Lifes Dream A Personal Story - 1079 Words

My husbands arrival at St. Anthony Grammar school of the Roman Catholic Mission in Nigeria, began the worst time of his twelve-year-old life-or thats what he thought at the time. But now Ben appreciates his memories of the death of his father at nine years of age, his boyhood days, the birth of America dream, and the fulfillment of the dream. At the time, it seemed like the end of the world when Ben lost his father at nine years of age. His father lived by and practiced the Golden Rule. Looking back, Ben is glad he had that experience. He learned from that, than anything else. His education began at an early age under his father, who put the touches to his study of the Alphabets. Upon the completion of his elementary education, Ben†¦show more content†¦Their biographies revealed the possibilities of willpower in the face of abject poverty. When he reviewed another book giving information about the American Colleges and Universities, He was inspired to soar to the heights of success. The dream was born and he renewed his desire to proceed to America for higher education regardless of the cost and the the price to be paid. One day at the United States Information Center, he decided that God should guide him in the choice of a university in America. He took out a book about the study of the Public and Private Higher Schools in the United States and he closed his eyes, prayed for divine guidance and opened one of its pages at random as he placed his pencil blindly on Eastern Washington University, Cheney, Washington State. He sent a letter to the university and after few weeks, the University acknowledge the receipt of the letter and assured him of his interest to attend the university to better his position in life by wishing to study in the United States. More importantly, the cost of attending the University was $7,500 for the the first year. Nevertheless, Ben planned to go to United States not only to be educated but to discover the secret which made successful people to be self-employed so as to be positioned to better the conditions of mankind. Consequently, he day dreamed about how he would start a business, with a goal to accumulate wealth toShow MoreRelatedThe Alchemist Themes833 Words   |  4 Pages Personal legend and dreams are primary themes for Santiago, the main character in the novel, The Alchemist. Throughout the book these themes are represented in his quest to find his purpose in life, achieving his personal legend, and learning to do what he loves. In Santiago’s quest for his purpose in life he discovered some life lessons. He found it is important to follow your dreams, but along the way your plan may turn out different then you thought it would. In The Alchemist the King saysRead MoreComparison Of The Alchemist And Life Of Pi799 Words   |  4 Pageskeep going, throughout his journey he had many people around him telling him to continue and to fight so he can complete his personal legend, Fatima was his true love and she loved him, so she encouraged him to accomplish his dream because she was apart of it. He made Fatima apart of his personal legend so he could have her. â€Å"And I am part of your dream, a part of your personal legend as you call it. Thats why I want you to continue toward your goal.†(97). This displays a different idea then LifeRead MoreThe Secret Life Of Walter Mitty1271 Words   |  6 Pagesloosely based on the same short story. Both Walters use their daydreams as coping mechanisms and escapism because they don’t like what they see and yet in the movie this dissatisfaction leads Walter to change in both his relationships and personal growth and in the story, it does not. Both the film and the story versions of Walter Mitty look at the age-old question, what is the meaning of life? There are similarities and there are differences in both the movie and the story and yet each leads us to someRead MoreBook Review of The 7 Habits of Highly Effective People801 Words   |  3 PagesThe 7 Habits of Highly Effective People Tuesdays with Morrie: Personal Change and Lifes Great Lessons Stephen Covey talks about seven habits that one can practice in order to achieve both personal and professional success in The 7Habits of Highly Effective People (1989). He defines these habits as the intersection of knowledge, skill and desire. Covey sees the development of these habits as part of an entities progress on a maturity continuum from dependence to independence to interdependenceRead MoreTuesdays with Morrie Essay1074 Words   |  5 Pageswith Morrie, uses plot and story, character development, point of view, theme, and symbols to convey his mesage. Include your personal thoughts and views, as well as textual references, to support your opinions. In Mitch Albom’s Tuesday’s with Morrie, Albom detailed his personal experiences with his professor Morrie Schwartz. Mitch also expressed how influential Morrie was to his friends, relatives, patients, and coworkers. Within this essay, the plot and story, character development, pointRead MoreThe Love of a Woman in Paulo Coelho’s Novel The Alchemist Essay1121 Words   |  5 Pagesnovel The Alchemist the story of the shepherd boy Santiago and his journey to fulfill his Personal Legend unfolds from beginning to end. On his journey Santiago meets several significant male characters that play very important roles in the development of his character, his journey, and his story. There are only a few female characters in The Alchemist, as men dominate the story; however, one of these female characters also plays a very significant role in Santiago’s story. Santiago falls in loveRead MoreAnalysis Of Mcewan s Atonement By Ian Mcewan1090 Words   |  5 PagesWhe n it comes to the personal, uncontrollable misfortunes in life, there seems to be two main ways to handle it: either ignore it, or face it then and there. Ian McEwan’s Atonement is a prime example of this struggle in dealing with traumatic situations. In Paper One, I stated that McEwan suggests the best way to deal with life’s traumas is to face them head on rather than to completely ignore them. McEwan shows this through the mistakes Briony makes as her innocence misguides