Reading Entertainment Books Is a Waste of Time

A few guardians accept that perusing amusement books is an exercise in futility for kids, they should just peruse instructive books. What is your assessment? Give your reasons and incorporate your own or relative experience. It is as of late declared that as opposed to perusing amusement books, youngsters should just peruse the instructive books because of diversion books burn through kids time, it is my own conviction that this statement is based on the frail ground. There have following explanations behind my supposition. One in number contention is that amusement book is better for youngsters to recognize learning. or on the other hand a certain something, diversion book will convey more data which incorporate conventional instructive, yet additionally have increasingly other fundamental recognize, for example, creative mind, Independent Thinking, an investigation did in excess of 1000 school covering 1500 kids between 7 to 15 years of age show that instructive book is for the most part center around assessment and latently getting â€Å"knowledge†, it is extraordinary if our kids simply get training inactively, they have no thought regarding crisp thing in this world, progressively significant, youngsters need greater chance to decision distinctive book type, in other word, each individuals need get an assortment of recognize on the off chance that they need to development solid in adolescence, it is no uncertainty that solitary instruc tive book can't satisfy the prerequisite of kids. Another factor we need to consider is that youngsters read amusement books is helpful to family, from one viewpoint, completely it is sweet time when parent organization with kids to peruse diversion until kids rest, it is accept that kids will have increasingly solid safe feel when they are grown-up. On another hand, amusement book will give more correspondence points that will assist with child rearing cross the hole between youngsters. accept me for instance, I am utilized to peruse my child's diversion books because of some web word or sentence I need gain from these books, therefore my child think his dad is same kind person since we have same language and we have great correspondence result dependent on amusement book, it is inconceivable on the off chance that we simply talk about instructive book. taking everything into account, youngsters should peruse some diversion books because of it isn't sit around idly, rather, it have positive effect on kids development and family ass embling.

Essential Guide to People Management

Question: Talk about the Essential Guide to People Management. Answer: Presentation: Correspondence is an essential factor, which permits the association to accomplish its key strategic; is a fundamental viewpoint which decides the interrelationship between the administration and the workers. Correspondence the board is characterized as the foundational execution, arranging , observing just as diagramming the correspondence channels inside an association, it is additionally held onto as the procedure by which an association is spreading the new correspondence orders which are associated with the association. During the introduction, M.S power point is utilized on the grounds that it was seen to be the most pertinent and compelling correspondence approach. The Microsoft PowerPoint has become the most practical correspondence approach in numerous organizations, the reason for Microsoft PowerPoint is to permit compelling correspondence, the data gave in introduction structure is viewed as clear and it very well may be seen without any problem. In any case, introduction, enhances the message to be imparted, it additionally quickens the retention of the data just as aiding proficient perception which helps in the quicker decisional making process (Bell Martin, 2014). How introduction was made The introduction was made to be the productive method of discussing admirably with the crowd. It was introduced before the crowd, who saw it to be increasingly significant in settling on their own choice, where these choices has the effect towards the association key objectives and targets. The projection was one of the frameworks used to introduce the report, this was fundamental and important on the grounds that each individual was to see the data introduced. How introduction was significant as correspondence approach The introduction was a decent type of correspondence in the association since it gave a reasonable data to the crowd, it was likewise significant since upgraded better perception of the data. The crowd had the option to see the realities about issues that would have been influencing their activity in and outside the association. Microsoft PowerPoint introduction is suitable on the grounds that it is utilized by much association in the present business condition, and along these lines elevating upper hand to the association. The crowd and the information on them The introduction is made to a group of people; they have a critical influence in guaranteeing that goal of the board correspondence is accomplished by the association. I understand that crowd has significant impact in guaranteeing that I give the best introduction, they were yearning to have the introduction being given to them, this is on the grounds that the data to be introduced was to impact their activity, and they focus on all the introduction made to them. The crowd during the introduction was the representatives, investors, departmental chiefs and the top administration of the association (Chopra, 2009,). The workers were to utilize the introduced data so as to guarantee they have their impact in guaranteeing that they have better clients connection, departmental administrators utilized the data to guarantee that they understand their job in accomplishing the departmental vital target, which are lined up with the association strategic, and basic beliefs. The investors, then a gain, were to utilize the data to assess the endeavors the administration are putting towards dealing with their association, while the top administrators were utilizing it to guarantee that the business venture is advancing toward accomplishing the set objectives and targets. The obligations of individuals during introduction The obligation of my individuals was to gather data as the gathering, at that point after the social event, we needed to choose inside ourselves a semigroup. For example, we had part the gathering individuals into two the bravo group, and thunder group (Bell Martin, 2014). The obligation of thunder group was to contact the crowd, which they did superbly that was by the input we got from the crowd. The bravo group was to see the introduction before conveying it the crowd; this was finished by cross-checking every introduction and we needed to charge where fundamental. The gathering had positive criticism from the crowd and this persuaded us. The consistency and precision during the portrayal The portrayal was consistent during the entire procedure; there was no hitch since we utilized current gear to show the whole force point introduction. By the reaction from the crowd, we genuinely realize that our introduction was seen plainly. Giving us certainty all through the entire procedure, our introduction was conveyed accurately and it was immediate to the point. The exactness of our introduction made the crowd to comprehend the whole procedure without any inquiries this gave us fulfillment realizing that we put forth a valiant effort as a gathering since we had ideal perception before portrayal from our mentor and individual understudies (Smith Mounter, 2008(. The approaches and strategy that were followed was precise during introduction The approaches and strategy were followed during the whole procedure were precise. Since our gathering followed the right measures during the introduction, we had clear information before beginning the whole procedure, since we peruse and get approaches and methodology. We didn't have issues about rules and procedure during the introduction. The rules were not that difficult to tail it was not convoluted since we clear guidance from the mentor, while the way toward doing the entire introduction was simple since we had completed a few exhibitions in class before we did the introduction to the crowd so it was anything but difficult to introduce. The plan component utilized accurately during introduction During the introduction, the gathering utilized accurately the structure components. We utilized four plan components, which comprises differentiate, reiteration, arrangement, and nearness. Complexity is seen as one of the ground-breaking structure component since it is really unrealistic any plan can be stood out from one another. Difference can be accomplished in different manners. For example, through space control unfilled, filled, close, and far, through selections of hues light, dim, warm, and cool and furthermore by content choice sans serif, serif, tight, intense, and afterward ultimately component situating gathered, separation, top, and base. Redundancy implies the reusing similar components in the whole structure. The redundancy of structure components in the middle of deck of slides will really depict the energetic feeling of harmony, cohesiveness, consistency. The Principle of arrangement is to ensure that the slide configuration doesn't seem as though it haphazardly pos itioned. The implies that each component is joined outwardly through the concealed line. The reiteration just worries about components through the degree of slides. While arrangement amasses in picking up understanding among components of a specific slide. In conclusion, vicinity is all around characterized as drawing things more distant or nearer so as to accomplish arranged look. It further expresses that the things that are of same must be assembled with the goal that it will be viewed as the gathering. The crowd will expect that the things that are not near one another in a plan are not related and they bunch every single same thing which are near one another as groupSince we utilized current innovation and gear by utilizing M.S power point, which is seen as extraordinary compared to other application when structuring components (Chopra, 2009). The Microsoft PowerPoint has become the most productive correspondence approach when structuring components, the motivation behind Microsoft PowerPoint is to permit viable correspondence so we needed to increasingly mindful wh en we were doing the introduction, with the data gave about the plan we knew about the introduction. So put forth a valiant effort on introduction and obviously the crowd saw without any problem. Be that as it may, obviously we utilized the structure consummately and well present it. With the assistance of our guide who gives us clear information about the plan components, we figured out how to do our introduction well. The product application that was utilized to make the introduction The most prominent case of the product application is Microsoft power point. Nonetheless, there are different models that is being utilized, which incorporates open office intrigue, stream board, apple keynote, Corel introduction, and Kingsoft introduction. The Presentation programming is typically is utilized in making slides appears for scholarly and business drives. Our introduction was done in light of scholastic reason. What's more, we utilized Microsoft power point in making the slide, which consolidates designs, writings, and while embeddings video and sound, in spite of the fact that the introduction programming is chosen by the motivation behind introduction and for our situation, we pick PowerPoint due to specialized information and solace level we had with it during the introduction. Aside from previously mentioned programming, which is normal, there are a few others, that incorporate liber office, ease, slide rocket, dazzle, Hewlett Packard Bruno and water delicate slides how that rely upon with the reason and of the introductions (Torrington, 2013). End I presume that without the assistance of the coach, it is difficult for any gathering to have the unmistakable introduction, with the approaches and method we followed during the whole procedure was precise. Since our gathering followed the right measures during the introduction, we had clear information before beginning the whole procedure, this since we peruse and get approaches and technique. Since we filled in as gathering, this helped us to accomplish our thought process during the introduction. We didn't have issues about rules and procedure during the introduction. The rules were not that difficult to tail it was not convoluted since we clear guidance from the mentor, while the way toward doing the entire introduction was simple since we had completed a few shows

