive projects are two different methods of attaining the same result. If one is accepted the other would be rejected. If Costco were considering relocating its corporate headquarters to Los Angeles or New York, only one of the 2 locations will be selected thus rejecting the alternate location.When projects are mutually exclusive, it means they do the same job or have the same purpose. 2. Define the term net present value (NPV). What is each franchise’s NPV? (4 points) Net Present Value is defined as the present value of project’s cash inflows minus the present value of its costs. It tells us how the project contributes to shareholder wealth. The larger the NPV the more value the project adds and thus the higher the stock price. NPV = CF0 + CF1/ (1+r)1 + CF2/(1+r)2 + CF3/(1+r)3†¦.. + CFN/(1+r)N r = 10% Franchise L CF0L = -100 CF1L = 10 CF2L = 60 CF3L = 80NPVL= CF0L + CF1L/ (1+r)1 + CF2L/(1+r)2 + CF3L/(1+r)3 = -100 +10/(1+. 10)1 + 60/(1. 10)2 + 80/(1. 10)3 = -100 + 9. 09 + 49. 59 + 60. 11 = $18. 79 Franchise S CF0S = -100 CF1S = 70 CF2S = 50 CF3S = 20 NPVS= CF0S + CF1S/ (1+r)1 + CF2S/(1+r)2 + CF3S/(1+r)3 = -100 +70/(1+. 10)1 + 50/(1. 10)2 + 20/(1. 10)3 = -100 + 63. 64 + 41. 32 + 15. 03 = $19. 99 3. What is the rationale behind the NPV method? According to NPV, which franchise or franchises should be accepted if they are independent? Mutually exclusive? How would the NPVs change if the cost of capital changed? (4 points)NPV is generally regarded as the best single screening criterion, primarily because it is directly related to the firm’s central goal of maximizing the stock’s intrinsic value. NPV tells us how the project contributes to shareholder wealth. The larger the NPV the more value the project adds and thus the higher the stock price. A negative NPV indicates sufficient cash is not being generated from the project to meet cost associated with the project. Zero NPV indicates that cash generated is only sufficient to cover costs. Positive NPV on the other hand indicates that the inflow of cash is larger than the outflow.NPV rules dictate that if projects are independent, both projects should be accepted as long as they have a positive NPV. In this case both Franchise S ; L have positive NPV’s and should be accepted. If projects are mutually exclusive, then the project with the larger NPV should be selected. In this case, Franchise S has a higher NPV indicating that the returns from investing in Franchise S is larger and thus Franchise S should be selected. 4. Define the term internal rate of return (IRR). What is each franchise’s IRR? (4 points) IRR is the discount rate that forces the PV of the inflow of a project to equal the initial cost.In other words it forces the NPV to be zero. IRR is an estimate of the projects rate of return and it is comparable to the YTM on a bond. NPV = CF0 + CF1/ (1+IRR)1 + CF2/(1+IRR)2 + CF3/(1+IRR)3†¦.. + CFN/(1+IRR)N = 0 Using Excel function IRR | Expected | | net cash flows | Year (t)| Franchise L| Franchise S| 0 | ($100)| ($100)| 1 | 10 | 70 | 2 | 60 | 50 | 3 | 80 | 20 | IRR| 18. 13%| 23. 56%| IRRL = 18. 13% IRRS = 23. 56% 5. What is the logic behind the IRR method? According to IRR, which franchises should be accepted if they are independent? Mutually exclusive? How would the IRRs change if cost of capital changed? 4 points) IRR is an estimate of a projects rate of return. If the return exceeds the cost of funds used to finance the project, then the difference is a bonus that goes to the firm’s stockholders and causes the stock price to rise. So if the WACC/hurdle rate(r) is less than the estimated return IRR, it indicates project will be profitable. As in NPV where zero is the threshold above which the project is considered profitable, r is the threshold above which IRR is considered profitable In the condition where Franchise S and L are independent, both franchises have positive IRR’s and thus both franchises should be accepted.However, when both franchises are mutually exclusive, the franchise with the larger IRR has to be selected, which in this case Franchise S. 6. Construct NPV profiles for Franchises L and S. At what discount rate do the profiles cross? From the NPV profile which franchise or franchises should be accepted if they are independent? Mutually exclusive? Explain. (6 points) NPV Profile for Franchise S ; LCost of Capital = 10%| | Year =| 0| 1| 2| 3| Project S| -100. 00| 70| 50| 20| Project L| -100. 00| 10| 60| 80| | | | | | | r| NPVS| NPVL| | | 0%| $40. 00| $50. 00| | | 5%| $29. 29| $33. 05| | 8. 68%| $22. 32| $22. 