Essays on Discounting

- Conditions for investing in employee training

Employers engage in employee training under certain circumstances. When there is technological change as well as a new product to be launched in an organization, the employer has to ensure that the employees are familiarized with the new technology. It calls for training to ensure there is maximum operational efficiency. Also, in the event that the business is making constant losses, adequate training is mandatory to ensure that various costs are reduced thereby increasing the profit margins of the company.

In the event that new employees are hired or promoted ...

Introduction

International Airline Group (IAG) is a British-Spanish based multinational airline holding company with its headquartering located in London, United Kingdom (Menter, 2009). In terms of size and financial competitiveness, IAG is known as the seventh largest company of the world. The shares of the company are actively trading in the London Stock Exchange (LSE) and it is a major constitute of Financial Times Stock Exchange (FTSE-100) Index. The company earned net revenue amounting to €18,675 million in the year 2013 with net profit amounting to €147 million in the same year. The main perspective of this assignment is ...

Introduction

Net Present Value (NPV) refers to the sum of all the present values of the future net cash inflows from a project subtract the initial cost of the investment. The present value of the cash flows is also known as the discounted cash flow because it is calculated by discounting the cash flow using a discounting factor. The discounting factor is calculated using a discounting rate that is predetermined based on the riskiness of the project in question. Net present value is used to compare to the value of future return of a project to the present value of the same returns. In ...

Weighted average cost of capital (WACC) is the minimum return expected from the securities of a company. It is the sum of the weighted costs of the individual components in the capital structure. The product of the cost of capital of a component and the proportion of the component in the capital structure yields the weighted cost of that particular component in the capital structure. The cost of capital for equity is the ratio of the dividend per share and the market price for each share. This is computed as 1.50/15*100=10%. The weighted cost of equity capital is the product ...

Abstract

In today’s competitive landscape, an organization must employ all possible means within reach to maximize growth and profitability by focusing on strategic marketing. Classic Airlines has the opportunity and resources to alter the landscape of the airline industry in its favor. In order to succeed, Classic Airlines must correctly forecast market potential and future demand, by establishing both short- and long-term marketing objectives.

Classic Airlines

Classic Airlines faces an organizational issue requiring urgent solution. The current internal and external marketing programs have not been able to satisfy the needs and wants of the stakeholders. Classic Airlines customers have resorted to ...

Question 1

Investment is an undertaking with an expected return in a given period of time. Investors focus on the value of return before making an investment decision. The investment value is subject to some elements which investors are concerned with their investments. These variables are as follows:

The expected cash flow of investment.

The investment cash flow can be used to evaluate the investment viability through use discounting techniques such as Net Present Value, Internal Rate of Return and Profitability Index. When the initial project outlay is less than the present value of the investment cash flows, then the project is viable using NPV technique. The firm’ ...

For Guillermo Furniture Store, the analysis of the break-even point provides the amount at which the total fixed cost is the same as the total contribution margin. A difference occurs between revenue and variable cost. The Guillermo’s production units are 1,885 and 377 for mid-point and high-end respectively. Guillermo has to decide which of the three options that he has to provide a solution to the situation the company is facing at present. In making the decision, Mr. Guillermo has to put into consideration the extra costs and their benefits. The decision making process involves opportunity cost, which ...

Business

The Story The atmosphere inside the Sales Corridor of an MNC beverage company became immensely tensed because the five medium scale distributors from the same region had severely threatened Regional Sales Manager (RSM) and Territory Commercial Manager (TCM) for immediate resignations from distribution agreements. The TCM was impatiently waiting for arrival of all concerned Area Sales Managers (ASM) and Market Development Officers (MDO) along with RSM to find the solution of grave cut-pricing issue emerged during past six months, which had subsequently ruined the confidence of major distributors who missed their monthly, quarterly and semi-annual sales targets during ...

1.1 Describe with examples, some of the characteristics of food production and food and beverage service systems that is in use within the hospitality industry. The food and beverage industry are a multi-billionaire industry, that has catered to many, making it a new industry that people can look forward to. There has to be a system, that the service directors are using to inherit a food service system that are to be followed by the directors all day-long.An option in food service industry is what we are bound to look for if there has to be a look-out and fixed system in food ...