Fighting the Blank Page Kamikaze Writing Mode

Fighting the Blank Page Kamikaze Writing Mode We all know it. We all hate it. That darn blinking cursor won’t move on its own. And when we find ourselves in the position where we desperately need it to move, it won’t. Writing under pressure is one of the bloodiest, most soul-eviscerating activities. Really, it is quite messy. It also happens to be a situation few writers can avoid. Some (sadist) say we should actually embrace such tension-filled occurrences. After all, we are tested during moments of pressure. How we respond to the pressure is a choice. And it is the choices we make that become the foundation of our character. Author James Bilkey said, “You never will be the person you can be if pressure, tension and discipline are out of your life.” You may come out of the situation with some bumps and bruises, but you’ll still be standing. So, if it is the choices we make that define our character, how will you choose to handle your next pressure filled writing project? First, Proof That It Can Be Done It may feel like you are the only person in the world who has been forced into such a precarious position. It may feel totally unfair, unjust and downright mean for someone to ask you to church out exceptional content under such circumstances. Guess what. You aren’t alone. You are not the first person to write under pressure. Nor will this be the last time you are asked to do so. Perhaps all you need is a little encouragement â€" proof that it can be done. Not only can it be done, it can be done well. Agatha Christie wrote her first detective novel, The Mysterious Affair at Styles, in two weeks. Ed McBain spent about a month on each of his earliest novels. Erle Stanley Gardner wrote for more than a half century and produced more than1,000 books. In fact, he churned out four novels, eighteen novelettes, two short stores and five articles in 1939 alone. John Creasey wrote more than 500 novels in 47 years. In a single year (1939), he published 38 novels. Georges Simenon wrote 10 novels in 11 months. His goal was to write a novel in 11 days. In total, he wrote 220 novels  John Steinbeck wrote  The Grapes of Wrath in five months. Herman Melville wrote Moby-Dick in six months. Noel Coward wrote  Blithe Spirit  in six days. Robert Louis Stevenson wrote Strange Case of Dr. Jekyll and Mr. Hyde in three days. Now that you know it can be done, let’s take a look at how you can make it happen too. How You Ended Up in This Situation There are various reasons why people find themselves in a stressful writing situation. We are going to take a look at the top three reasons why a writer might feel pressure to compose: the need to earn money, bouncing back after a major life event, or facing a very tight deadline. Writing Under Pressure Scenario #1: Writing to Earn Money Fyodor Mikhailovich Dostoyevsky was a Rusian novelist, short story writer and essayist. He was also a gambler. Dostoyevsky wrote Crime and Punishment in an attempt to pay off his debts. Unfortunately, the staggering amount he earned wasn’t enough. He had to ask his new wife to sell some of her possessions to cover the rest. After placating his debtors, Dostoyevsky fell right back into old habits. Just three weeks after venturing out on their honeymoon, he had to wrap things up early. Dostoyevsky had gambled away all the couple’s money. Returning to his typewriter, the poor, broke writer churned out the first 100 pages of The Idiot in just 23 days. Many people use their pen as a money maker; writing is not a new career venture. However, some writers need to earn more than just the average pay check. They need extra money and they need it now. This is a very harrowing situation to find yourself in. The pressure is intense and the need to produce results can sometimes be a life or death situation. At times like this, drastic measures need to be taken. If you don’t have any time available for frivolous things like writer’s block or procrastination, try this intense writing app. Write or Die encourages writing by punishing your attempts to be idle. Based on the idea that a tangible consequence is more effective than an intangible reward, Write or Die offers negative reinforcement. Studies show this method strengthens a behavior because a negative condition is undesirable. What kind of punishment is dreaded by a writer under a strict deadline? The Kamikaze mode of the Writer or Die app has the answer â€" keep writing or your work will unwork itself. After just a few seconds without activity, the app will begin to delete words. These consequences will persist until your preset conditions have been met (time is up or you’ve reached your desired word count). Not everyone falls into the category of stressed, broke writer. Sometimes, there are other reasons why we feel stressed. Writing Under Pressure Scenario #2: Bouncing Back Often times, it is difficult enough to force yourself to write when things in life are going well. Even if you feel emotionally happy and ready to work, the muse just won’t come. When you are in the midst of a stressful or upsetting life event, it seems downright impossible to put pen to paper. After all, how are you supposed to think about a blog posting when a loved one has just died? Is it possible to write a witty newspaper column after learning you have cancer? So what can you do? 1. Don’t feel guilty. As long as you aren’t neglecting the person or thing that needs attention at that moment, you have every right to attend to your own needs. You don’t need to feel selfish because you are getting your work done in the midst of chaos. In fact, it is almost necessary for you to return to work. If writing is what makes you feel like your old self, you might need to write in order to regain a sense of normalcy. 2. Schedule time to think. This new life event is probably dominating your thoughts. You dwell on the situation all day and perhaps all night. As a result, you haven’t given any thought to what you are supposed to be writing. Make an intentional effort to sit and think about your writing task. Try to block everything else out of your mind. Don’t succumb to mindless activities like watching TV or Facebook stalking. Instead, use that time to think about how this recent event could enhance your writing. 3. Remember why you write. This major life event has probably taken over your life. You may think it ridiculous to add even more to your to-do list; you have enough on your plate without the task of writing. However, if writing is your heart’s passion, it won’t add to the stress â€" it will take the stress away. You’ll probably feel relieved to be engaging in a very natural impulse. Maybe you don’t have excess stress or sadness in your life. Maybe you are just facing the pressure of a run-of-the-mill deadline. Writing Under Pressure Scenario #3: Facing a Very Tight Deadline Deadlines are a fact of life. As a writer, you can’t escape them and by now, you have probably grown accustom to them. However, some deadlines are tighter than normal. When you find yourself facing an extreme deadline, consider the following tips. 1. Do your chores first. It happens without fail; the moment a deadline rears its ugly face, you feel the overwhelming need to procrastinate. Whether you have an uncontrollable urge to clean your home from top to bottom or you absolutely have to take the dog for a walk, we all have procrastination triggers â€" random things we do instead of writing. Be aware of these triggers and complete those tasks before you sit down to write. Think of it as procrastinating in advance. Once you sit down to compose, you’re mind will be clear and you won’t have an excuse to stop. 2. Know where you can and can’t work. Ray Bradbury once said he used to write on his typewriter in the living room. The radio would be on and his mother, father and brother would all be talking at the same time. Not everyone has the mental focus to compose under such conditions. More often than not, we need a quite, distraction free environment. Of course, it is impossible to find the perfect spot to write. And according to E.B White, “A writer who waits for ideal conditions under which to work will die without putting a word on paper.” However, that doesn’t mean you shouldn’t try to find a quite place to write. If you are truly under the gun, you might consider checking yourself into a hotel for the weekend. On Friday night, take your favorite snacks to sustain you and work until check out Sunday afternoon. By removing yourself from your regular environment, you greatly reduce the chance for distractions. 3. Define your task. Don’t blindly jump into a writing project. Take the time to think about your topic and the purpose for writing. 4. Do some chunking. Chunking is the process of taking a large task and breaking it up into smaller, more manageable projects. When we are faced with a writing project, it often seems insurmountable. The pressure we feel leads us to engage in some self-sabotage in the form of procrastination. However, if you have a list of smaller tasks, they seem more manageable. For example, you could chunk your writing project like his: Research the idea Contact and interview experts Write a rough draft Revise and polish draft Submit final product The more intimidating the project, the more you need to strategize your time. Calculate how much time is available to complete each step. Don’t forget to include a few breaks. This lets your mind breathe between tasks, making you fully focused on completing the next one. Once you have established a timetable, stick to it. If you hit a trouble spot, skip it. When you come back to it later, you may find you can remove it entirely. Don’t stop working until you have met your goal. Jack Kerouac said writers should place the desk near the bed with a good light. He suggested working midnight till dawn and getting a drink when you get tired. Susan Sontag said, “Once something is really underway, I don’t want to do anything else. I don’t go out, much of the time I forget to eat, I sleep very little.” 5. Just get it down. Get words on the page. Humorist James Thurber once said, “Don’t get it right, just get it written.” If you spend time worrying about every little world, you will simply heighten your anxiety level. You’ll distract yourself from the overall purpose and hinder the larger goal â€" which is to finish on time! 6. Use unorthodox methods. Ray Bradbury once said, “When I wanted to write Fahrenheit 451, I went up to UCLA and found a basement typing room where, if you inserted ten cents into the typewriter, you could buy thirty minutes of typing time.” You’ll be hard pressed to find many typing rooms with typewriters. However, you can find plenty of people willing to charge exorbitant fees to use their services. Find a coffee shop that charges for their WiFi. Go to a computer lab at the local university and pay by the hour to use their computers. If you know you are throwing money out the window, you’ll be more tempted to make the unreasonable spending come to a screeching halt as soon as possible. 7. If all else fails, use stimulants. There is one time a caffeine addiction comes in handy â€" and that is when you have to write under pressure. If a harmless addiction to a stimulant isn’t handy, reach for a common sugar high. These caffeine-high and sugar-rush states of being are the cure for writers block. Plus, they are responsible for eradicating mundane, boring writing. If you tend to lean more towards healthy mental stimulation, try exercising. The endorphins you receive after just a brisk walk will be magical. Looking Towards the Future If you really want to get good at writing under pressure, you’ll need to practice. After all, practice makes perfect. Learn to navigate the big stressors with ease and your next writing-under-pressure task will be a cake walk. While you are practicing, be realistic about your capabilities. Don’t be negative with yourself. No matter how hard you try, you are bound to miss a deadline every once in awhile. Unexpected setbacks creep up and cause delays. When this happens, it is important to stay positive. Don’t think of yourself as a failure. Ask yourself why you didn’t meet the deadline. See if you can pinpoint a way to prevent it from happening again. What can you do differently in the future? Don’t let negative thoughts like, “Why did I even bother?” creep in. Instead, think, “At least I tried. I’ll do better next time.” No matter why you find yourself in a stressful situation, head this advice. Susan Jeffers says: “Feel the fear and do it anyway.” 84QGKZ3RUQKB

