Strategic Position of McDonalds in the Fast Food Industry Essay

Strategic Position of McDonalds in the Fast Food Industry - Essay Example According to Derdak and Pederson, McDonald’s Corporation is the leading hamburger fast-food restaurant chain in the world. Maurice McDonald and Richard McDonald initially started the company in 1940 as a barbecue restaurant but Ray Kroc later brought it in 1995; Kroc was initially a franchise agent of the restaurant and he is the one who initiated the global expansion of the restaurant chain.According to Derdak and Pederson, McDonald’s Corporation is the leading hamburger fast food restaurant chain in the world. Maurice McDonald and Richard McDonald initially started the company in 1940 as a barbecue restaurant but Ray Kroc later brought it in 1995; Kroc was initially a franchise agent of the restaurant and he is the one who initiated the global expansion of the restaurant chain. Presently the McDonald’s Corporations has its own restaurants that it manages and there are licensed franchisees and affiliates that operate under the corporation’s portfolio. The refore, the net income of the company is attributed to sales from its own restaurants, licensing fees from franchisees, and royalties. The present headquarters of the corporation are in Oak Brook, Illinois in the United States, and it has presence in over thirty four thousand locations across the world. Among the popular dishes served at the McDonald’s restaurants include French fries, hamburger, Chicken, coffee, milk shakes, soft drinks, salads and desserts.