her into a dividedRead More Importance of Self-Image in the Loman Family1483 Words   |  6 Pages Published in 1949, Arthur Miller’s Death of Salesman is a post Second World War American drama that highlights the plight of isolation and desolation experienced by the common man, as symbolized by Willy. The play deals with the society, life’s absurdity, various internal and external conflicts, death and above all, the tragedy of existence. It is located in the industrial society of the twentieth century where the pressure to succeed and the financial difficulties seem insurmountable. The playRead MoreJohn W. Wright s Coach Wooden 1683 Words   |  7 Pageswho tells the stories of leaders such as Civil Rights leader and activist, Dr. Martin Luther King, Jr., who fought for justices and equality for all while teaching his followers of equality, civil disobedience and nonviolence (Gardner, 1990) is one example of a transformation leader in his book who emphasizes that the success of a leader equates to the success of their followers. Furthermore, this leadership style is present in Coach Wooden’s book, which details his many personal stories of leadershipRead MoreAlchemist Essay1157 Words   |  5 Pagesphilosophical story by Paulo Coelho about a boy named Santiago who follows his dreams. He sets off on an arduous journey to the Egyptian pyramids and learns many valuable lessons as he attempts to uncover hidden treasure. With the aid of a number of inspiring individuals who provide valuable insight on their personal beliefs, Santiago seeks to fulfill his main obligation in life. If Santiago did not have the assistance of significant figures in his journey, he would have never achieved his Personal Legend

Historical Significance Of The Steam Invention - 985 Words

Introduction: In the real world, human beings always rely on various natural resources to survive over thousand years. The ancients use water and woods mostly. As the time goes by, modern people considered that oil and coal are the most important energy for people. In human history, people have been experienced industrial revolutions over three times. The very first time industrial revolution occurred at 1760s and ended at 1850s and it marks that mankind entered the age of steam. Without any doubt, all kinds of steamer boomed at the market, steam locomotive, steam train and etc. It proved that historical significance of the steam inventions, which ended the human dependence on animal power, wind and water for over 4700 years, at the meantime, due to the steam things, some human historian believed that 19th century European domination of the world is based on the steam engine. After decades, a new type of energy source for human has been obtained – natural resources and people would develop the possession of the earth fossil fuels, namely oil and gas. The second industrial revolution had changed the world operation mode, which means Mankind entered the age of electricity and reach the peak in the information revolution. Oil and coal became the major resources. Especially after 1870, all industries are subject to the impact of science. Due to the use of electricity and the invention of the main use of oil and gasoline internal combustion engine, the power industry has beenShow MoreRelatedTechnology And The Growth And Expansion Of The Population And Society Essay1508 Words   |  7 Pagescould appear in an everyday situation. The first technologies of importance were associated with the survival, obtaining food and its preparation. The fire, the tools made of stone, weapons and the cloth were technological developments of great significance. Without a doubt one of the most astonishing innovations was agriculture. In a way, all human history revolves around two revolutio ns: hunting to agriculture and agriculture to industry. Without the different technologies that has developed theRead MoreUrbanization, Industrialization, Popullation1376 Words   |  6 Pagespresented a prototype for industrial revolution spreading throughout Western Europe and North America afterwards. The greatest significance of this process is that it replaced manual labor by machinery as well as mechanical production took the place of manual production. Furthermore, the industrialization was made possible by the great, incredible and numerous inventions, such as steam engine technology, electric power, cotton gin, elevators, telegraph code, telephone, railroads, steel mills, refrigeratorRead MoreTechnological Advancements of the Victorian Period Essay1863 Words   |  8 Pagesincorporation of latest technologies in the field. The increasing urbanization had been the reason of the emergence of this field in the first place. In the 1800s, the industrial revolution has undoubtedly been one of the most significant socio-historical factors, where there had been a sudden increase in the demand of industrial workers, and therefore the field spurred and more and more people were trained to serve the demand. Back then as described above the field had been known as vocational trainingRead MoreMechanical Engineering Applied For Vehicles : Past, Present And Future1765 Words   |  8 Pagestraffic. Second, the current development of it and its application in transport. Then, the possibilities of future directions. In a word, this paper will elaborate the benefits and progress mechanical engineering bringing to vehicles in order of time. Historical Background Mechanical engineering has been existing throughout the history of mankind since stone and timbers were used as tools for the first time in human’s life. During Stone Age, prototypes of boat (circa 6000 BC) and wheeled vehicle (circaRead MoreHow Transport in the Modern World has Affected us as a People and our Surroundings1605 Words   |  7 Pagescomparing my experiences of going without the use of public transport systems to the points in this essay, relaying my thoughts on how transport in a modern world has affected both us as a people and our surroundings. HISTORICAL TRANSPORT SHAPING NEW WORLD Transport in a historical context is important to look at when confronting the ideas of transportation shaping the modern world. The developments throughout