Essay Night - 1225 Words

Night From the View of an S.S. Officer nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;This whole situation started out simple enough. The men and myself first moved into a little town called Sighet. The people there seemed so naive. None of them realized what was about to happen; none of them realized what happened when the Germans move into town. We first started by imprisoning the officials and made all the Jews were yellow stars. The Jews were then moved into a very small ghetto and cramped quarters. It was obvious that none of them had heard of the horror of the concentration camps and what awaited them once they left the safety of their homes. Some of the officers and I tried to be nice to the Jews because I,†¦show more content†¦I know some of them have to be lying about their age. Boys that are barely 15 claiming they are 18, but they only want what everybody else at the camps want; to stay alive. nbsp;nbsp;nbsp;nbsp;nbsp;Some prisoners and myself were transferred to a camp named Buna. It was a four-hour walk to the camp and once we got there the prisoners were required to undergo more medical exams to make sure they are still fit to work. The dentist even went as far as to remove the gold crowns in prisoners’ teeth. Things were going well for a few months although the officers and myself would take nothing less than hard work and cooperation from everyone. One day we had an unexpected air raid on Buna. The planes showered the camp with bombs and that is when things started to get out of control. People were trying to get away, stealing items, and trying to sneak some extra rations of soup. The officers were told to publicly hang anyone who broke the rules during this attack. We were made to do it in front of the entire camp so they could see what would happen if a person disobeyed. I was put in charge of supervising the hanging, but I couldn’t let morals get in the way. I was put here to do a job and that is what I had to do. We executed 4 people in total, including a small child just for trying to get food. nbsp;nbsp;nbsp;nbsp;nbsp;I was aware that the Jewish holidays were approaching and it required them to fast. The rations that were given to the prisoners were hardly enough toShow MoreRelatedShadow of the Night619 Words   |  3 PagesShadow of the Night On a freezing, dark blue night of Li, in the Village of Li-Marta. This was an old little village, the houses were nothing but ash and rubble except an old abandoned barn. The barn had creaking floor boards and a rotten wooden roof. In this abandoned barn there lived a young and confident farm boy; his clothes were ragged and full of holes. The young boy was called Rye named after the agricultural god Ren-Rye. As Rye was sitting on the creaking floor boards a thought hit himRead MoreThe Night By Elie Wiesel904 Words   |  4 PagesIn Night by Elie Wiesel, the author reflects on his own experience of being separated from his family and eventually his own religion. This separation was not by any means voluntary, they were forced apart during the Holocaust. Wiesel was a Jew when the invasion of Hungary occurred and the Germans ripped members of his religion away from their home in Sighet. A once peaceful community where Wiesel learned to love the Kabbalah was now home to only dust and lost memories. Most members of that JewishRead MoreNight, By Eliezer Wiesel1585 Words   |  7 Pages There are many important themes and overtones to the book Night, by Eliezer Wiesel. One of the major themes from the book includes the protagonist, and author of his memoire, Elie Wiesel’s ever changing relationship with God. An example of this is when Moche the Beadle asked Elie an important question t hat would change his life forever, as the basis of his passion and aptitude for studying the ancient texts and teachings of Judaism, â€Å"When Moche the Beadle asked Elie why he prayed, Elie couldn tRead MoreNight Market Marketing Essay833 Words   |  4 Pages Preparing for Night Market Success Its funny how some night markets transform almost magically into something romantic even. Is it because of the moon, the lighting, the food, the music or the people? I believe its all of those features that make a momentous night at the market. In light of this, we believe market booths have the ability to return higher profits after dark. Therefore, we have come up with several key ideas to prepare your market stall for night success. Most vendors relyRead MoreStarry Night971 Words   |  4 PagesStarry Night is a beautiful painting, representational in the type of art. The size of the painting is 29 in. by 36  ¼ in., and oil on canvas were the materials used. Van Gogh is using an expressive quality and an emotionalism viewpoint. On the left side of the painting, there is a group of black lines that curve in waves upward, coming to a point. To the lower right, there is a small town that leads up to hills and then mountains. The painting is set at night, and the sky is a wondrous swirl of burstingRead MoreThe Night Sky - Original Writing926 Words   |  4 PagesIt was a dark and stormy night, the wind blows as the ghostly moonlight filled the darkness. George the highwayman made his way toward Bess the innkeeper’s daughter. She was gazing out the window when the two of their eyes met. Hers, black as the night sky, and a dark red love knot placed on her hair. A red dress made of the fabric silk. Her h air was a dark brown, but could have been mistaken as black. Her outfit fit her personality as much as it did the highwayman. I hope he loves poetry.Read MoreSummary Of Night By Eli Wiesel1561 Words   |  7 PagesNight by Eli Wiesel Amrinder Bhuller P.2 Author: The author of Night is Elie Wiesel. In my opinion, he did a very good job in writing this story! Eli was born on September 30, 1928. Eli is currently 86 and has written a lot of books. Eli had served as a prisoner Auschwitz and other concentration camps. He wrote all his experiences in this book. The Night talks about his experiences in these concentration camps and all he went through. Everything is probably historically correct because he wentRead MoreThe s Night - Original Writing1526 Words   |  7 PagesEverything that happened in Elie Wiesel’s night. I will see, smell, and feel the holocaust through the eyes of Wiesel. â€Å"Alright, uh, Yavin. Nice name. I’m Mr. Hiraku. Are you ready?† the teacher asked, looking down at his chart for my name. â€Å"Yes sir.† I answered, a bit shakily. I had used VR before for video games, but never for something so important. â€Å"Alright. I’m going to read you off some side effects involved with this experience. ‘While participating in the Night VR experience software, you may encounterRead MoreNight, Hope, By Elie Wiesel1580 Words   |  7 Pagesthey grabbed onto it as tightly as they could. Throughout Elie Wiesel’s memoir, Night, hope is a recurring theme. Elie and the people he was around were living in the darkest of conditions, but they still were able to shine a bright light on their situation. They remained hopeful, and this inspired the world. Putting all of this together, it is evident that the theme of hope was demonstrated throughout the book Night because Elie and the Jewish people tried to remain hopeful as they were forced intoRead MoreNight Time Tour951 Words   |  4 Pagesonce more at the sea where the sunset splattered colors of red and orange on the rough surface of blue and violet. Although the boardwalk was lively with smells of French fries and the cries of s eagulls, I nuzzled into the car seat and waited for the Night Time Tour to begin. I absolutely loved long car rides; it was the perfect excuse to let idle thoughts roam and to isolate myself from the world. I only observed the outside through the window of the family van, my personal theater. The images that

Culture And Communication Style China - 767 Words

Culture Communication Style Proble China and its people have a very specific way of conducting business and one of the most important things to consider is that the Chinese highly value relationships. It is hard to break into the Chinese market, without first creating a relationship with a businessperson from the area. One of the most vital steps towards having a successful business endeavor with Chinese people is â€Å"understanding the web of relationships that defines business in China† (Loyalka, 2006). To build these relationships, the Chinese prefer to start out informal. â€Å"Sharing enjoyable times with Chinese partners helps form relationships† (Leung, 2008). Going to dinner or a karaoke bar are just a few examples of normal relationship building activities. To take it to the next level, â€Å"lasting [relationships]†¦come from deals that go beyond making money to include benefits for local workers and communities† (Leung, 2008). It is obvious that the Chinese people also value the i dea of community. Building relationships and supporting local communities are imperative values to remember when working in the Chinese business world. ms The need for effective communication in conjunction with cultural awareness, sensitivity, and understanding is intensified when working with other cultures such as China’s. The key communication tenants to consider when conducting business in China are international cultural variances and non-verbal communication styles (Dou Clark Jr., 1999,Show MoreRelatedChinese Management Style and Western Style1169 Words   |  5 PagesCompare and contrast common Chinese management styles and common Western management styles By Di Yang 09114786 Accounting, Xi’an Jiaotong-Liverpool University Introduction It is a fact that the economic trade tends to occur among counties all over the world. 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InRead MoreDifferences Cultural in Chinese Food and Western Food1648 Words   |  7 PagesIntercultural Communication Ms. Jamie Ku 9th June 2013 The Cultural Differences between Chinese and Western Food Abstract Food is one of the most enjoyable aspects of cultures to share. Every place has its own culinary delights to discover. Food culture can reflect the indication of human social development and improvement. In this paper, food ideas and values, food production, processing and other aspects of cooking, compared the consumer psychology of Chinese and Western food culture differencesRead MoreThe International Business Negotiations Influenced By Chinese And American Cultures And Differences743 Words   |  3 Pagesinfluenced by Chinese and American cultures and differences Jialin Zhao CMN6060 Professor Stephen Novick October 26, 2016 Abstract Cultural negotiations are business negotiations with different cultural conditions. 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Also to be honest I am just as guilty as anyone in not knowing the differences between Japanese and Chinese culture, so on a side note I also hope to clear up a few misunderstandings. At the very least you will know some information about the Chinese culture solving part of theRead MoreEssay on intercultural communication1346 Words   |  6 Pagesintercultural communication is also required.† Do you agree or disagree with his opinion? In a well-structured essay explain your ideas using clear examples to support your ideas. Distance and time are no longer the biggest obstacles to doing business, as result of human innovation and technological progress. And with the development of communications and wide-spread cooperation all over world, more and more companies are exploring the international market. (Johnson 2012) Intercultural communication has