A History of Autism Developments

A History of Autism Developments In Autistic Space Temple Grandin is a professor of animal science at Colorado State University, and consultant to the livestock industry on animal behavior. She completed her PhD in Animal Science at the University of Illinois in Urbana and invented the hug box, a device to calm those on the autism spectrum. She is one of the first individuals on the autism spectrum to publicly share insights from her personal experience of autism. Grandin was diagnosed with brain damage when she was two. She could not speak until age three and struggled with severe behavioral issues through her teens. She thanked her mother who never lost faith in her and fought many battles to ensure that she got an education, and her high school science teacher, William Carlock, who built up her confidence and channeled her teenage fascination with cows into a career in animal science. At the University, she came to see her profound emotional connection with animals as autistic, and crucial for her work. In May 1989, she moderated a round table discussion at the conference of autism professionals and educators in Chapel Hill, North Carolina. Her presentation prompted Rimland to introduce her 1986 memoir, Emergence, as the first book written by a recovered autistic individual. By then, she was on her way to becoming the most recognized autistic people on earth. In his 1995 book An Anthropologist on Mars, neurologist Oliver Sacks depicted Grandin as a mature autistic person with a complex inner life. The title of his book was inspired by Grandin when she said all her life she felt like an anthropologist observing human interactions from a distance. But by now, Grandin wouldnt consider herself as a recovered autistic. Autism is part of who I am, she told Sacks, If I could snap my fingers and be non-autistic, I would not, because then I wouldnt be me. But Grandins perspective did not take root among the advocacy organizations. When parent-run advocacy organizations get online in the 1990s, they continued to feature images of children on their websites, as if autistic adults didnt exist. The presentation at conferences dwelled on the usual deficits and impairments, rather than on exploring the atypical gifts that Grandin found so useful in her work. Jim Sinclair, a young man in the audience, determined to change that. Besides being on the spectrum, Sinclair was born with the physical characteristics of both genders. His parents had raised him as female on the advice of their doctor, but he had never felt female. He was speaking in echolalia until he was twelve. The complex rules of the social world seemed incomprehensible to him when he was a teenager. By the time he was in graduate school, his efforts to pass as non-autistic fell apart. When Sinclair saw Portrait of an Autistic Young Man, he had a profound sense of recognition. He could see what the experts in the film could not see: that Joseph was trying to communicate through his behavior. He wanted to connect with other autistic people, so he subscribed to a quarterly publication called the MAAP (for more able autistic people) and submitted poems and letters to the editor hoping his peers would contact him. One of Sinclairs poems attracted Gary Mesibovs attention. Mesibov, a cofounder of TEACCH, offered Sinclair a scholarship to attend the Chapel Hill conference and write an essay about his experience. Sinclairs essay on the conference appeared in a TEACCH anthology along with contributions from Lorna Wing and Catherine Lord. A year later, Sinclair was invited to sit on a panel in California by the Autism Society of America. He felt like a self-narrating zoo exhibit. Rather than being the token autistic on a panel at a conference in Indianapolis, Sinclair conspired with other members of the MAAP list to make their presence visible throughout the proceedings. Each of them would make a point of raising their hands during the QA sessions, identifying themselves as autistic people, and then asked questions or make a relevant comment so that people would notice they were there. *** In 1992, Sinclair launched the first autistic-run organization in history, called Autism Network International (ANI), with Donna Williams and Kathy Lissner. ANI would stand up for the civil rights and self-determination of people all across the spectrum. ANI organized its first Autreat at Camp Bristol Hills in Canandaigua, New York, in July 1996. The theme of the conference was Celebrating Autistic Culture. Autreat became an annual event and provided a template for similar conferences in other countries. *** A new idea was brewing in the autistic community. It turned out to be an old idea from Asperger that people with the traits of his syndrome have always been part of the human community, standing apart, making the world a better place. In the late 1990s, Judy Singer, an autistic student of anthropology and sociology in Australia called it neurodiversity. After her daughters diagnosis of Asperger syndrome at age nine, Singer recognized autistic traits in herself. She joined a mailing list called Independent Living on the Autism Spectrum (InLv). People with dyslexia, ADHD, and other conditions were also welcome to join the list. It was in telephone conversations with Harvey Blume, a list member and writer in the New York Times, that Singer came up with the term neurodiversity. *** In 2004, two teenagers named Alex Plank and Dan Grover launched Wrong Planet, one of the first autistic spaces in the internet. They were both digital natives with Asperger syndrome. The community grew slowly and steadily at first, and then it went viral with Planks interview with Bram Cohen, the autistic creator of BitTorrent. *** In December 2007, a series of billboards appeared on street corners in Manhattan. One ad read, We have your son. We will make sure he will not be able to care for himself or interact socially as long as he lives. This is only the beginning. These ads were sponsored by the Child Study Center (CSC) of New York University to alert the public to the silent public health epidemic of childhood mental illness. Then from out of nowhere, an organization called the Autistic Self-Advocacy Network (ASAN) along with outraged parents and prominent disability rights groups launched a storm of e-mails and blogs in NYUs direction objecting to the demeaning wording of the ads. This is the first time in history that autistics were challenging the mainstream media without the help of a parent-run organization. The architect of the protest was a nineteen-year-old cofounder of the ASAN named Ari Neeman. Neeman was diagnosed with Asperger syndrome when he was twelve years old. On December 6, the day after the CSCs ad campaign, Neeman called the CSC expressing his concerns and left phone messages, but got no reply. Two days later, ASAN blasted out an action alert. The next day when the major media outlets were running stories on the controversy, the CSC agreed to pull the ads. In 2010, President Obama nominated Neeman to the National Council on Disability (NCS). In recent years, the ASAN had played a significant role in formulating the federal disability policy. *** For parents like Craig and Shannon Rosa, the neurodiversity movement has offered ways of fighting for a better future for their children that dont depend on hopes of recovery. One of the most important lessons they had learned on their journey with Leo is patience. They have to accept that he is unfolding at his own pace. Shannon and her circle of friends launched a website called Thinking Persons Guide to Autism for parents just starting out on the journey so that they dont have to go through the ordeal that the Rosas did.

To Kill a Mockingbird by Harper Lee :: essays research papers

I’ve been reading a fascinating book about a little community in Alabama called To Kill A Mockingbird by Harper Lee. This book portrays lessons about life and the importance of telling the truth. One of the best lessons taught in this book is that doing the right thing isn’t always rewarded. There are three characters in this story that I’d like to tell how they play a part in this small community of Maycomb. These characters are Boo Radley, Scout, and Atticus. First let me talk about Boo Radley, also known as Arthur. Boo is the object of fascination for Jem, Scout, and Dill. He is a recluse who has remained in the house down the street from the Finch house for years. When he was younger he got into some trouble when he became involved with a group of rowdy kids from Old Sarum. One night they resisted arrest by Maycomb County’s beadle and locked him in the courthouse outhouse. After that, Arthur’s father, Mr. Radley, took him home and he wasn’t seen again for fifteen years. But it was said that one day Boo Radley stabbed his father in the leg with a pair of scissors while cutting newspaper clippings for his scrapbook. For this he was locked in the courthouse basement for many years before he came home again. From these stories learned from gossiping neighbors, Jem, Scout, and Dill made ghost stories of Boo Radley, and the other children in town were afraid of him as well. They said that he only came out at night to eat cats and squirrels, and he was the local spook. Boo, however, begins to win Scout and Jem over by leaving gifts for them in the knothole of an oak tree until his brother, Nathan, cements the knothole. Boo even covers Scout with a blanket on a cold night she and Jem spent in front of the Radley house while Miss Maudie’s house burned down. Boo was so quiet that Scout never even realized he’d covered her shoulders with the blanket until after the fact. After all the children’s attempts to drag Boo Radley from his house, he ends up saving them from Bob Ewell. Now let me talk about Scout. Originally named Jean Louise Finch, scout is the narrator. In the story she is looking back as an adult to the two years of her life when she learned courage and kindness and the importance of doing the right thing.