history show each consequence of new technologies on civilisations and individuals. TheRead MoreThe Discovery Of Penicillin During The World Of Medicine2931 Words   |  12 Pagesmold had developed on an accidentally contaminated staphylococcus culture plate (Penicillin). Upon examination of the mold, he noticed that the culture prevented the growth of staphylococci. Fleming had discovered the world s first antibiotic. Significance: The discovery of penicillin changed the world of medicine enormously. With its development, diseases that were previously severe and often fatal, such as bacterial meningitis, could now be easily treated (Penicillin). Throughout history, soldiersRead More William B. Willcoxs The Age of Aristocracy Essay1918 Words   |  8 Pagesmotivations of the men in the forefront, they seem to serve primarily as a means of building our interest in the next big world conflict, glimpsed on the horizon of the upcoming chapter. A brief overview of the new inventions of the Industrial Revolution in Pause Between Storms reminds us how steam engines work and roads and canals are constructed; this information does not strongly influence the story, except to explain why industry was generating a movement to reform the nations economic policy (137)Read MoreSignificance Of The Centennial International Exhibition Of Industry2382 Words   |  10 PagesCentennial Exhibition that took place in Philadelphia, Pennsylvania in the year 1876 was a ground breaking event that showcased the incredible advancement in culture and industry experienced by the United States immediately after the Civil War. The significance of the Centennial to the American economy, relations with European powers and recovery from the Civil War cannot be overlooked. During the late 1840s and 1850s America had been completely unable to compete with foreign nation’s industrial prowessRead MoreThe United States Of America2360 Words   |  10 Pagesas world power and one of the nation’s top competitors in terms of strength and equality. However, in the second half of the 18th century, America greatly lacked what was needed to grow and prosper into the thriving country it is today. Several historical themes like, for instance, the growth of national identity, diversity, and geographical resourcefulness can be used to analyze the growth of America. These factors allowed Americans to break out from colonial monotony. Without a vast improvementRead MoreHistory of the world in 6 glasses2699 Words   |  11 Pagesits invention or discovery was so ancient that it is recorded only indirectly, in m yth and legend. Archaeological evidence suggests that wine was first produced during the Neolithic period, between 9000 and 4000 BCE. It was produced in the Zagros Mountains because three factors in that particular area made wine production possible: the presence of the wild Eurasian grape wine, the availability of cereal crops to provide year-round food reserves for wine-making communities, and the invention of pottery

Wealth Maximization And Payback Period - Free Sample Solution

Question: Part A Critically evaluate and analyse the differing ways in which the shareholders of a company can encourage its managers to act in a way that is consistent with the objective of maximization of shareholder wealth. Are You Daunted by the Thought of Due Assignments? Avail Our Services and Receive Assignment Help from Experts. In this section students should demonstrate knowledge, understanding, and an ability to critically evaluate the importance of agency theory, and the role it plays within financial management. The response should draw upon the differing techniques that can be used by shareholders to reduce the agency problem that is faced within many businesses. A critical evaluation of relevant academic literature should be performed, providing clear evidence of wider reading within this topical area of research, rather than simply describing the core concepts. Attempting to evaluate within the context of real-life examples where shareholders have actively attempted to address agency problems would assist in developing the depth of response offered. Part B In practice financial managers use a variety of differing investment appraisal techniques upon assessing the viability of potential capital investment projects. Critically compare and contrast two investment appraisal techniques, one of which must be a discounted cash flow technique that would assist within the financial management decision-making process. In this section students should demonstrate knowledge and understanding of two investment appraisal techniques used by financial managers, how they can inform future projects, what limits their ability to guide investment, and which technique you would prefer (with reasons). The response should demonstrate evidence of wider reading and application of the chosen techniques within a real-life business context, supported through relevant empirical research. Real-life examples can be drawn from differing countries, industries and individual businesses, clearly identifying whether the investment appraisal techniques chosen are applied in practice. The inclusion of relevant numerical examples to develop the response further would be advantageous although should not form the main thrust of the work. Answer: Introduction Shareholders are the owners of the company. They contributed a significant part of the capital by which a company can operate its business. They take all the risks associated with the company. So it is the duty of the company to provide them adequate rewards. On the other hand investors can only willing to invest in a companys share from which he can able to get a good return. The following study is based on these two objectives where it is shown how the wealth maximization goal is achieved and how the project appraisal techniques can be used to evaluate the returns of the shareholders (Shim, Siegel and Dauber 2008). Part A Wealth maximization Wealth maximization is an important term used in financial management. The term wealth means the value of the shareholders, so its does not only consider the profit earned by the company. We know shareholders are