The Science Of Eugenics Movement - 1423 Words

The science of eugenics was widely used during the 20th century in the United States to strategically eliminate the reproductive rights of women who were deemed inferior on the social ladder (â€Å"What is Eugenics?†). Some women of color, women with disabilities, and women from lower financial classes were sterilized for permanent birth control, and sometimes without their consent or knowledge (â€Å"What is Eugenics?†). The eugenics movement was aimed to promote selective human features in order to increase those with intelligence, good health, physical characteristics, and class. Currently, the recent controversy of human genetic engineering has scientist concerned that it will become the new eugenics. Sterilizing women as a precaution to prevent the overpopulation of unfavorable offspring would go against Jonathan Swift’s equal treatment of all humans, Benjamin Franklin’s hopes for men to understand the value of humanity, and be a direct violation to t he natural born rights of all humans. Therefore, the controversial practice of genetic modification to restrict reproduction rights only to people of desirable traits is unethical because it promotes racial cleansing. â€Å"A Modest Proposal† by Jonathan Swift proposes to eliminate the poor Irish Catholics to prevent them from becoming a burden to society. Swift insists that poor Irish Catholics should participate in outrageous behavior that are similar to eugenics. However, Swift uses verbal irony and fallacies to create a superficialShow MoreRelatedEugenics And The Eugenics Movement1512 Words   |  7 PagesEugenics is the pseudoscience of obtaining desired traits in a population through controlled repopulation, specifically by preventing those deemed â€Å"unfit† by â€Å"Nordic stereotypes† from breeding. Most modern day Americans do not realize the origins of eugenics, which was planted by Charles Darwin and Sir Francis Galton and bloomed in America, and w hat effect it had on the attempt to create a master race in Nazi Germany. America played a very influential role in German eugenics by collaboration betweenRead MoreEssay on Eugenics1060 Words   |  5 Pages The roots of eugenics can be traced back to Britain in the early 1880’s when Sir Francis Galton generated the term from the Greek word for â€Å"well-born†. He defined eugenics as the science of improving stock, whether human or animal. According to the American Eugenics Movement, today’s study of eugenics has many similarities to studies done in the early 20th century. Back then, â€Å"Eugenics was, quite literally, an effort to breed better human beings – by encouraging the reproduction of people with quot;goodquot;Read MoreEugenics : The And The Pursuit Of Happiness1365 Words   |  6 Pagesthis period of time is considered â€Å"Eugenics†. Eugenics can be seen as a reasonable, and fair thing to do. However eugenics is now seen as an u nreasonable, vicious and corrupt thing to do. Eugenics is still a problem that America daily; now it is just classified in a different way. The word Eugenics comes from the Greek roots for good and origin, or â€Å"good birth† therefore it involves applying genetics for the purpose of improving the human race. The term eugenics was first used by Francis Galton,Read MoreArticle Abstracts: Concept of Nazism1283 Words   |  5 Pagesis exploring the less-examined, less-understood, and even the less acknowledged aspects of the history of the Nazi party and the movement towards Nazism. Using an analytical approach that identifies key figures, events, and historical trends in Germany and the world during the development and progress of the Nazi party and Nazism, Hayek concludes that there was a movement both by the far-left and the far-right against the liberalism of the period following World War I, and that it was the combinationRead MoreEugenics Essay1545 Words   |  7 PagesEugenics, the word that got its bad reputation years ago through an event that changed history: the Holocaust. First dubbed by Francis Galto n in the 1880’s, the word Eugenics stemmed from the words â€Å"good† and â€Å"generation.† (Eugenics-Meanings) Eugenics means the study of or belief in the possibility of improving the qualities of the human species or a human population. This improvement is done through discouraging reproduction by persons having genetic defects or presumed to have inheritable undesirableRead MoreThe Use Of Sterilization Of Minorities By Supporting The Eugenics Movement946 Words   |  4 PagesNazi-reigned Germany. Supposedly, this rhetoric has been disproven throughout the United States; however, there are proven accounts that the United States government has recently supported this theory of sterilization of minorities by supporting the eugenics movement, which was not only in Nazi Germany, but also on United States soil. The topic of improving the genetic makeup of different races has not only just become a common theme for many modern day countries to use to make thei r societies more geneticallyRead MoreThe Theory Of Sterilization Of Minorities By Supporting The Eugenics Movement950 Words   |  4 PagesGermany. Supposedly, this rhetoric has been disproven throughout the United States; however, there are proven accounts that the United States government has recently supported this theory of sterilization of minorities by supporting the eugenics movement. This movement was not only practiced in Nazi Germany, but also on United States soil. The topic of improving the genetic makeup of different races has not only just become a common theme for many modern day countries to use to make their societiesRead MoreWhy Eugenics Is A Violation Of A Human s Rights1749 Words   |  7 Pageshuman rights is to challenge their very existence.† In the past century, humans have been experimenting and debating the use of eugenics, which is the science of improving the human race through controlled breeding in order to increase the occurrence of desirable , heritable characteristics (Mankiller). Although eugenics is supported by many, one could argue that eugenics is a violation of a human’s rights. In the United States Constitution, some of the human rights mentioned are the right to libertyRead MoreThe United States Should Not Freedom Of Choice1585 Words   |  7 Pageswhere authoritarian Eugenics dictated which traits/race were favored. Allowing individuals to have a freedom of choice, according to Agar, it motivates us to adopt pluralistic view and monistic view of human excellence. As a consequence, â€Å"an evil doctrine† is being alter into a morally acceptable one. In other words, with liberal Eugenics everyone is free to follow their personal conception of human excellence without being dictated by an authoritarian figure like in past movements. But if this liberalRead MoreEugenics, The Progressive Development Of The Idea1622 Words   |  7 PagesThe term â€Å"eugenics† derived from Greek with the pre fix eu- for â€Å"good† and the suffix -genos for â€Å"birth† is defined as the science which deals with all influences that improve the inborn qualities of a race. The idea began to arise in the eighteenth century with the theories of evolution and the discussions of race, which gave an opportunity for some to consider and judge that certain traits and features were better and more appealing than others. In this analysis, we will be focusing on the beginning