Management

Question # 1 10 Different Types of APCs under OPPS The unit of payment under OPPS in most of the cases is APC. CMS allocates each services of Hospital a common procedure code to APC based on similar clinical feature and cost. The rate of payment and co-payment is calculated for an APC that is applied to each service within in APC. Sometimes newly introduced services are assigned to new technology of APC, which are depend on similarity of resource used, until cost of data are available to permit assignment to APC clinical . Packaging is the critical feature ...

GUARDIAN ANGELS FASHIONS

Executive Summary Guardian Angels Fashions is a modern clothing retail outlet that deals with youths’ attire. This retail outlet will deal with the upcoming youth fashions, and thus this will make it fulfill the uniqueness criterion. The target customers for Guardian Angels Fashions are the youths who dominate in the society. Youths value the upcoming fashions in the clothing industry, and thus this retail outlet aims to utilize this opportunity by providing these basic commodities to them at pocket friendly prices. Over the next four years, Guardian Angels Fashions outlet aims to expand its operations up to the national ...

Tools for Evaluating the Projects

Biz Systems Consultants Ltd is a firm that is set up by experienced persons. Now they are in consideration for the projects that have investment of 17, 00,000$ and three projects are mutually exclusive. In this report we will find out the ways and tools that can help the firm in accessing the feasibility of the project. There are different methods of accessing the feasibility of projects as well as many sources of finance but we will discuss here the three major sources of finance that are best suitable for the company (Bearse, 1993). For the company Biz ...

It is commonly known that the money in hand today is more worth than the money of same amount in future. This idea is based on earning potential. This principle says that the money can earn interest and gradually can grow. Everyone knows the fact that the money deposited in bank account will earn interest. The time value of the money is a priori principle that a fixed amount of the money that is accessible today is more costly than the same amount of near future. This principle can be generalized for the economic resources available by social contract. We can ...

Avnet INC.

History The Avnet INC. is a Distributor Company founded by a Russian immigrant called Charles Avnet. Charles started by purchasing parts of the radio and selling the parts to different individuals, especially in the port cities of the United States. With time, he transformed his distribution platform by selling the surplus parts to dealers and manufacturers. Charles Avnet shifted his operations during the Great depression by focusing more on wholesaling. Between 1920 and 1930, Avnet transformed his business by branching out and diversifying by dealing with radio kits in cars and assembly kits in the automobiles. The incorporation of ...

Executive Summary

Evaluating investments risks’ and potential return is crucial for investors’ as a way of establishing the expected return for their portfolios. In that respect, the analysis has used the Darden Case on American Greetings and the analysis on the Company as an investment has been done with use of DCF model that uses the present value of the expected future cash-flows. In addition, the analysis has been done using the future cash-flows for the years 2012 to 2015. The company’s WACC has been established to be 0.11% given the risk-free rate of 0.05% and the Market rate of ...

Individual report

Introduction The task of the following individual report is to discuss critically two questions using economic models and objectives. The first question is “The recent price wars in the supermarket and mobile phone industries have been beneficial to both consumers and their respective industries. The discussion of that topic is about the recent price wars between the UK supermarkets – the monopolists Tesco, Morrison, Sainsbury and Asda and the German supermarkets Aldi and Lidl. German supermarket gain the half of the British market by low prices for their goods and it lay the beginning of the price war. The ...

Every person is born with a different mindset and thinking in this world, and on the basis of this mindset and thinking, they will take different aspects accordingly. On the basis of the mindset, an individual will select a desired career for them. The clearest intentions behind selecting and addressing a particular career depends upon the fact that how much future benefit it will give or arise for the individual in particular (Peterson, Fabozzi & Habegger, 2004). The aspect of return on Investment (ROI) is the most important aspect that strides under the analysis of development or pursuing a career. In this particular assignment, ...

Incentives in the Workplace: Is Money the Key?

INTRODUCTION While it is true that money matters in terms of financial gain and the gloriously pursuit to excel in accrual of revenues in business, research study and professional observational critiques have shown that monetary incentives in the workplace are not the key factor which motivates people in the workplace setting. The main article of referential focus, entitled ‘Social Incentives in the Workplace’ by economist research analysts Oriana Bandiera, Iwan Barankay, and Imran Rasul of the London School of Economics conducted a study which measures worker productivity as associated with rewards. Bandiera, Barankay, and Rasul (2010) discovered some startling ...