the owner of the company and they get dividends at the end of the year depending on the performance and profit of the company. The problem is that the profit which have earned today by the company have no certainty that it will be earn tomorrow also so the main concern of the shareholder is always to maximize the value of his share so that he is able to sell his share and will have a capital gain. This process is called wealth maximization. It can be better described by a simple example. Say a shareholder purchased a share of company at $ 4 in 2006 and was getting continuous dividend. In the year 2015 the value of that share rise to $18 and the shareholder sell the share at that price. So he will have a capital gain of $ 14 which arises because of his wealth maximizes from $ 4 to $ 14. Wealth maximization occurs when shareholders have confidence about the rising of the price of the shares (Welch, 2010). Agency theory As per the entity concept of accounting it is said that the company and its owner have separate legal entity (Heracleous and Lan, 2011). It was also decided in a famous case study Salamon Vs Salamon Co that the existence of Salamon Company as a sole trader and later as a partnership business is separate. So in case of company also the entity of managers and owners are separate and from this relationship between owner and manager the agency theory is evolved (Agency Theory, Information, and Incentives, 2015). This theory says that the relationship between managers and owners is like the principal and agent and as per the law an agent means a person used to affect a contract between their principal and a third party. This theory is based on the following assumptions (Forbes-Pitt, 2011) - In agency relationship persons have rational behavior and they are always willing to maximize their personal utility. This implies that the persons are only concerned about how their individual goal can be satisfied. The utility gaining by the principal for providing services, information is same as or equal to the utility achieved by the agents in receiving benefits. The company creates a link between contracts and the activities must be conducted as per of those contracts. Problems with the agency theory The agency theory has several problems which are discussed as follows- In this theory the main importance is given on the individual interest by ignoring the collective interest (Brammer, 2005). As we know that an organization should have such objectives which will help it to achieving the organizational goals. For this purpose all the parties in the organization must have proper communication and same level of interest. In practical situation it is often observed that the interest of these two parties namely management and owner are separate. Management are only concentrating in decision making activities which may increase their profit but they may be less bothered about the wealth maximization goal as they have no share in dividends (Levante, 2007). Again the problem can arise when the risk taking attitude of the parties are different. The owners might have an opinion that the company should invest in high risky project in order to get higher return but the management may reluctant to do so as they will be accountable for taking extra risk and with the addition they will not get any reward for this. On the other hand owner can prefer debt financing as it will increase their return but management may not agree with this decision as this will increase their fixed financial obligations (Dickinson and Villeval, 2008). Techniques for resolving agency problems For resolving agency problems mentioned above several techniques are suggested. One of the most important techniques among this is the effective corporate governance. Hermes, an institutional fund manager had developed 12 principles which can be applied to any company for reconcile the profit maximization and wealth maximization objectives (Jiraporn et al., 2008) ; (Yahanpath and Joseph, 2011). Transparency and Communication Principle 1 Each and every company should disclose accurate and timely information to all its parties, owners and management so that any miscommunication between these parties can be avoided. Feedback from all the concerned parties is equally acceptable. Corporate culture Principle 2 A strong internal culture should be established which will help in value creation of the members. Here the employees can be trained to get accustomed with the organization and arrangements can be made for delegating responsibilities and evaluation of the performance should be made (Chuang, 2014). Principle 3 The company should developed effective corporate strategies for each of their business units and by keeping in mind their target customers. Principle 4 The company should maximize its sustainable operating performance which is in their existing business. A proper acquisition should be incorporated before some new acquisition decisions can be taken. Principle 5 All companies should ensure that the investment plans must passed through feasibility studies and only that kind of investments are given preference which maximizes the long term wealth of the shareholders. Risk management Principle 6 When a company is taking a long project for long term benefit of the shareholders then it is obvious that the management should have assessed the risk properly. The Board of Directors must have effective risk management tools. Principle 7 The company should have a capital structure which will reduce the long term cost of capital. Debt financing is cheaper than the equity financing but involves higher obligations so it is the decision which can be taken on the basis of the financial ability of the company. If the capital structure is not as per the requirements then it should be reconsidered. Environment, Stakeholders and Social issues Principle 8 Company should build effective relationship with all the parties who have an interest on the company like suppliers, customers, government, employees etc. Principle 9 For long term sustainability of the business the company should manage the environmental and social factors which give an impact on the business. A business