Finance for Managers Earnings Transparency

Question: Describe about the Finance for Managers for Earnings Transparency. Answer: 1: Present dividend = D0 = 2.35 Required Rate of return = R = 15% Growth rate for first 5 years = g1 = 22% Dividend at end of year 1 = D1 = D0 * (1+g1) Present Value of dividend D1 = PV (D1) = D1/ (1+ R) Dividend at end of year 2 = D2 = D0 * (1+g1) ^2 Present Value of dividend D2 = PV (D2) = D2/ (1+ R) ^2 Similarly for t=5, Dividend at end of year t = Dt = D0 * (1+g1) ^t a) Present Value of dividend Dt = PV (Dt) = Dt/ (1+ R) ^t Growth rate after 5 years = g = 6% b) Price of share at end of year 5 = P5 = (D0 * (1+g1) ^5 * (1+g))/ (R-g) Present Value of Price of share at end of year 5 = PV (P5) = P5/ (1+R) ^5 c) Price of share today = PV (D1) + PV (D2) + PV (D3) + PV (D4) + PV (D5) +PV (D1) + PV (P5) For exact calculation refer to attached excel sheet d) The following factors are followed by the Financial Managers of a company at the time of deciding the dividend policy of that company: Type of the Industry: The industries which generate consistent revenue adopt the stable dividend policy. On the other hand, the industries which generate uncertain revenues are conservative in the adoption of the dividend policies (Malik et al. 2013). The Age of Companies: New companies use to retain their earnings as they need capital for the business; they invest back the earning in spite of giving dividends. In case of the new companies, there are not any issues regarding investment; thus they give dividends out of the earnings (Rafique 2012). Leverage: Due to have debt liabilities, companies with greater leverages gives small amount of dividends (Obradovich and Gill 2013). Liquidity: Having large amount of cash reserves and other liquid assets, the companies are able to pay higher amount of dividends. Inflation: The companies use to pay fewer amounts of dividends and retail the earning at the time of inflation (Khan, Meher and Syed 2013). 2: F = Face Value N = Time period Since coupon is paid semi-annually, m=2 No. of time coupon is paid = m*n Coupon Rate = 9.875% R = Rate of interest a) Market Value of Bond = (C/m)/(R/m) * [1- 1/(1+R/m)^mn] + F / ( 1 + R/m)^mn b) The bond prices increase when the interest rate decreases and vice-versa. (Exact calculation is attached in the excel file) c) When the price of the bond which is trading in the market is higher than its par value, it is considered as the Premium Bond (Favara et al. 2016). On the other hand, when the price of the bond which is trading in the market is lower than its par value, it is considered as the Discount Bond (Elliott and Nishide 2014). d) The increase in bond price is due to the decrease in the interest rate and vice-versa (Malkiel 2015). 3: a) Debt D 300000000 Bonds Coupon C 0.09 time period n 15 m 2 time interval mn 30 Face value F 1000 Price of bond Pb 1440.03 Price of Bond = Pb = (C/m)/ (Rd/m) * [1- 1/(1+Rd/m)^mn] + F / ( 1 + Rd/m)^mn Input all values to calculate Rd Ordinary shares 14000000 Dividend D1 2.2 Growth g 0.05 Price of share P0 20 Price of share = P0 = D1 / (Ro-g) Input all values to calculate Ro Preference Shares 2000000 Price of share Ps 12 Dividend D 1.2 Price of share = Ps = D/ Rs Input all values to calculate Rs Tax Rate = t = 30% Value of debt = D = 300000000 Value of ordinary shares = Vo = Number of ordinary shares * Price of ordinary shares Value of preference shares = Vs = Number of preference shares * Price of preference shares Total Value of company = V = D+ Vo + Vs Weighted Average Cost of Capital = WACC = (D/V)* (Rd) * (1-t) + (Vo/V)*Ro + (Vs/V)*Rs b) The cost of capital is controlled by the Financial Managers by controlling the following factors: Capital Structure: The increase in cost of capital is caused by more amounts of debts. As a result the cost of capital is changed. The same is applicable for the equities Dividend: The cost of capital can be changed by the company by controlling the payout ratio. Policy of Investment: Cost of debt and cost of equity is changed with accordance to the investment policy of the company. Here, the risk factor needs to be considered (Barth, Konchitchki and Landsman 2013). 4: a) The Loan of Bank of America The amount Toyota plans to borrow = $5 million Term of the loan = 90 days Interest cost = Prime rate 1.125% = 6.25% 1.125% = 5.125% Interest cost = $5,000,000 0.05125 (90/360) = $64,062.50 The Loan of Daiwa Bank The amount Toyota plans to borrow = $5 million Termof theloan= 90 days Interestcost= LIBOR +0.75%= 4.2%+ 0.75%= 4.95% Interest cost = $5,000,000 0.0495 (90/360) = $61,875 The Daiwa Bank offers Toyota thelower cost loan with a lower interest cost of $61,875 versus $64,062.50. b) Yield to maturity (YTM) refers to the total return expected on a bond if it is held till maturity and all the payments are made as scheduled. YTM helps the financial managers in comparing bonds with different coupon rates and maturities (Billett, Hribar and Liu 2015). 5: Expected Cash flow in Korean Won = Cash flow (US millions) * Expected exchange Rate (won/$) Present Value of expected cash flow = Expected Cash flow in Korean Won / (1+R) ^t Where R = Discount Rate and t = time in years Net Present Value = Sum of all Present Value of expected cash flow Moon Rhee should proceed with the project as the Net Present Value (NPV) is positive provided that it has the enough amount of financial backing to invest such a large amount and wit for three to four years for the return (Pasqual, Padilla and Jadotte 2013). 6: Billys Tools EBITDA = Profit Depreciation and Amortization Earnings per share = EPS = EBITDA / No. of shares P/E = Price of share / EPS Enterprise Value /EBITDA = ((Price of share * No. of shares) + Debt) / EBITDA Johnson Machine Tools Ltd EBITDA = Profit Depreciation and Amortization a) Value of shares of company using P/E = P/E * EBITDA Total value = Value of shares of company using P/E + Debt b) Total value using value/EBITDA = (Enterprise Value /EBITDA) * EBITDA Value of shares = Total value using value/EBITDA- Debt 7: a) Scenario 1 Scenario 2 Selling Price 20 22 Demand 15000 13500 Variable cost 10 10 Fixed cost 100000 100000 EBIT 50000 62000 Depreciation and Amortization 20000 20000 Tax rate 0.3 0.3 Working capital 3000 3000 Free cash flow 52000 60400 EBIT = ((Selling Price Variable Cost) * Demand) Fixed Cost Free Cash Flow = EBIT (1- tax rate) + Depreciation and Amortization Working Capital Free Cash Flow will increase if the price is increased. b) Scenario Analysis is a more realistic tool for the assessment of the impact if different scenario on a project. There is a difference between sensitivity analysis and scenario analysis. Sensitivity Analysis considers the sensitivity of the Net Present Value (NPV) analysis to changes in the variable values (Gal and Greenberg 2012). On the other hand, Scenario Analysis considers the probability of the changes in NPV Analysis happening in the variables (Dutta and Babbel 2014). References Barth, M.E., Konchitchki, Y. and Landsman, W.R., 2013. Cost of capital and earnings transparency.Journal of Accounting and Economics,55(2), pp.206-224. Billett, M.T., Hribar, P. and Liu, Y., 2015. Shareholder-manager alignment and the cost of debt.Available at SSRN 958991. Dutta, K.K. and Babbel, D.F., 2014. Scenario analysis in the measurement of operational risk capital: a change of measure approach.Journal of Risk and Insurance,81(2), pp.303-334. Elliott, R.J. and Nishide, K., 2014. Pricing of discount bonds with a Markov switching regime.Annals of Finance,10(3), pp.509-522. Favara, G., Gilchrist, S., Lewis, K.F. and Zakrajsek, E., 2016.Recession Risk and the Excess Bond Premium. Board of Governors of the Federal Reserve System (US). Gal, T. and Greenberg, H.J. eds., 2012.Advances in sensitivity analysis and parametric programming(Vol. 6). Springer Science Business Media. Khan, M.I.K., Meher, M.A.K.M. and Syed, S.M.K., 2013. Impact of Inflation on Dividend Policy: Synchronization of Capital Gain and Interest Rate. Malik, F., Gul, S., Khan, M.T., Rehman, S.U. and Khan, M., 2013. Factors influencing corporate dividend payout decisions of financial and non-financial firms.Research Journal of Finance and Accounting,4(1), pp.35-46. Malkiel, B.G., 2015.Term structure of interest rates: expectations and behavior patterns. Princeton University Press. Obradovich, J. and Gill, A., 2013. Coporate Governance, Institutional Ownership, and the Decision to Pay the Amount of Dividends: Evidence from USA. Pasqual, J., Padilla, E. and Jadotte, E., 2013. Technical note: equivalence of different profitability criteria with the net present value.International Journal of Production Economics,142(1), pp.205-210. Rafique, M., 2012. Factors affecting dividend payout: Evidence from listed non-financial firms of Karachi stock exchange.Business Management Dynamics,1(11), pp.76-92.

The Movie Exhibition Industry

Deliverable 1 The Motion Picture Industry Value Chain Could the motion picture industry add value to their productions if they concentrated on only one venture? Most of the distribution in the market is done by the divisions of major studios. The studio’s investments span across various major fields and this makes the management of the investment a great challenge. Advertising We will write a custom essay sample on The Movie Exhibition Industry specifically for you for only $16.05 $11/page Learn More If the studio’s concentrated only on movie production, the quality of their productions would increase. They would channel all their energies into creating new movie ideas and this would definitely appeal to their target audience. The Business of Exhibition Could movie exhibitors find other ways of adding value to the customer while gaining revenue? Most of the profits made by exhibitors are from the sale of concessions. The food served at the movies has gradually increased in price but the quality has remained the same. If movie exhibitors diversified their food options and incorporated alcohol in their drinks options, their high food prices would be justified and the customer base would be increased if they added food options for vegetarians. The Theater Experience Now that people can watch movies in their own home, what can movie exhibitors do now to gain that competitive advantage over home theatre systems and offer customers something that their home theatre system cannot? In order to stay in business, the theaters can open smaller branches closer to the living areas so that the people do not have to go through long drives to get to the movies. They should be placed around malls where a lot of people frequent for necessities like food. This would attract customers who had gone to the mall for other reasons and have time to spare. Raising the Exhibition Curtain in 2011 and Beyond How can exhibitors ensure that they re tain their customers with the current economic recession? The exhibitors are overcharging the customers and this has reduced the number of people willing to go to the movies. The exhibitors should be considerate when they set their price. The customers understand a small price hike due to recession but extreme price hikes as have been witnessed, are affecting the number of people going for movies. Deliverable 2 Is the lack of competition from new investors causing these companies to deliver low standard services? How much more do the exhibitors need to do in order to maintain the theater experience do they need to shift to a completely different type of service that no other entertainment venue can offer for that same price? How can the theaters survive the hard economic times while ticket prices are rising, the number of people going to movies is dropping, and the numbers of theatres are increasing? Deliverable 3 The motion picture industry seems to be lacking competition from ne w investors. If there were more studios producing movies, there would be more ideas being made into different movies. This would attract more movie goers. Similarly, if more companies invested in exhibition, the competition would force the exhibitors offer better services. For exhibitors to create a great experience for movie goers they can improve the food they sell and more food options availed. The people working at the movies should also be polite to the customers and treat them well. For theaters to still make a profit without overpricing the tickets, they could reduce the number of staff they have by introducing computerized ticket sale point and drink buying points. They could save on the workers salaries and still run a profitable and efficient business.Advertising Looking for essay on art and design? Let's see if we can help you! Get your first paper with 15% OFF Learn More This essay on The Movie Exhibition Industry was written and submitted by user Malaysia Alvarez 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.