32| | | 10%| $19. 98| $18. 78| | | 15%| $11. 83| $6. 67| | | 18. 126%| $7. 23| $0. 00| | | 20%| $4. 63| -$3. 70| | | 23. 564%| $0. 00| -$10. 20| | On this plot the X Axis is the cost of capital and the Y axis is the NPV. IRR is the discount rate at which profile line crosses the X axis. Profiles crossover at an 8. 68% cost of capital. Based on the pl ot, the NPV for both Franchise S and Franchise L have NPV’s above the cost of capital indicating cash inflow is larger than the costs and thus both projects should be selected if they are independent of each other.On the other hand, if the projects are mutually exclusive, the project with the larger x-intercept (higher IRR), which is Franchise S, should be accepted. 7. What is the underlying cause of ranking conflicts between NPV and IRR? (3 points) Ranking conflicts occur when cost of Capital is higher than crossover rate which causes NPV and IRR to point in different directions. The two basic conditions that cause these conflicts are * Timing difference: When one project receives majority of the cash early while the other receives it later.This is the reason for conflict between Franchise S ; Franchise L * Project size (scale) difference: Significant difference in invested amount can cause a conflict When either timing or size differences occur, the firm will have different amounts of funds to invest in other projects depending on which of the two mutually exclusive projects it chooses. Given this situation, the rate of return at which differential cash flows can be reinvested is a critical issue. Therefore, whenever conflict exists between mutually exclusive projects, NPV method is better to use. 8.What is the â€Å"reinvestment rate assumption,† and how does it affect the NPV versus IRR conflict? (3 points) NPV calculation is based on the assumption that cash inflows can be reinvested at the projects risk adjusted WACC, whereas the IRR calculation is based on the assumption that cash inflows can be reinvested at the IRR itself. Since NPV assumes reinvestment at cost of capital which is more realistic and is typically lower than the IRR (cash flows generally cannot be reinvested at heir IRR), so NPV is the more reasonable method. NPV should be used to choose between mutually exclusive projects. . Define the term modified IRR (MIRR). Find the M IRRs for Franchises L and S. (4 points) IRR overstates the expected rate of return for accepted projects because cash flows cannot be reinvested at the IRR. The Modified IRR (MIRR) rectifies this problem by assuming reinvestment at the WACC or any other reasonable rate. Using excel function MIRR, we calculated the MIRR for Franchise L and S. WACC| 10%| | | | year| 1| 1| 2| 3| Franchise L| ($100)| 10| 60| 80| Franchise S| ($100)| 70| 50| 20| | | | | | MIRRL| 16. 50%| | | | MIRRS| 16. 89%| | | | 10.What are the MIRR’s advantages and disadvantages vis-a-vis the regular IRR? What are the MIRR’s advantages and disadvantages vis-a-vis the NPV? (4 points) MIRR has two significant advantages over IRR. First, MIRR assumes reinvestments at cost of capital rather than investment at IRR which is generally not correct. Thus, MIRR is usually a better indicator of profitability. In addition, the MIRR eliminates the multiple IRR problem because there can never be more than one MIRR, a nd it can be compared with the cost of capital when deciding on accepting or rejecting projects.MIRR does not always lead to the same decision as NPV in the case of mutually exclusive projects where difference in size and timing can give rise to conflicts. In these considerations, NPV is a better indicator as it selects the project that maximizes value. However, MIRR is superior to the regular IRR as an indicator of a project’s â€Å"true† rate of return. Part III: Forecasting Financial Statements Matthews Industries’ most recent financial statements are available in the attached Excel worksheet and also in the partial model file Ch12 P11 Build a Model. xls from the textbook’s web site.Matthews Industries’ financial planners must forecast the company’s financial results for the coming year. The forecast will be based on the forecasted financial statements method, and any additional funds needed will be obtained by using notes payable. Comple te the partial model and answer the following questions. 1. Assume that the firm’s 2010 profit margin, payout ratio, capital intensity ratio, and spontaneous liabilities to sales ratio remain constant. If sales grow by 10% in 2011, what is the required external capital the firm will need in 2011 as calculated by the AFN equation? 