is the part of the large society so it is the primary responsibility of a company to do some betterment for the society. Principle 10 A company has a large number of shareholders. Though they are the owner of the company but it is not possible for all of them to participate in the management of the organization so a Board of directors is nominated by them who manage the affairs of the business but when the company is taking some decisions for restructuring of capital structure or acquisition etc teen it must allow the shareholders before taking the decisions. Principle 11 The Board of Directors should guide the company with diverse range of competencies, experience and enable the company to carry its duties, responsibilities. Sometimes there are different approaches are used, a proper explanation for that should be given by the management to its shareholders. Principle 12 The company should design its remuneration structure and remuneration policies adequately and implement those timely. Real life examples on agency problems Barclays bank plc In this company the main conflict arises between the management and the shareholders because The company declared a 2.4 billion bonus shares in spite of 34% fall in profit. The company plan to cut 12000 jobs in year 2014. Management makes an argument with the shareholders that the bonus increase is necessary. The shareholders are afraid about this bonus issue because the company had a poor financial history. Tesco plc This company has also faces some agency problem recently which affects their value of the shares (Hargreaves Lansdown, 2015). Tescos market share fall from 29.9% to 29.1% in 2014. In late 2014 Tesco admitted that they were making a misstatement of their profits by 263 million as a result of which the shareholders get disappointed. The company failed to give information to the suppliers timely and they were cancelling their deals. While the investigation is going on eight executives were suspended with pay and the cost of the company increased. The share price again falls by 44% and the shareholders wealth getting affected very badly. They closed down their 43 shops and thousands of job cut occurred. But the shareholders do not lose their hopes fully. They again began to start believing the company and it is reflected by the recent share price movements as it is again started to increase. Part B Contrast and Comparison between Payback period and Net present value Net present value and Payback period A contrast and comparison of the discounted cash flow technique and another technique of investment appraisal has been made. The discounted cash flow technique that has been used for the study is the net present value. The other cash flow technique that has been used for the study is the payback period (Bragg, 2011). The discounted cash flow technique is one of the investment appraisal techniques that evaluate the attractiveness of the investment opportunity. The future free cash flow projections are analyzed in the technique of discounted cash flow and they are discounted in order to arrive at the present value (Connor, 2006). This is done for the evaluation of the potential investment opportunity. On analysis of the projects via the discounted cash flow technique the value of the project where the DCF analysis is higher than the current cost of the investment is chosen. Net present value calculation is one of the major discounted cash flow techniques. It calculates the sum of the present value of the cash flows. The inflows and the outflows of the project are discounted at the present value. The process of calculation of the net present value is a very simple technique and it is straight forward in nature (Goel, 2015). On the other hand payback period is one of the capital budgeting techniques that refers to the time period that is required to recoup the funds that has been invested. This is necessary technique to achieve the breakeven point. However, the payback period does not take into consideration the time value of money (Heysel and Filion, 2014). Dissimilarities between the net present value technique and payback period The net present value method is a dynamic technique of investment appraisal. It is a discounted cash flow technique. The technique is calculated using the technique of time value of money. The profitability from the project will be assessed on calculation of the return from the capital that has been invested. It is achieved under the assumption of the discount rate. The investment proposals whose net present value is zero will have the same return as that of the alternative investment. The investment with net present value greater than zero than the alternative techniques of investment will achieve an increase in the capital. The investment with net present value less than zero will have worse return than the alternative techniques of investment and the investment may not be able to achieve the capital expenses. The net present value method is considered as a process for the assessment of the investment techniques. It is also used as a tool for the assessment of the investment techni que by comparing it with the alternative techniques. The capital value can be interpreted in terms of monetary units by using the net present value technique (Holland and Torregrosa, 2008). The major advantage of this method is that it uses the discounted rates. On the other hand the payback period can be considered as the static investment appraisal method. The period is determined that is required to get back the capital that has been invested. This is achieved via the repayments. The investment that has the shortest period of pack back is considered as the best investment decision and it is the most advantageous decision. The payback decision is an important technique for comparison between the various alternatives. The comparison between the various alternatives can be done using the technique of payback period. The absolute risk from the investment can be determined by using the technique of payback period (Kalyebara and Islam, 2013). There are large organizations where there is specific target that is set for the investment to get recouped. The