When the Free Market Dries Out Bremmers Account of the Future Economics

When the Free Market Dries Out Bremmers Account of the Future Economics It seems that the idea of a capitalistic society and the fact that capitalism is at present the only logical way to structure various social and economical relationships seems obvious enough; yet it cannot be denied that certain alternatives may exist and that capitalism is, after all, the idea created by people and can be, therefore, just as easily demolished by them.Advertising We will write a custom book review sample on When the Free Market Dries Out: Bremmer’s Account of the Future Economics specifically for you for only $16.05 $11/page Learn More Taking a closer look at the ideas which Ian Bremmer communicates in his recent book The end of free market, one must take into account the sad fact that capitalistic structure of society might finally prove less resistant in the competition with the rest of structures than expected. Analyzing the book by Bremmer ad checking its verbosity, one can possibly come to the conclusion whether the humankind wil l finally be dominated by a less flexible system known as state capitalism or remain within the boundaries of the traditional democratic ideas. According to what Bremmer says, it is the state capitalism that poses the greatest threat to the realm of the capitalistic world. Undermining the very principles of the capitalistic ideas, it is finally going to destroy the fundament of the society as it is today, making markets completing subjected to the power of the state government. In Bremmer’s own words, the people obsessed with totalitarian ideas â€Å"have invented something new: state capitalism1†; according to the author, the given system is supposed to destroy the entire mechanism of the capitalist world and finally bring the existing financial economical and political relationships to an inevitable end. Analyzing the given book, one must mention, first of all, that the arguments which the author offers are in fact quite string. Indeed, the concept if the state capit alism is not the product of someone’s inflamed imagination – on the contrary, the theory is rather old and has sufficient grounds to base o. According to the evidence offered by Grinder and Hagel, the concept of state capitalism is quite a well-known idea which differs from the fundamentals of capitalism â€Å"with regard to the second proposition: that an inherent antagonism exists between banks and industrial corporations.†2Advertising Looking for book review on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More However, even back then, the authors could see the obvious flaws of the proposed system: â€Å"This is not to deny the possibility that localized conflicts of interest may frequently emerge between particular banks and particular industrial corporations over the perception of profit opportunities.†3 Therefore, it should be admitted that the threat of the state capitalism develo pment has been quite an issue for a considerable amount of time. In addition, among the arguments which Bremmer provides in his argument concerning the effects of the possible state capitalism advent, the fact that globalization enhances the above-mentioned process is evident. According to the author, â€Å"All that movement across borders will eventually strip nation-states of their power, because governments will never be able to manage the international commercial, political, social, and environmental challenges that globalization creates†4. However, the author misses the positive effects of globalization, namely, the significance which globalization has for a range of developing countries. Indeed, dealing with the countries which are currently only developing their economics and are at their earliest stages of development is quite complicated and even dangerous; in addition, the leading countries do not bear such moral obligations as to help the developing countries striv e for better economical conditions. According to Lee and Vivarelli, globalization, despite the numerous controversies it might cause, does have a sufficient effect on such issues as unemployment, helping to resolve the issue:Advertising We will write a custom book review sample on When the Free Market Dries Out: Bremmer’s Account of the Future Economics specifically for you for only $16.05 $11/page Learn More When a developing country opens its borders to foreign capital, FDIs generate positive employment impacts both directly and indirectly through job creation within suppliers and retailers and also a tertiary employment effect through generating additional incomes and so increasing aggregate demand.5 Therefore, it can be considered that the ideas which Bremmer conveys might seem a bit selfish and appropriate only for the leading countries of the world, while the developing ones might fall into an even worse crisis. Because of the given issue, the ideas offered by Bremmer cannot be considered as completely true and unbiased suppositions. If Bremmer had been less focused on the leaders in the world market sphere and paid a tad more attention to the concerns of the third-world countries, he could have come to a different decision. Another important element in Bremmer’s assessment of the existing policies concerning markets and their variations all over the world, which borders prophecy, is the fact that the author traditionally considers the Russian and the Chinese markets as not fully compatible, since they are supposedly still influenced by the state, though legitimately governed by free entrepreneurships. Indeed, the effects of the Cold War are still evident.6 However, according to what the report offered by Dun and Bradstreet Ltd. Says, The combined impact of the new monetary policy direction and increased investor risk aversion will result in further downward pressure on the Real, which experienced a rapid depreciat ion against the US dollar in September and continues to experience volatility in light of the euro-zone crisis. Notably, inflation has remained stubbornly high despite the slowdown in the economy; CPI inflation rose to 7.3% in September although we anticipate that it will ease slightly by end-2011). No matter how hard it is to accept the bitter facts which Bremmer offers in his work, it is still clear that the Eastern Europe and the Asian countries, namely, China7, are suffering considerable crisis currently and, which is even more significant, are going to face another economic challenge in the nearest future. According to the statistics data and the economical prognoses provided in the DG Special Report,Advertising Looking for book review on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More DB expects the economy to slow in 2012. Russia remains vulnerable to the risk aversion that gripped global financial markets during August-October 2011. In Q3 alone the country registered USD18.7bn in net capital outflows, and the rouble fell by 12% against the US dollar.8 Hence, Bremmer offers a precise analysis of the current state of economy in the world’s largest countries, thus, basing his research on completely verified and, therefore, impeccable and trustworthy data. However, it is still worth noticing that the researcher does not compare the data with the previous records, offering only the results of a relatively short time period. Despite the somewhat insistent tone of the book, Bremmer does provide solid research; among the most impressive pieces which the author offers, the classification of the state capitalism models is an all-embracing overview of the shapes which the phenomenon has taken or can presumably take. As the author himself warns the readers, State ca pitalism is not a single coherent political ideology. It’s a set of principles that a government can adapt to meet its particular needs. As we’ll see, Saudi royals, Russia’s elite factors, and China’s senior party leadership design policies intended to extend their domestic power within very different political environments. (85) Thus, the fact that the author acknowledges the existence of various types of state capitalism due to the difference in cultural, economical and political peculiarities of different countries is an obvious advantage of the book. Offering a more profound analysis and allowing to investigate the problem even deeper, the classification which the author offers is extremely important for the further prognoses for the future of the capitalistic relationships and the free market. However, it can also be considered a major drawback that the author apparently diminishes the role of government concerning of the financial and economical pro cesses which are going on in the corresponding countries. According to what Bremmer says, the states should not interfere the economical or the financial situation which the state companies are currently in, providing only financial support for the state-owned enterprises: â€Å"To finance all these state-owned and state-supported companies, governments should simply print the money they need, but they would lower the value of their currencies, stroke inflation, and undermine the value of their assets in the process†9. In addition, Bremmer never refers to the obvious â€Å"moral hazard†10, as Mostrous, Gue and Dittman defined the issue concerning the state capitalistic system in action. Nevertheless, among the negative aspects of Bremmer’s work, the overall tone of the research and the emphases put on certain issues are worth being reconsidered. For instance, Bremmer does not stress the importance of the change where it comes as an obvious and undeniable fact: à ¢â‚¬Å"In meetings of much greater consequence now taking place around the world, this inability to agree on the proper role for the state in the performance of markets will change the way we live†11. In addition, it seems that Bremmer, though acknowledging the necessity and inevitability of the globalization process, still does not approve of it. The latter could be considered an opinion which must be taken into consideration, yet the author does not convey the exact negative results of the globalization except the fact that it is likely to spur the above-mentioned fusion of different countries’ economical and financial policies. According to Bremmer, the latter is likely to drive to state capitalism structure emerging in the rest of the countries and finally gripping the world, ousting the current capitalist system: The most obvious example comes from the transition from an international bargaining table dominated by heads of state of the G7 group of industrialized nat ions- all of them champions of free-market capitalism- toward a G20 model that acknowledges the need to allow relative free-market skeptics like China, Russia, Saudi Arabia, India, and others to join the conversation.12 Addressing the positive aspects of the research conducted by Bremmer and the ideas which obviously contain a grain of truth in them, it is necessary to mention that fact that the author considers the possibility of enmity between Russia or China and the United States, comparing it to the has-been Cold War experience (Bremmer). Despite the fact that the author reassures that there is no longer any trace of hostility between the countries and that the past prejudices and arguments are long gone, there is still considerable anxiety in Bremmer’s work: China might one day pose a broader military threat than it does now, but its economy has grown so quickly and its living standards have improved so dramatically over the past two decades that it’s hard to imag ine the kind of catastrophic, game-changing event that would push its leadership to pose a Soviet-scale military challenge to America and Europe (Bremmer). Even though the supposition that the good relationships between the states might finally end is not offensive in its existence, it is still a considerably far stretch. As Cohen and Grinberg explain, the relationships between the USA and China are quite stable at present, since both countries are willingly integrating into the Smart Power, which is â€Å"based on, as Secretary Clinton outlined in her confirmation hearing, the fundamental belief that ‘We must use†¦ the full range of tools at our disposal- diplomatic, economic, military, political and cultural – picking the right tool, or combination of tools, for each situation.’’’13 In addition, in regard to the topics discussed by Bremmer, the issue of economic globalization should be addressed as well as one of the elements most closely in tertwined with the concept of capitalism. However, it is worth keeping in mind that the threats of the state capitalism as the structure which allegedly is supposed to make the entire world market subjected to the state government and the governmental structure. If taking into account all the factors which shape the world market situation, one must admit that the impact which state capitalism is going to have on the world markets is rather unpredictable and cannot be considered a â€Å"totalitarian regime† a priori. As Kagarlitsky explains, â€Å"attempts to create a state sector may give rise to state capitalism and even to semi-feudal relations, or may remain a pure formality14.† Therefore, it can be deduced that Bremmer includes a number of exaggerations in his book, thus, depicting the future of the human race in the darkest ways possible. The given method is, no doubt, extremely efficient for the people to start act and change the course of the history as soon as possible, without letting the dreadful threat take over the world and turn what at present is Bremmer’s suspicion about the future into the exact reality. Hence, one must give Bremmer’s book certain credit for extremely vivid images of the world without democratic economy and the markets belonging entirely to states and the people who are currently at the helm. It can be considered that, in his theory concerning the possible flaws of the capitalistic structure, Bremmer has a point. Therefore, judging by the analysis introduced above, despite the evident drawbacks of the existing structure of relationships between people, either economical, or social, or political, the democratic one is the least flawed and by far the most promising in terms of people’s further development and the growth of the international business relationships which will finally lead to prosperity. Hence, it can be considered that the potential threat which state capitalism poses to the socie ty can still be eliminated. Nevertheless, it must be accepted that the current tendencies in the economical systems of certain countries obviously and willingly accept the fact that have-been free markets are controlled by the governmental structures. Hence, entrepreneurs should strive towards a free economic space which is not dominated by the government. Once reaching complete independency, the world market will be able to evolve. Bibliography A DG Special Report. Outlook for key emerging markets. Virgin Islands, US: Dun Bradstreet Ltd, 2011. Braun, Aurel. NATO-Russia relations in the twenty-first century. New York, NY:   Routledge, 2008. Bremmer, Ian. The end of the free market. New York, NY: Penguin Publisher Inc., 2010. scribd.com/doc/81627810/The-End-of-the-Free-Market-Ian-Bremmer Cohen, William S., Greenberg, Maurice R. Smart power in U.S.-China  relationships. Ottawa, CA: CSIS, 2009. Grinder, Walter E. Hagel, John III. â€Å"Toward a theory of state capitalism: ultim ate decision-making and class structure.† Journal of Libertarian Studies, 1, No. 1 (1977): 59-79. Kagarlitsky, Boris. The twilight of globalization. Sterling, VI: Pluto Press, 2000. Lee, Eddy, Vivarelli, Marco. â€Å"The social impact of globalization in the developing countries.† IZA, No. 1925 (2006): 1-26. Mostrous, Yiannis G., Gue, Elliott H., Dittman, David F. The rise of the state:  profitable investing and geopolitics in the 21st century. Upper Saddle River, NJ: FT Press, 2010. Swaine, Michael D. America’s challenge: engaging a rising China in the twenty-first  century. Washington, DC: Carnegie Endowment, 2011. Footnotes 1. Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010. scribd.com/doc/81627810/The-End-of-the-Free-Market-Ian-Bremmer). 2 Walter E. Grinder John III Hagel, â€Å"Toward a theory of state capitalism: ultimate decision-making and class structure.† Journal of Libertarian Studies, 1, No. 1 (1977): 66. 3 Walter E. Grinder John III Hagel, â€Å"Toward a theory of state capitalism: ultimate decision-making and class structure.† Journal of Libertarian Studies, 1, No. 1 (1977): 66. 4 Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010. scribd.com/doc/81627810/The-End-of-the-Free-Market-Ian-Bremmer). 5 Eddy Lee Marco Vivarelli, â€Å"The social impact of globalization in the developing countries.† IZA, No. 1925 (2006): 6. 6 Aurel Braun, NATO-Russia relations in the twenty-first century (New York, NY: Routledge, 2008). 7 Michael D Swaine, America’s challenge: engaging a rising China in the twenty-first  Century (Washington, DC: Carnegie Endowment, 2011). 8 A DG Special Report. Outlook for key emerging market ( Virgin Islands, US: Dun Bradstreet Ltd, 2011), 4. 9 Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010. scribd.com/doc/81627810/The-End-of-the-Free-Market-Ian-Bremmer) 10 Yiannis G. Most rous, Elliott H. Gue, David F. Dittman, The rise of the state:  profitable investing and geopolitics in the 21st century (Upper Saddle River, NJ: FT Press, 2010), 13. 11 Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010. scribd.com/doc/81627810/The-End-of-the-Free-Market-Ian-Bremmer). 12 Ian Bremmer, The end of the free market (New York, NY: Penguin Publisher Inc., 2010. scribd.com/doc/81627810/The-End-of-the-Free-Market-Ian-Bremmer). 13 William S.Cohen, Maurice R. Greenberg, Smart power in U.S.-China  relationships. (Ottawa, CA: CSIS, 2009): 4. 14 Boris Kagarlitsky, The twilight of globalization, (Sterling, VI: Pluto Press, 2000): 53.