Examine different ways in which ‘good’ is used in Meta Ethics Essay

In the modern degrading society we live in today, people are constantly questioning the highly debatable topic of morals. We would like to think that we are trying our hardest to strive to do what is right in society to make us decent people. However it is hard to do what is ‘good’ when there are so many different ways of defining the meaning of good itself. There are three main types of ethics, Descriptive, Prescriptive and Meta ethics. Descriptive ethics presents the facts in the way people live and how they make moral choices in life. It simply states the facts without making any moral judgement of ‘good’ or ‘bad’. Prescriptive ethics states the norm about what is right or wrong by examining the choices and the reasons behind the issues. It says how we should live or behave setting standards for everyone to live by. This is the most widely used form of ethical language when debating morality. Meta ethics is a philosophical analysis of different words used in ethical language. It closely examines the words themselves and their exact meaning in different contexts. The subject of Meta ethics is to intimately study the moral language to be able to reach a better understanding of its meaning. Without the knowledge and intense understanding of the language we use in moral debates, we cannot argue our points successfully or be able to come to any logical conclusion. Therefore it is vitally necessary that we determine the meaning of the words we use so we can successfully take part in these ethical discussions. The most important ethical term, which unfortunately is so loosely used in society, is the term ‘good’. We frequently hear of a concert being ‘good’ or that person is a ‘good’ person or it is ‘good’ to be peaceful. But when we so casually use the term ‘good’ do we actually know what we are implying? What does the term ‘good’ mean in itself? Surely we should all be able to instantly provide an answer to this question because we all use the term ‘good’ on a regular basis. However we find that when posed with this question, many are not sure themselves of the core meaning of the word. In this essay I shall be examining the intensity of the ethical term ‘good’ and what people mean when they determine something to be ‘good’ of ‘bad’. We need to decide in fact, if it is actually possible to define the word ‘good’ at all or does it depend totally on the situation, having a slightly different meaning in every different context. The meaning of the term ‘good’ is not necessarily something that we all naturally agree on. There are many factors that affect the reasons why we perceive the meaning of ‘good’ to be what it is. Some examples of this include the sources of our values and morals, how we are brought up and the way our conscience plays a part in our every day lives. Naturally everyone may see different situations to be different degrees of ‘good’ or ‘bad’ in their opinion. A key concept leading to the understanding of something being ‘good’ is Definism. This idea is that we need to define accurately what we mean by the term ‘good’ before we can specifically distinguish if something is good or bad. Once we have classified the meaning of ‘good’ we can then accordingly judge every situation or act against it. When we have identified the essence of the term in itself we can grasp the ideas and understandings behind it. However many ask, † can the term ‘good’ universally be defined?† We shall now look at the different ways society tries to identify the word ‘good’. There are two main ways of defining a moral act, these being absolute and relative terms. Absolute moral terms are when something is perceived as always being ‘good’ or ‘right’ regardless of the situation or the facts involved. This is also known as an objective term, it is completely independent of all conditions to determine its moral ‘goodness’. All absolute moral terms are known universally as always being correct regardless. For example, many argue that Peace will always be ‘good’ along with happiness. These terms should apply to everyone in society in every situation because they will always be right and striving to reach them can never be wrong. Relative terms are the direct opposite of absolute terms. When something is relative, it totally depends on the specific situation it is in. It is also dependent on people’s personal opinions. Everyone views situations in their own way, which is slightly different to everyone else. It all relies on what you believe it to be in your own individual opinion. The term ‘good’ therefore can only be determined in its particular context. This is also known as Subjectiveness, for example euthanasia or fighting for a cause you believe in are two examples of relative situations of doing a ‘good’ thing. There are several theories’ we can look at in which the term ‘good’ is used in Meta ethics. The first of these is the utilitarian theory of good. According to this theory, a term is determined as being good pending the results of a specific moral act. For example, if we were in the situation where we had to kill one person to save the lives of thousands of others then this would be seen as ‘good’. This is because although the sacrifice of one life is not ‘good’ in itself alone, because it saves the lives of many more it is seen as the greater ‘good’ because it is the lesser of two evils. The results of killing one person to save many are much greater than the act of killing one in the first place. The ‘evil’ of killing one is cancelled out by the ‘good’ of saving so many others. Therefore the utilitarian theory of good can be measured by what it achieves. Another important theory is that of Natural law. The term ‘good’ is used in this part of Meta ethics according to how well something fulfils its purpose. The key philosopher that brought this idea into ethical recognition was Aristotle in ancient Greece many years ago. He believed that everything existing has a natural purpose in life in which it is aiming towards as its ultimate goal. This means that the level of ‘goodness’ something is, is measured by how much a particular act contributes to the ultimate purpose the object has. If it helps to fulfil this purpose then it is a morally ‘good’ act, however if it makes it harder to fulfil its purpose then