10 points) AFNMatthews =| Add'l Req'd Assets| ? | Spontaneous liabilities| ? | Add'n to RE| =| (A0*/S0)? S | ? | (L0*/S0)? S | ? | S1 ? M ? (1–POR)|   | | | | | |   | =| (A0*/S0)(gS0) | ? | (L0*/S0)(gS0) | ? | S1 ? M ? (1–POR)|   | | | | | |   | =| $660| ? | $74. 70| ? | $257. 73|   | | | | | |   | AFNMatthews =| $327. 27| million|   |   |   |   | The required external capital for 2011 as calculated by AFN is 327. 27 Million. 2. If 2010 ratios remain constant, what is Matthews’ self-supporting growth rate?How will the self-supporting growth rate change if each of the following changes occur: (1) the profit mar gin declines, (2) the payout ratio increases, or (3) the capital intensity ratio declines? (10 points) | PM(1 – POR)(S0)| $234. 30|   | Self-supporting g =| =| | = 4. 17%| | A0* – L0* – PM(1 – POR)S0| $5,615. 70|   | Mathew’s self-supporting growth is calculated to be 4. 17%. Effect on Self-Supporting growth when all ratios are kept constant except one ratio is changed as follows 1) When the profit margin declines, the self-supporting growth percentage drops.Assuming that everything else is constant and M falls to 2. 55%, self-supporting growth g would fall to 2. 96% 2) When Payout-ratio increases, self-supporting growth percentage drops. Assuming that everything else is constant and POR increases to 55%, self-supporting growth g would fall to 3. 39% 3) When capital intensity ratio (A0*/S0) declines, it does not change the self-supporting growth 3. Matthews’ management has reviewed its financial statements and arrived at two possible sce narios for 2011.The first scenario assumes a steady state while the second scenario, the target scenario, shows some improvement in ratios toward industry-average values. Forecasted values for the scenarios are shown in the partially completed file Ch12 P11 Build a Model. xls. If Matthews assumes that external financing is achieved through notes payable and financing feedbacks are not considered because the new notes payable are added at the end of the year, what are the firm’s forecasted AFN, EPS, DPS, and year-end stock price under each scenario? (14 points) Using the file Chapter 12P11 Build a Model. ls, forecasted values for scenarios are as follows: Forecasted Values| Steady State| Target State| AFN| $324. 40 Million| -332. 50 Million| EPS| $3. 16| $5. 66| DPS| $1. 42| $2. 41| Year-end Stock Price| $25. 27| $70. 79| See excel file submitted separately for detailed calculations on Part III. Scoring Sheet: Question #| Max Points| Points scored| Part I| | | 1| 5| | 2| 3| | 3| 3| | 4| 3| | 5| 2| | 6| 2| | 7| 2| | 8| 2| | 9| 2| | 10| 2| | 11| 2| | Part II| | | 1| 2| | 2| 4| | 3| 4| | 4| 4| | 5| 4| | 6| 6| | 7| 3| | 8| 3| | 9| 4| | 10| 4| | Part III| | | 1| 10| | 2| 10| | 3| 14| | TOTAL| 100| | | | | Points towards final grade| 15| |

How consumers are protected in contracts for the sale Essay

Goods are any form of products that are supplied to consumers for their convenience. They are generally modelled as having diminishing marginal utility. Ultimately, whether an object is a good or a bad depends on each individual consumer and therefore, it is important to realize that not all goods are good all the time and not all goods are goods to all people. Sourced: http://en.wikipedia.org/wiki/Good_(economics) Role of the Sales of Goods Act 1979: The Sales of Goods Act 1979 gives consumers the opportunity of returning or exchanging products which do not fit the description for example, if a consumer has joined a new contract with the O2 and have been told that with the new contract they get a contract phone in black, however on the day when the phone arrives its white then the consumer can take their problem straight back to O2 and they would have to change the product straight away as it doesn’t look like what it is said to. Also if the contract clearly states that it will be a particular phone and turns out to be a different make then O2 would have to make sure the exchange the products and supply the customer with the one they have stated. Express Terms of the Sales of Goods Act 1979: An express term of a contract is a declaration which is made by two or more organisations; and has agreed upon what is stated in the contract, the contracts can be made through verbal methods or by word of mouth. Once the contract has been agreed upon both the organisations have to make sure the follow the deal. Conditions: A condition is a term which has to be followed within the agreement, For example, if O2 are selling their phone