DIGITAL MEDIA PLATFORMS AND EDUCATION Essay Example | Topics and Well Written Essays - 250 words

DIGITAL MEDIA PLATFORMS AND EDUCATION - Essay Example However, it is factual that this mode of education is bringing in a lot of transformation to the student life, like coming up with ‘on-demand’ rather than sequential modes of learning (Power, 2010). At the same time, most institutions are still insisting and using the old systems of personal delivery, timetables, and printed books. The mode of transmission from an educator to a student and examinations as a mode of assessment is still in use (Power, 2010). This research aims at uncovering the impact that the digital media revolution has had on education standards and the effects it is having on the old traditional system. The main aim of choosing this topic is due to the viral nature at which digital media is infiltrating the current generation. This is an aspect that is bound to have effects on various realms, with education as a vital factor in the day to day livelihoods. Findings from the research can be used by education stakeholders on a variety of decision making

How does a leader find the balance between employee needs and the Essay

How does a leader find the balance between employee needs and the organizational goals of a company - Essay Example Such leaders sometimes prove effective in achieving their goal but they are inconsiderate toward their employees. In my perspective, this type of leadership is not balanced because such leaders can’t approach their goals and reach a decision that can satisfy most of their employees. So being a â€Å"balanced† leader who tries to achieve the company’s goal, and also cares for the workers requires a special approach. First of all, the leader should understand the characteristics of all of their workers, and he/she should use past experience to reach a decision that can satisfy the majority of individuals in the company. Understanding the characteristics of workers is the main objective in drawing a balance between the employees’ need and the organization’s goals. The leader of a company should gather all information about the workers and study each section of their abilities and weaknesses. Employees are human beings and they are not perfect, so understanding their situation is the first step in balancing the employees’ needs and organization’s goal. Then the leader can establish the working style, vision, mission, and rules of organization that can satisfy the employees as well as help the leader achieve the goals of the company. Besides collecting and analyzing the data, leaders should use past experience when they reached a decision for their previous organizations. They should reflect on their past experience while making a recent decision for the company, so that the leaders can learn from their past mistakes that made them distracted from the organization’s goals and also overlook the employees’ needs. This way, the decision they take will satisfy the recent employees’ needs, and approach the organization’s goals. It is complicated to draw a balance between the employees’ needs and the organization’s goals. It is because we are living in the real world that is different from a perfect world. There are no paths to

My Vacation Essay Example for Free

My Vacation Essay There is one magical place where my family vacations to most summers. It is quiet, relaxing, beautiful, magnificent, and inspiring. Located in Saranac Lake, in rural New York, this is where my family has some of the best times. We stay in a calm and serene cabin where my Aunt and Uncle live. But I’m getting ahead of myself. Before I can explain what I do during this vacation, I must explain the background and history of this special family gathering. My family is not the type the goes on expensive or classy vacations to the Caribbean. We prefer memorable vacations, whether it is in Florida, Colorado, Cape Cod, or Saranac Lake. The places we go do not matter, but more the events that take place during them. Once my mom’s side of the family had grown, and all my grandparents, aunts, and uncles, had their children, everyone decided it would be fun to have a family reunion of some sort. My Aunt’s cabin sounded like a fun place to meet every summer- and that’s where we have met ever since. Now lots of the kids have grown up, and even though they are older they still enjoy some of the things we did when we first came. Some activities include hiking, swimming, fishing, canoeing, and boating on the lake. Also, playing board games and watching movies when it’s rainy, having cookies down on the dock, or playing a good game of hide and seek in the woods. Vacations to the lake are like an escape from the outside world, and a chance to see nature and still have fun. Every summer is guaranteed to be a blast, in rain or shine. To conclude, my vacations to the lake will always remain memorable and special. I hope that one day I will be able to continue the tradition for my family. Through the years, I have always been sort of jealous of my friends who told about their extravagant vacations to paradise, but I have soon realized that I would never trade my experiences for any of theirs. Why? Because I have something that they will never have. I have a family that loves and cares for each other, and would do anything to make everyone happy. I have a lifetimes worth of memories from only a few days. Finally, I have joy.