it is considered ‘bad’. This idea of Natural law lead on to the development of Christian theology, especially by the greatly admired philosopher St Thomas Aquinas who linked Aristotle’s ideas with Christianity. In religion, the term ‘good’ is related to what God would or wouldn’t approve of. If God saw a certain act as acceptable or if it fulfilled a command from him from a religious Holy Book then it would be seen as ‘good’. For example devoting time to worship him would be seen as ‘good’ but committing adultery would be seen as ‘bad’ in Gods eyes. The ultimate ‘good’ example in Christianity is Jesus whose life was seen to be morally ‘good’ because everything he did was approved of by God. He was perfect and therefore Christians today try to follow in his footsteps and do as he did. ‘Goodness’ is unlike any other quality and the ultimate aim for all living things according to many people. Something can therefore be determined as ‘good’ because it is unique, individual and supreme. We can detect this by the simple skill of human intuition because the ‘goodness’ is self-evident. This approach is known as Intuitionism or Ethical non-naturalism. Because it is a unique feature, it is very dependent on different situations or circumstances. The term ‘good’ will therefore have an individual meaning for different acts that will only apply to that one situation and could have a totally different meaning in another circumstance. We can also determine ‘good’ because intuition tells us the results it has are beneficial to others or ourselves. However, even though the consequences may benefit and be ‘good’, it is impossible to define the word from an intuitional point of view because it is always c hanging depending on the factors involved. G E Moore is the most famous example of an Intuitionist. He claimed the term ‘good’ was ‘incapable of definition because it is simple and has no parts.’ He believed too that the term had a different meaning that changed depending the circumstances or different situations the word is used. He likened this to a horse, they have many properties and qualities that make a horse a horse but if you ‘reduce a horse to its simplest terms, you can not define these terms.’ The phrase ‘good’ will have a certain meaning not only for different situations but also for different people. Many people can observe an act but they may disagree as to whether the act was good or not depending on their conscience and opinion. Intuitionism means it has a distinct meaning for you. G E Moore gave the example of the colour yellow, we cannot define a colour, we may be able to give examples of things that are yellow but to give an actual definition of yellow is quite impossible. He believed that we should judge the goodness of an action based on its results, aiming to maximise ‘good’ in the world. He was a strong intuitionist, which involved the belief that within us we have a â€Å"moral faculty† which reveals â€Å"moral truth† to us, showing us what was morally ‘good’. Another focal area of Meta ethics, which involves language, is Emotivism or ethical non-Cognitivism. Emotivism is sometimes viewed as merely the expression of feelings of the speaker. They can be seen more as commands or rules the speakers wants its audience to follow. These feelings are the opinions of the speaker saying what they believe to be right or wrong and are dependent on a matter of taste. The term ‘good’ is accordingly defined depending on what the speaker believes to be right. They state a moral preference of what they do or do not approve of and not the core meaning itself. The preferences of the speaker therefore, try to influence the opinions of the audience. They are not concerned with the moral statements themselves or their meaning but more focused on the purpose of the statement. The speaker indents on promoting a response from the audience relating to what is right or wrong. This theory is also known as the ‘Boo’ and ‘Hooray’ theory which can be seen as offensive because it is seen to reduce morality to simple cheers or boo’s. It is called this because when listening to a point of view, the audience simply shouts ‘hooray’ to say something is ‘good’ or that they approve of it or ‘boo’ if they disagree and think it is morally ‘bad’. However one problem with this theory is that in a modern society, we do not irrationally act merely on our feelings and emotions alone. We use logical thinking and reasoning too and this therefore must be included. Prescriptivism solved this problem by using reason to determine ‘goodness’. R M Hare who tried to examine what was actually happening when a person was making a moral statement took the best example of this approach. He tried to find out what was it meant to do and if moral statements had a purpose. This type of Meta ethics tries to prescribe a course of action that is recommended. . For example, the speaker may say ‘ To be considered a ‘good’ person, we should try our hardest to help those less fortunate than ourselves’. By saying this he is expressing what a good person is and also is suggesting a course of action we should take, i.e. helping others. As a result of this way of talking, the speaker is very opinionated and thus forcing an action as a result of his beliefs. The speaker is giving advice that applies to all situations at any given time regardless of other factors. It is Universable and therefore applies to all people in every situation. The theory of Universability is a general idea that can be applied to past, present and future and to all other people. In conclusion we can see that there are many different ways in which the term ‘good’ is used in Meta ethics. In Intuitionism it is used to describe moral principles that are self evidently right. In Emotivism, when we say something is ‘good’, it is what we see as being right according to out emotions and feelings. Prescriptivism on the other hand uses reason and logic to determine what is ‘good’. Utilitarianists perceive something to be ‘good’ pending the results that follow the action. How we determine what is ‘good’ or ‘bad’ to ourselves, greatly depends on which ethical view we take to situations as a result of our opinion. There is no one definition for what is ‘good’ and so it is down to us to decide which one we believe to be right and then try to live our lives accordingly.