contract to customers, whereas supply customers with a different phone contract then it shows that  O2 did there bit of providing the customer with a mobile phone contract however didn’t provide them with the right one. A breach of contract will entitle O2 to follow the correct law of the contract and provide the consumer with the right one. Warranties: A warranty is a term that does not fully follow all agreements, so For example, carrying on from the O2 phone contract issue , when the customers buys the phone contract and is assured by the company that they will receive a special tariff with the contract. Therefore, when the phone contract arrives on the day there is no extra tariff, when the party doesn’t stick to its word then this is seen as a warranty. The customer is able to sue the supplier however it doesn’t mean that the agreement will end. Implied terms of the Sales of Goods Act 1979: There are sequence of conditions which are automatically prepared in every contract by the sales of goods act; and they would be dealing with the following which include: title, description, fitness for purpose and satisfactory quality. I have stated these factors below and explained what each and every one of them means: Title: this is when there is an implied condition which allows the sellers to have the right to sell the goods for example, O2 impliedly confirms that the phone contract it sells actually belong to it and also that it can legally pass on the ownership to another telecommunications company, however if O2 are not able to pass on the title to the buyers then it will mean that O2 will be liable for breach for the contract. Description: the contract must fully explain how the product has been described, when there is a contract for the sales of goods by description then there will be an implied condition that the goods will correspond with that description. However the slightest removal from the description will then enable the buyer into rejecting the goods for breach of condition of the contract made. Fitness for purpose: A fitness for purpose is where a seller who in this case  is O2 plans to sell its goods in the good courses of their business, for example if O2 was to sell their contract to the consumers for the business to be better and make more sales. There is an implied condition for this was they are fit for the particular purpose, this means that the buyer (consumer) has expressly or impliedly known to the seller. Satisfactory quality: The satisfactory quality is where the sellers sell goods for the good of their business; there is an implied term that the goods that is supplied are of the right satisfactory quality. However except to the extent of defects which are brought straight to the buyer’s attention, this will be done before the contract is made meaning that T-Mobile will need to sell satisfactory quality to their consumers. Conclusion: Overall in the briefing sheet I have made sure that all evidence is provided, also that a clear explanation is made of how a contract protects the consumer and what happens if that contract is breached. Mainly information is suggested on the different conditions made by the sales of goods act such as title, description, fitness for purpose and also satisfactory quality. Factors that invalidate contracts: There are many factors that can make a contract invalidated, which means that the contracts cannot be used anymore, such as the following: Misrepresentation: Misrepresentation is where there is a false statement in the contract which is made by one of the parties to the other before the contract is agreed on. There is no general duty to disclose facts, and silence will not normally amount to a misrepresentation. But gestures, smiles or a course of conduct may amount to a representation. Duress: Duress is where a party enters into a contract against their will for example, if O2 is forced into a contract by either violence or treat of violence to themselves or to their family then it means that the contract that is being made may become invalid. In this case the affected party can avoid the contract on the ground of duress; this is because all parties who are entering a contract must enter freely. Mistake: In general terms a mistake  is when a contract is being made however one of the party members may have made a mistake in knowing what they are agreeing to or a contract can be made which turns out to be wrong, this i s down to a mistake occurring, sometimes when there is a mistake in a contract it can make it invalidated.