payback period can be calculated using the average method or it can be calculated using the cumulative method. However the investment decision entirely on the basis of the payback period can lea d to results that are misleading in nature. The cash flows that are considered during the amortization period are considered in the calculation of the payback period. Thus there are various discrepancies associated with the technique of payback period. Thus it must not be considered as the sole technique for the calculation of the payback period (Kimmel, Weygandt and Kieso, 2011). Limitation of the Net present value and Payback period technique The net present value technique takes into consideration, the cash flows which are both positive and negative for conducting the project at present and in the future. The future cash flows that will be generated are discounted in order to reflect that the future inflows of cash are worth for the present day. The future cash flows are adjusted using the discount rate that takes into consideration the inflation rate. The cost of capital is taken into consideration. The present values of the cash flows that are negative and positive in nature are added to calculate the net present value. The project will be accepted when the net present value is positive while it is rejected when the net present value is negative. While making decisions between various projects, the project with high net present value is selected (McSweeney, 2006). The payback period does not taken into consideration the inflation rate and the cost of capital. The purchasing power of money declines with time. This is not considered by the payback period. On the other hand the major drawback of the net present value method is that it is based on assumptions. The estimation of the discount rate is based on assumptions. Thus the calculation may not be accurate. The analysis of the investment decision using the net present value technique is accurate than the payback period. Thus it is more feasible technique than the payback period (Naumov, 2013). Practical examples of application of net present value and payback period Net present value In the year 2012, Kotak Mahindra Bank had acquired the non performing portfolio of the Barclays bank in India. The credit card business was acquired by the organization. The decision taken by Kotak Mahindra Bank to acquire the assets of Barclays Bank was a result of analysis of the profitability from the project. In such situation, the discounted cash flow technique plays a major role. The portfolio that has been acquired by Kotak has an estimation of around Rs 300 crore and the acquisition is of 200,000 cards. The present value of the inflow over the years has been considered. The outflows that will occur as a result of this acquisition have been taken into consideration. The three possibilities that can arise as a result of the investment decision have been discussed. The three possibilities can be either zero, positive or negative. The acquisition has been possible as it has produced positive results. If the present value of the inflow of cash is less than the present value of the outflow of cash then the project would have been rejected (Park, 2013). Another example can be cited to show the application of net present value. Fine Electonics Company is considering purchasing equipment that will be attached with the main manufacturing machine of the company. The cost of the equipment will be $6000 and there will be an increase in the annual cash flow by $2200. The life of the project will be 6 years. However the machine will have no salvage value. A 20% return on the investments in expected. The net present value of the investment project has been computed. The feasibility of the investment decision has been analyzed. Item Years Amount of cash flow 20% cost of capital Present value of the cash inflow Annual inflow of cash 1-6 $2200 3.33 $7317 Initial investment $6000 ($6000) Net present value $1317 Since in this case the net present value is $1317, the project will be accepted. Payback period Payback period for different projects can be analyzed for the selection of the project which will give the highest return. For example, among two projects B and C that have identical inflow of cash, the project C is considered as the cash inflow from this project is $60,000. The project C is able to recoup the invested capital within shorter period of time than the project B. The payback period is sophisticated tool for making investment decisions in the organization. The investment opportunities can be analyzed by using this tool (Peterson Drake and Fabozzi, 2002). Conclusion The paper has analyzed the importance of the agency theory and the role played by the theory in taking major decisions of financial management. The ways in which the agency problem can be reduced significantly has been discussed. The agency problem of Tesco and Barclays Bank has been analyzed and the feasible solution to the problems has been studied. The various investment appraisal techniques have been studied. A comparison and contrast between the net present value method and the payback period technique has been studied. Among the two investment appraisal technique the net present value method is a better investment appraisal technique as it analyses the projects using time value of money. On the other hand the payback period does not consider the time value of money which is one of the major discrepancies of the technique. References Agency Theory, Information, and Incentives. (2015). . Bragg, S. (2011). The new CFO financial leadership manual. Hoboken, N.J.: Wiley. Brammer, S. (2005). Profit maximisation vs. agency: an analysis of charitable giving by UK firms.Cambridge Journal of Economics, 29(4), pp.517-534. Chuang, K. (2014).FINANCIALadvisors, financial crisis, and shareholder wealth in bank mergers.GlobalFINANCEJournal, 25(3), pp.229-245. Connor, T. (2006). Net present value: blame the workman not the tool. Strat. Change, 15(4), pp.197-204. Dickinson, D. and Villeval, M. (2008). Does monitoring decrease work effort?.Games and Economic Behavior, 63(1), pp.56-76. Forbes-Pitt, K. (2011).The assumption