Financial Management Chapter 8 K

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

Odysseus As The Epic Hero Essays - Odyssey, Odysseus, Calypso

Odysseus As The Epic Hero Essays - Odyssey, Odysseus, Calypso Odysseus As The Epic Hero Odysseus's Journey to Becoming The Epic Hero Outline I. Introduction - In Homer's The Odyssey the tale of a man's journey back home after long years at war is also the tale of a man's spiritual journey through his own soul. II. The beginning - Odysseus leaves Troy feeling almost immortal and this pride is what leads to his downfall and second rise. III. The middle - Odysseus undergoes his symbolic death and rebirth. IV. The end - Odysseus has regained power over his household and has restored order to his life. V. Conclusion In Homer's The Odyssey, the tale of a man's journey home after long years at war, is also the tale of a man's spiritual journey through his own soul. Odysseus' role as an epic hero is modified throughout the epic poem. As Odysseus leaves Troy for home, he is the typical bloodthirsty warrior. During the course of his trek, he undergoes a symbolic death and rebirth. Upon his arrival in Ithaka, the wiser man he has become is evident. The Odyssey is Odysseus' story of his journey not only from Troy to Ithaka, but also from bloodthirsty warrior to epic hero. Odysseus begins the tale of his trip from Troy to Phaiakia in Book IX. The beginning of his tale displays the bloodthirsty warrior that left Troy. What of those years of rough adventure, weathered under Zeus? The wind that carried west from Ilion Brought me to Ismaros, on the far shore, A strongpoint on the coast of Kikones. I stormed that place and killed the men who fought. The first lines of Odysseus' story display his warrior side. This passage shows how he and his crew landed and immediately went to battle and plundered. Although Odysseus recalls telling his men to stop afterwards and return to the ship, he never really forcibly tried to make the men return. The lack of effort on Odysseus' part implies that he did not truly care if the men ransacked Ilion. Due to this greed and bloodlust, nearly a third of each ship's crew was lost. This bloodthirsty warrior cared only for battle and blood, instead of his men and his return home. After stopping on the island of Aiaia, the home of Kirke, Odysseus journeys to Hades. This represents a symbolic death for Odysseus. There he must speak with Teirasias to hear the prophet's visions for Odysseus's journey home. Teirasias predicts that the journey can take two paths; either a peaceful journey home, or if the crew and Odysseus can not restrain their desires, death and destruction will befall the crew. Odysseus and his crew do not heed Teirasias's warning, and the entire crew save Odysseus is lost at sea. After nine years on Kalypso's island Odysseus finally continues his journey home. The strong god glittering left her as he spoke, And now her ladyship, having given heed To Zeus's mandate, went to find Odysseus In his stone seat to seaward-tear on tear Brimming his eyes. The sweet days of his life time Were running out in anguish over his exile, For long ago the nymph had ceased to please. Though he fought shy of her and her desire, He lay with her each night, for she compelled him. But when day came he sat on the rocky shore And broke his own heart groaning, with his eyes wet Scanning the bare horizon of the sea. Odysseus had begun to lose hope of ever getting home. Kalypso grudgingly gives in to Zeus' order and aids Odysseus in obtaining wood for a ship. After nineteen days at sea, he is battered in a vicious storm and washes up half-unconscious, bloody, and naked in Phaiakia. This episode represents a symbolic rebirth for Odysseus. His time of incubation on Kalypso's isle is over and he emerges naked and bloody - like the day he was born. Once he has landed on Phaiakia, Odysseus realizes that he can not continue on as a bloodthirsty warrior, but rather must heed the wisdom passed on to him by those he met in Hades and change his outlook. It is at this point that Odysseus begins to fully comprehend the effects his actions have on those around him, as well as on his future. Only now is he truly ready for his tumultuous return to Ithaka. By the time