Introduction

J.C. Penney is a 110 year old department store chain that recently unveiled its new pricing plans and strategies in order to remain competitive in an increasingly competitive retail market sector. It can be asserted that majority of the companies that flourished a few years to a few months before the global recession suffered from a certain extent of slowdown after the latest global financial crisis was unveiled in 2008 from which the United States economy has not fully recovered (Lublin & Mattioli, 2013). The goal of the new pricing and integration strategy, as announced by the CEO of J.C. Penney, Ron Johnson, is ...

Answer 1)

Payback Period is one of the most simple technique of capital budgeting where it is used to ascertain the time it will take for the entity to recover its initial cash outflows from the cash inflows generated by investment project. It is an important determinant as no business organization would like to invest in projects with long payback time period.

Payback period is calculated with following formula:

Payback Period= Initial Investment/ Annual Cash Inflows

Answer 2)

Secondly, it is the simple and easy applicability of the payback period which is the another reason for continued applicability of the payback period method.

Answer 3)

In order to evaluate the usefulness of ...

a) Both, Present Value and Future Value are related to the process of compounding. Future value refers to the nominal amount to which a current deposit will grow over time when it is placed in an account paying compound interest. In other words, future value is the present value compounded over the years through compounding process. On the other hand, Present Value is the current or value of a given series of payment on a given date. In fact, present value is calculated by discounting the future value through a process called discounting, where an appropriate discounting factor is used to calculate the present ...

Finance - Investment appraisal

Finance - Investment Appraisal Payback period for Option A: Payback period for Option A = [2 + (90000/120000)] years [2 + 0.75] years 2.75 years = 2 years and 270 days

Payback period for Option B:

The Payback period for Option A = [5 + (80000/430000)] years [5 + 0.19] years 5.75 years = 2 years and 70 days

NPV and IRR for the option A:

NPV for option A = Sum of all cash inflows and outflows = +64280 IRR for option A = lower NPV% + (higher NPV % - lower NPV %)x ( lower NPV / Lower NPV – Higher NPV) = 0.1 + (12% - 10%) x (86200 / 86200 – 64280) = 0.1 + 0.07 = 0.107 = ...

Business

Net present value is one of the most widely used financial methods for the investment appraisal. The first advantage of using the NPV method of investment appraisal is that it incorporates the time value of money. Moreover, the discount rate or cost of capital used in the calculation of NPV of any project is calculated after taking care of all the financial structure and tax adjustments of the business. This discounting factor also contains the risk and inflation adjustments which provide accurate time value of money. Another advantage of the NPV method of investment appraisal is that it uses ...

14th November, 2013

It is of no doubt that value created by the managment of the company benefits the shareholders but it is the society which is benefited at largebecause the quest for value by the management drives resources to the most efficient use and thus benefiting the society as a whole. However, even today there is not set principle or theory on how share prices are determined?

In the financial arena, there are two methods of valuation of shares: Accounting Model and Economic Model.

Accounting model is the conventional model of calculating share price using multiples of P/E and EPS, where share value is calculated by multiplying EPS and P/E Ratio. Although this method is simple and prvoides apparnt ...

Final Report for Nike

In forecasting the future trend of the success of the business during the drafting of the proforma income statement, the revenue earned is assumed to decline in the next two years before it finally rises in the subsequent years. This is by calculating the net present values of the revenue items at a WACC of 12.2%. Time series analysis is done in order to forecast the future value of the various aspects of the company (Arnaud D& Nobert J 56). The gross profit margin is assumed to be constant at 43% hence enabling the proration of the revenue items. Assets ...

Environmental Risk Perception

This article recognizes the changes in the environment, pollution and modern technologies and their impact for both human and nature. The people perceive these risks prompts the actions adopted in addressing such risks. The article provides various factors that have been proposed in providing explanation risks with the environment providing a discussion of the biases and heuristics. However, the perceptions have also been based on subjective judgements on risks and cognitive biases. The article also provides a discussion of the psychometric, model, which identifies the core features of risk underlying perceptions of risks. The explanation on environmental risks and perception is ...

What is Net Present Value (NPV)

NPV = Total PV of CF – Initial cash outflow

Where total PV of cash flow is defined by

PV of CF = CF1 / (1+r)^1 + CF2 / (1+r)^2 + CF3 / (1+r)^3 + CF4 / (1+r)^4 + CF5 / (1+r)^5. CFn/ (1+r)^n Net present value helps in comparing a dollar today with a dollar in the future. It can do so by discounting the future dollar by adjusting for inflation (Rouse, 2011). Companies use this method to see the financial viability of a project against its financial target.