of agency theory. London: Routledge. Goel, S. (2015). Capital Budgeting. Business Expert Press. Hargreaves Lansdown, (2015).Tesco plc dividend payments | TSCO dividends. [online] Available at: https://www.hl.co.uk/shares/shares-search-results/t/tesco-plc-ordinary-5p/dividends [Accessed 7 Jul. 2015]. Heracleous, L. and Lan, L. (2011). Agency Theory, Institutional Sensitivity, and Inductive Reasoning: Towards a Legal Perspective.Journal of Management Studies, 49(1), pp.223-239. Heysel, C. and Filion, Y. (2014). Estimating the Payback Period of In-line Micro Turbines with Analytical Probabilistic Models. Procedia Engineering, 70, pp.815-822. Holland, J. and Torregrosa, D. (2008). Capital budgeting. [Washington, D.C.]: Congress of the U.S., Congressional Budget Office. Jiraporn, P., Miller, G., Yoon, S. and Kim, Y. (2008). Is earnings management opportunistic or beneficial? An agency theory perspective.International Review of Financial Analysis, 17(3), pp.622-634. Kalyebara, B. and Islam, S. (2013). Corporate Governance, Capital Markets, and Capital Budgeting. Dordrecht: Springer. Kimmel, P., Weygandt, J. and Kieso, D. (2011). Accounting. Hoboken, N.J.: Wiley. Levante, M. (2007). Victory or Profit Maximisation?.FINANCE Bien Commun, 26(1), p.48. McSweeney, B. (2006). Net present value: the illusion of certainty. Strat. Change, 15(1), pp.47-51. Naumov, A. (2013). ON ACCURACY OF PROJECT'S PAYBACK PERIOD ESTIMATES. Theoretical Applied Science, 5(09), pp.95-99. Park, C. (2013). Fundamentals of engineering economics. Upper Saddle River, N.J.: Pearson. Peterson Drake, P. and Fabozzi, F. (2002). Capital budgeting. New York, NY: Wiley. Shim, J., Siegel, J. and Dauber, N. (2008).Corporate controller's handbook ofFINANCIALmanagement 2008-2009. Chicago, IL: CCH. Welch, S. (2010). When Wealth Management Met 2008: Now What ?.The Journal of Wealth Management, 12(4), pp.31-45. Yahanpath, N. and Joseph, T. (2011). A brief review of the role of shareholder wealth maximisation and other factors contributing to the globalFINANCIALcrisis.Qualitative Research in FinancialMARKETS, 3(1), pp.64-77. Zhang, M., Huang, L. and Cai, Y. (2012). Forecast on Payback Period of Restaurant Projects Investment by Computer Simulation. AMR, 446-449, pp.3782-3786.

The Peculiarities of Housing Crisis in the USA

Today economists widely discuss the perspectives and the first indicators of the development of the new global financial crisis which can influence all the economical and social fields. That is why it is necessary to examine the previous experience and the economical background of the countries and focus on the causes of the crisis of 2007-2009 in order to prevent the progress of the critical situation and overcome the most dangerous effects nowadays.Advertising We will write a custom essay sample on The Peculiarities of Housing Crisis in the USA specifically for you for only $16.05 $11/page Learn More Many researchers agree that one of the main causes of the financial crisis in the USA in 2007-2009 was the housing crisis which contributed to the development of the problem and to the increase of risky tendencies. The housing crisis of 2006-2008 should be discussed as the process which includes two main stages which are the formation and the burst of â₠¬Ëœhousing bubbles’ and the following subprime mortgage crisis. To understand the peculiarities of the crisis, it is necessary to concentrate on the characteristics of ‘housing bubbles’ typical for the US economy of the 2000th which ‘burst’ caused the development of the following crisis. It is important to notice that ‘housing bubbles’ are rather speculative in their nature, and they are characterized by a range of such features as the rapid and enormous increases of the valuations of property, and it usually ends in the immediate drop of the prices which can lead to the borrowers’ crisis because they have no the opportunity to pay for their property according to the mortgages (Bhattacharya). The housing crisis in the USA was not the crisis of building companies or of the housing rent market. It was the result of bursting ‘housing bubbles’ which were based on the fictitious funds which actually were not connected with the real prices for the property and real borrowers’ incomes. Today economists accentuate a number of causes for the development of housing crisis in the USA. According to Goodman, these causes are â€Å"high default transition rates, low cure rates, and longer liquidation timelines† (Goodman 27). However, this characterization of the causes is rather limited. In his works, Stone focused on the controversial aspects which can be considered as some of the main conditions for the beginning of the crisis. He developed such influential factors as the wide income inequality in the housing industry, the facts of persistent racism in housing provision, the discussion of housing as a speculative commodity, and as a result, the overdependence of housing financing on debt capital markets (Stone).Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More â€Å"Taking these three elements togethe r, no sector of the economy has been as dependent on debt as housing† (Stone 36). Moreover, in his works on the issue of the housing crisis, Stone presents the complex analysis of the major causes of the misbalance in the economy of the housing sector in the country. The crisis developed according to several stages the main phases of which were the burst of ‘housing bubble’ and its effects. The housing boom ended in 2006 when â€Å"the share of subprime mortgages in total mortgage originations reached 20 per cent†, the prices reached the peak and then declined in the same year (Bardhan 3). 