Free Essays on Representations Of Race And Ethnicity In Film

Introduction The issue of representing race and ethnicity is a controversial one. While ethnicity and race are related concepts, the concept of ethnicity is rooted in the idea of societal groups, marked especially by shared nationality, tribal afilliation, religious faith, shared language, or cultural or traditional origins and backgrounds. Whereas race is rooted in the idea of biological classification of homo sapiens to subspecies according to morphological features such as skin color or facial characteristics. "Ethnicity" is sometimes used as a euphemism for "race". It is a term also used to justify real or imagined historic ties as well. Ethnicity goes far beyond the modern ties of a person to a particular nation (e.g., citizenship), and focuses more upon the connection to a perceived shared past and culture . Many representations of race and ethnicity are created and shaped by popular culture and media. In the film ‘Black Rain’, the concepts of race and ethnicity are represented to show the conflict between two races; namely the Mongoloid race and the Caucasian race. This paper will aim to criticize these representations in light of related readings in order to question these representations. I will start by examining the representations for the Mongoloid race, followed by the Caucasian race. Due to the length limit of this paper, only the most important points will be discussed and even so, in summary. Inferior Mongoloid Race In the film ‘Black Rain’ the Mongoloid race is represented and portrayed as inferior to the Caucasian race. The film is in fact a result of Orientalism; orientalism being the corporate institution for dealing with the Orient (Mongoloid race) – dealing with it by making statements about it, authorizing views of it, describing it, by teaching it, settling it, ruling over it: in short, Orientalism as a Western (Caucasian) style for dominating, restructuring, and having authority over the Or... Free Essays on Representations Of Race And Ethnicity In Film Free Essays on Representations Of Race And Ethnicity In Film Introduction The issue of representing race and ethnicity is a controversial one. While ethnicity and race are related concepts, the concept of ethnicity is rooted in the idea of societal groups, marked especially by shared nationality, tribal afilliation, religious faith, shared language, or cultural or traditional origins and backgrounds. Whereas race is rooted in the idea of biological classification of homo sapiens to subspecies according to morphological features such as skin color or facial characteristics. "Ethnicity" is sometimes used as a euphemism for "race". It is a term also used to justify real or imagined historic ties as well. Ethnicity goes far beyond the modern ties of a person to a particular nation (e.g., citizenship), and focuses more upon the connection to a perceived shared past and culture . Many representations of race and ethnicity are created and shaped by popular culture and media. In the film ‘Black Rain’, the concepts of race and ethnicity are represented to show the conflict between two races; namely the Mongoloid race and the Caucasian race. This paper will aim to criticize these representations in light of related readings in order to question these representations. I will start by examining the representations for the Mongoloid race, followed by the Caucasian race. Due to the length limit of this paper, only the most important points will be discussed and even so, in summary. Inferior Mongoloid Race In the film ‘Black Rain’ the Mongoloid race is represented and portrayed as inferior to the Caucasian race. The film is in fact a result of Orientalism; orientalism being the corporate institution for dealing with the Orient (Mongoloid race) – dealing with it by making statements about it, authorizing views of it, describing it, by teaching it, settling it, ruling over it: in short, Orientalism as a Western (Caucasian) style for dominating, restructuring, and having authority over the Or...