Google’s Project

In the problem, the cash flow is indicated in the first row of the table ...

Treatment of contingencies has gained significance in the wake of mergers and acquisitions prompted by recessionary trend and exposure to Sarbanes-Oxley Act (SOX) and as part of risk-management. Accounting Standards Codification (ASC) 450 applies to “Contingencies”. It relates to both the contingencies of loss and gain. Except for the carry forward of tax loss, gain contingencies are not recognized since it is not apt to be recognized before actual realization. US.GAAP does not allow recognition of contingent assets and only requires brief disclosure when a future gain is likely to be realized. However, loss contingencies can be recognized. They ...

Slide 1: Lease: Exposure Draft 2013

Slide 2: BHP Billiton: Company Background One of the largest resources company in the world Operates in countries like USA, Australia, Pakistan, Algeria, Canada, Chile, Brazil, Thailand, Colombia, Peru & Venezuela. One of the leading manufacturer of iron ore, copper , aluminum, uranium, nickel, silver and coal. Also one of the major player in oil exploration and oil extraction. Slide 3: BHP Billiton: Current Lease Accounting Practice BHP Billiton has many different types of lease agreements in different countries. Land lease agreements are carried in book of accounts at cost. Depreciation of the ...

Part One

Our current loan balance=$ 130794.68, while monthly payments including premiums from escrew account=$1083.967 - Strategy for solving the problem Looking at the loan duration, obviously the duration of twenty years will incur a higher monthly installment payment as opposed to the loan term of twenty five years. Assuming the escrow payment remains flat for the successive periods, we are going to calculate the monthly payments possibilities using financial annuity formulas. The interest rate 5.75% is assumed to be annual, so we will have to calculate a p-thly rate, in this case we compute a monthly interest rate. Use ...

- The relative merits of using a Cost based, demand based or competition based pricing method for the case of Cowgirl chocolate products. Cost-based pricing shows a variety of gross profit and product cost and most businesses use this method when pricing products. Examples of cost-based pricing include cost push pricing, mark up prices and planned profit pricing. It is easy to calculate pricing using this approach and allows an analysis of how different prices affect output needed. Everything in the business can be quantified into a cost, and cost-based pricing structure requires entrepreneurs first determine the costly expenses of production ( ...

Te Au Rangahau (The Maori Business Research Centre at Massey University) Project

- Payback Period Project A’s payback period falls in the seventh year while project B’s payback period falls in the sixth year. Project B would, therefore, be a better option using the payback period method. Note that for project A, the total payback is 20000 only, while for project B, the total payback is 22000. The payback period decision method as the following assumptions, advantages and disadvantages. Ignores the time value of money. No discounting takes place. It also makes the assumption that inflows accrues evenly throughout the year. This could be contrary to the unfolding ...

Guillermo owns the Guillermo Furniture store, which is specialized in making high and mid-end grade furniture. The company faces foreign competition from a company that makes use of advanced technology to produce quality products at low process. This has necessitated Guillermo to study various approaches of making his enterprise profitable and have a competitive advantage, as well as maintain his market share. The store will either be managed through high-tech or become a broker, to achieve the aforementioned goal. The paper analyzes the various alternatives, which are available to Guillermo that includes sensitivity analysis. The case presented is demonstrative of a typical ...

Importance of capital budgeting process

The capital budgeting process facilitates the financial management duty of allocation of finances and decision making on investment choices. With limited amounts of capital, financial managers are required to advise on the most appropriate business investment opportunity to pursue. The capital budgeting process suffices for the identification of the best alternative for investment. Through the capital budgeting process, financial managers are able to compute the expected cash flows in various investment options. Through the discounting methods, they are able to accurately estimate the expected cash flows and settle on the most profitable in consideration of the market dynamics such ...

Ben’s age is critical in the decision to pursue the MBA. This is because the age indicates the number of years he has in the employment industry. As such, the age would inform the decision as the duration left in service would be used to compute the cash flows that would be accrue in terms of salaries and remuneration. The outcome would be compared to the costs incurred in pursued of the MBA. The figures would then be compared to the net cash flows that accrue in the absence of the MBA. This would inform the rationale for ...

The advent of the digital age has brought along new business processes and technology that run organizations. Globalization has since taken root in concepts of products development and service delivery and thus companies are able to have operations in almost every corner of the world. Nations are now able to take advantage of such worldwide business opportunities in order to increase profits and revenue. However, this global nature of business has brought along its fair share of problems. There is new wave of competition in the market by companies consistently innovating new products to meet consumer needs. This cut-throat ...