2007 could be characterized by numerous defaults and foreclosures, and in 2008 the whole financial system of the USA began to suffer from â€Å"collapsing transactions in derivatives† (Bardhan 3). In 2006 in the situation of the continuous growth of the prices for real property Americans were ready to take loans under any conditions because they were sure that they could return the money with the help of definite financial operations and even make some profits. Businessmen concentrated on the constant increase of prices without paying attention to the fact that this process cannot be endless. As a result, the amount of loans which were not supported by the real incomes of borrowers increased greatly (Prassas). Thus, in the situation of the open competitiveness banks did all possible to attract the clients and gave the loans without consulting the information about their incomes. Derivatives from mortgages were popular with the public. They were bought in order to get the definite income. The facts of the increase of these incomes persuaded the public to buy more, but this effect was not long. There were more and more derivatives, the difference between the speculative and fictitious capitals, delinquencies and foreclosures grew. It was the first step to further developing the situation with delinquencies and foreclosures because in 2008 the p rices for the real property rapidly decreased, but the sum of the necessary repayments increased. Now a great number of Americans could not pay for their loans (Bhattacharya). Analyzing the progress of crisis, Stone accentuates that â€Å"borrowing far beyond any realistic potential of repayment – built on the myth that residential property values always and forever rise – a classic bubble† (Stone 36). It is possible to discuss the consequences of housing crisis in the USA from two opposite positions. Many economists accentuate that there are no positive tendencies in the crisis’s consequences. The decline of housing prices resulted in rising foreclosures. Many organizations specialized in credits, financial entities, and investment banks became bankrupts. The negative results of the crisis were also connected with the main government-sponsored enterprises, Fannie Mae and Freddie Mac. The threat for the investment companies created the dangerous situation for the whole financial system of the country which also broke the relations with the international investors (Bardhan). â€Å"Credit markets became nonfunctional, rate spreads between risky and risk-free government debt skyrocketed, and the entire financial sector effectively became not just illiquid but insolvent† (Bardhan 3).Advertising We will write a custom essay sample on The Peculiarities of Housing Crisis in the USA specifically for you for only $16.05 $11/page Learn More Nevertheless, it is important to make the accents on the fact that the housing crisis was not spread on the private commerce because of the differences in realizing the main principles of the development and financing (Bardhan). That is why the problem of housing crisis is predominantly associated with the average Americans who bought the real property taking credits and had no money to pay for their loans after decreasing the prices on property. However, several positi ve trends in the housing market can be observed. â€Å"Prices have fallen significantly, housing is more affordable now than at any time in the past two decades, and the tax credit for first-time homebuyers has helped spur purchasing† (Goodman 26). Thus, two indicators of the crisis in the field were determined by the investors who suffered from their results significantly. They focused on the increase of â€Å"the number of loans in delinquency or foreclosure† or the â€Å"housing overhang† and the growth of a number of the borrowers â€Å"with negative equity who are likely to default† (Goodman 26). To fulfill all these conditions for the development of the crisis, it is necessary to create the critical situation depending on the growth of the housing occupancy and debt costs which is accompanied with rising property taxes, the high leverage supported by the decline of prices on the real property, the general decline of personal incomes which leads to t he inability to pay for mortgages, and as the decisive factor, the decrease of the real property values (Stone). The threat of bankruptcy made the companies which function in the field of housing market and banks make definite decisions in order to solve the consequences of the crisis. The situation results in the progress of different systems which could contribute to overcoming the crisis: In order to continue to qualify consumers for the purchase of a home, and to help drive the housing market, lenders offered more creative financing options, such as 40-year mortgages, interest-only loans, and jumbo loans, in addition to the typical business practices of offering loans based on fixed- and adjustable-rate mortgages, refinancing, and lending on the basis of home equity (Prassas 40). To overcome the problem of foreclosures and delinquencies, banks implemented a range of definite strict measures according to realizing the credit conditions for all the companies, in spite of their pay ing capacity. There are also several visions of the question of possibilities to predict the development of ‘economic bubbles’ and that is why to prevent the causes for critical situations in economy. The solution of this question can help to prevent global economic crises.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The lessons of the housing crisis in the USA in 2006-2009 can be considered as effective for analyzing the situation and developing the range of measures in order to be able to overcome and even predict the development of the negative tendencies in economy in the future. Works Cited Bardhan, Ashok. â€Å"Housing and the Financial Crisis in the US: Cause or Symptom?† The Journal for Decision Makers 34.3 (2009): 1-7. Print. Bhattacharya, Subhrendu. â€Å"Accelerated Trade in Housing Industry: An American Challenge in Recent Times†. Journal of International Economics 2.1 (2011): 76-84. Print. Goodman, Laurie. â€Å"Dimensioning Housing Crisis†. Financial Analysts Journal 66.3 (2010): 26-37. Print. Prassas, George. â€Å"Employment in Financial Activities: Double Billed by Housing and Financial Crises†. Monthly Labor Review 134.4 (2011): 40-44. Print. Stone, Michael E. â€Å"Housing and the Financial Crisis: Causes, Consequences, Cures†. Housing Financ e International 24.1 (2009): 34-39. Print. This essay on The Peculiarities of Housing Crisis in the USA was written and submitted by user Alma Castro to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.