Organizations must be prepared not only to deal with but also to utilize the different characteristics of people based on physiological, psychological and social development. An organization must consider three main aspects as far as attaining operational effectiveness is concerned. They include flexibility in organizational design, interpersonal relations and individual evaluations. To gain maximum motivation and commitment from the human resources, the management must systematically recognize the unique individual capabilities within the organization. The process requires the organization to follow what is right, legal and most effective in handling learning individual behavioral characteristics.

The behavior of individuals depends primarily ...

1. Measurement of unemployment usually has a role during the management of an organization. For example, it provides measures of labor in various aspects such as labor supply, labor input and the extent at which the current time of labor and human resources are really utilized. This information can be used by organization’s management to evaluate human resources developments in planning and formulating policies. Unemployment data can be used to effectively understand current trends and all changes in labor markets (Schneider, 2008). This can be used to analyze economic and social aspects with an aim of evaluating macro- economic ...

Persuasion or persuasive communication is a type of social science in which one aims at guiding people to adopt an idea, action or attitude using rational and symbolic means (Cialdini, 2001). Persuasion therefore relies on appeal rather than force. Persuasive communication can be divided into three main parts: the communicator or persuader, the message and the audience. The combination of traits and characteristics of the persuader, the message and the audience aims at bringing the utmost appeal and persuade the audience.

Persuaders

Our ability to persuade is influenced by three overarching characteristics; trust, expertise and likeability (Hamilton, 2007). Persuasion could either ...

Discount Rate in Project Appraisal

Discount rate is a measure of risk and the cost of capital used to finance a project. There are various models, which have been designed, to determine the discount rate to use in appraising projects of multi-activity companies. The models include capital asset pricing model, arbitrage pricing theory, weighted average cost of capital and marginal cost of capital. These alternative ways of deciding on discount rates are discussed in this paper.

One of the approaches is the interaction between equity; asset and debt through information available can be utilized. In this case, a sector that has identical characteristics as the new project ...

Disclosure Index

The financials in 2010 and 2011 have been prepared according to the relevant AASB standards. The expansive disclosure section is quite thorough, informing potential investors and current shareholders about existing trends within the company. The financials disclose all required information about the company’s operations, including the detailed requirements for financial instruments and other items that have to do with extended credit. During the year under report, there were quite a few changes in the AASB reporting requirements, as the financials note, but none of those changes had a significant effect on the reporting methodology at David Jones.

The 2010 and ...

Executive Summary The current paper is devoted to studying of two financial valuation approaches and consists of two parts. The first part contains a description of Adjusted Present Value (APV) as valuation method and its advantages over other valuation methods. Computation of APV of the Top Plc Company was provided. The second part of the paper is devoted to the description of Black-Scholes Model, its practical application and limitations on the example of House4You Company.

Introduction

There are many valuation methods in financial analysis. The first part of the paper is devoted to the description, analysis and application of ...

There are various techniques used to evaluate viability of investments and in comparing different investments. These techniques include net present value, payback period, accounting rate of return and internal rate of return . Net present value is preferred when evaluating projects because in takes into consideration time value of money unlike Payback period and accounting rate of return. Although internal rate of return considers time value of money it is confusing to compute and conceptualize . Net Present value is computed by discounting annual cash flows at a given discounting rate. Annual cash flows are determined by subtracting annual cash outflows ...

Introduction

The success of a company depends on the company’s attention to the short-term decisions. Short-term decisions affect the management of current assets and current liabilities. The company’s liquidity position depends majorly on the level of current assets of the company. If a company is to survive in the business, it must have the ability of generating enough cash that meets its short-term (current) needs (Bhattacharya, 2004).

Working capital management is therefore an important factor in the success of a company, both in the short term and long term. The degree of solvency or liquidity depends on the extent to which ...

In “Mood States of Shoppers and Store Image: Promising Interactions and Possible Behavioral Effects,” Sherman and Smith (1987) evaluate the concept of consumer mood and how it pertains to their behavior in shopping. They used Mehrabian’s mood scale in order to measure the moods of the sample consumers in their study, as well as how they perceived the image of the store in order to see how it affected shopping behavior. The aim of this study was to provide market researchers with information on how to improve store image and consumer mood in a way that would increase sales ...