The Life Of Mozart Essay -- essays research papers

  Ã‚  Ã‚  Ã‚  Ã‚  My book report is from the biography of Mozart written by Robert W. Gutman. It was illustrated by the Jacket art courtesy of Music Lovers Society and was published by Harcourt Brace and Company. It was printed in New York City and the year of publication was 1999.   Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  Mozart was born in Salzburg, Austria, the son of composer, musical author, and violinist, Leopold Mozart and his wife, Anna Maria Pertl. His given names were Johann Chrysostom Wolfgang Theophilus, the last of which is Gottlieb in German, and Amadeus in Latin. He used Wolfgang and Amadeus in his signature, so he is generally known by these two names.   Ã‚  Ã‚  Ã‚  Ã‚  He displayed marked musical gifts very early, playing the keyboard confidently when aged four, composing his first pieces for it aged five, and quickly mastering the violin. Leopold was keen to exhibit his son's extraordinary talents, along with those of his gifted pianist-daughter, Maria-Anna (called Nannerl) (1751--1829), and he undertook a series of tours across Europe with them when Mozart was just six years old.   Ã‚  Ã‚  Ã‚  Ã‚  In 1767 the family went to Vienna for five months, where Mozart wrote an opera buffa (comic opera) for the Emperor, La finta semplice (trans, the Pretend Simpleton); and a Singspiel (a German-language opera with some spoken dialogue), Bastien und Bastienne (1769), commissioned by Dr Franz Anton Mesmer. However, in Vienna, the Italian musicians at court, including the composer Antonio Salieri, made it difficult for him to produce his operas. He returned to Salzburg, and was appointed honorary Konzertmeister to Archbishop Sigismund von Schrattenbach.   Ã‚  Ã‚  Ã‚  Ã‚  There followed three extended visits by father and son to Italy (1770--2). Musical experience gained on these tours helped mold Mozart's style, especially in dramatic music. He was prolific, writing sacred vocal pieces and instrumental works too. By 1772 he had written about 25 symphonies (some are lost), and his first quartets. Further quartets and symphonies followed during and after a visit to Vienna in 1773, when he came into contact with Haydn's music. Between 1775--6 he composed two operas: La finta Giardiniera (trans The Lady Who Disguised Herself as a Gardener) and Il Re Pastore (The Shepherd King); five... ...apellmeister of St Stephen's Cathedral. His last complete works were the masonic Singspiel, Die Zauberflote (1791, The Magic Flute); an opera seria, La clemenze di Tito (1791, The mercy of Tito), and a clarinet concerto for Leopold's coronation. Commissioned by an unknown stranger to compose the Requiem Mass, Mozart became obsessed with the idea that it was for his own death, and he died before the work was finished after a three-week fever. No convincing evidence about the cause of death has come to light, although there has been much speculation about it. Deeply in debt at the time of his death, Mozart did not live long enough to enjoy the financial rewards from the success of The Magic Flute, and was buried in a pauper's grave.   Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  Even though I did not get a chance to read the whole entire book, I thought that Mozart’s life was interesting and worthwhile. He seemed a little kooky at times, but his music is very beautiful. I thought that Robert W. Gutman did a very good job interpreting Mozarts’ life. The book was a little hard to follow but it gave me much to write about him and learned more about his work.

Damodaran Book on Investment Valuation, 2nd Edition

INVESTMENT VALUATION: SECOND EDITION I will be putting my entire second edition online, while the book goes through the printing process – it will be available at the end of the year. This may seem like a bit of a free lunch, and I guess it is. I hope, though, that you can do me a favor as you go through the manuscript. If you find any mistakes – mathematical or grammatical – could you please let me know? It would help me ensure that the typos do not find their way into the final version. Chapter 1: Introduction to Valuation Chapter 2: Approaches to Valuation Chapter 3: Understanding Financial Statements Chapter 4: The Basics of Risk Chapter 5: Option Pricing Theory and Models Chapter 6: Market Efficiency: Theory and Models Chapter 7: Riskless Rates and Risk Premiums Chapter 8: Estimating Risk Parameters and Costs of Financing Chapter 9: Measuring Earnings Chapter 10: From Earnings to Cash Flows Chapter 11: Estimating Growth Chapter 12: Closure in Valuation: Estimating Terminal Value Chapter 13: Dividend Discount Models Chapter 14: Free Cashflow to Equity Models Chapter 15: Firm Valuation: Cost of Capital and APV Approaches Chapter 16: Estimating Equity Value Per Share Chapter 17: Fundamental Principles of Relative Valuation Chapter 18: Earnings Multiples Chapter 19: Book Value Multiples Chapter 20: Revenue and Sector-Specific Multiples Chapter 21: Valuing Financial Service Firms Chapter 22: Valuing Firms with Negative Earnings Chapter 23: Valuing Young and Start-up Firms Chapter 24: Valuing Private Firms Chapter 25: Acquisitions and Takeovers Chapter 26: Valuing Real Estate Chapter 27: Valuing Other Assets Chapter 28: The Option to Delay and Valuation Implications Chapter 29: The Option to Expand and Abandon: Valuation Implications Chapter 30: Valuing Equity in Distressed Firms Chapter 31: Value Enhancement: A Discounted Cashflow Framework Chapter 32: Value Enhancement: EVA, CFROI and Other Tools Chapter 33: Valuing Bonds Chapter 34: Valuing Forward and Futures Contracts Chapter 35: Overview and Conclusions References 1 CHAPTER 1 INTRODUCTION TO VALUATION Every asset, financial as well as real, has a v alue. The key to successfully nvesting in and managing these assets lies in understanding not only what the value is but also the sources of the value. Any asset can be valued, but some assets are easier to value than others and the details of valuation will vary from case to case. Thus, the valuation of a share of a real estate property will require different information and follow a different format than the valuation of a publicly traded stock. What is surprising, however, is not the differences in valuation techniques across assets, but the degree of similarity in basic principles. There is undeniably uncertainty associated with valuation. Often that uncertainty comes from the asset being valued, though the valuation model may add to that uncertainty. This chapter lays out a philosophical basis for valuation, together with a discussion of how valuation is or can be used in a variety of frameworks, from portfolio management to corporate finance. A philosophical basis for valuation It was Oscar Wilde who described a cynic as one who â€Å"knows the price of everything, but the value of nothing†. He could very well have been describing some equity research analysts and many investors, a surprising number of whom subscribe to the ‘bigger fool' theory of investing, which argues that the value of an asset is irrelevant as long as there is a ‘bigger fool' willing to buy the asset from them. While this may provide a basis for some profits, it is a dangerous game to play, since there is no guarantee that such an investor will still be around when the time to sell comes. A postulate of sound investing is that an investor does not pay more for an asset than its worth. This statement may seem logical and obvious, but it is forgotten and rediscovered at some time in every generation and in every market. There are those who are disingenuous enough to argue that value is in the eyes of the beholder, and that any price can be justified if there are other investors willing to pay that price. That is patently absurd. Perceptions may be all that matter when the asset is a painting or a sculpture, but investors do not (and should not) buy most assets for aesthetic or emotional reasons; 2 financial assets are acquired for the cashflows expected on them. Consequently, perceptions of value have to be backed up by reality, which implies that the price paid for any asset should reflect the cashflows that it is expected to generate. The models of valuation described in this book attempt to relate value to the level and expected growth in these cashflows. There are many areas in valuation where there is room for disagreement, including how to estimate true value and how long it will take for prices to adjust to true value. But there is one point on which there can be no disagreement. Asset prices cannot be justified by merely using the argument that there will be other investors around willing to pay a higher price in the future. Generalities about Valuation Like all analytical disciplines, valuation has developed its own set of myths over time. This section examines and debunks some of these myths. Myth 1: Since valuation models are quantitative, valuation is objective Valuation is neither the science that some of its proponents make it out to be nor the objective search for the true value that idealists would like it to become. The models that we use in valuation may be quantitative, but the inputs leave plenty of room for subjective judgments. Thus, the final value that we obtain from these models is colored by the bias that we bring into the process. In fact, in many valuations, the price gets set first and the valuation follows. The obvious solution is to eliminate all bias before starting on a valuation, but this is easier said than done. Given the exposure we have to external information, analyses and opinions about a firm, it is unlikely that we embark on most valuations without some bias. There are two ways of reducing the bias in the process. The first is to avoid taking strong public positions on the value of a firm before the valuation is complete. In far too many cases, the decision on whether a firm is under or over valued precedes the actual 3 valuation1, leading to seriously biased analyses. The second is to minimize the stake we have in whether the firm is under or over valued, prior to the valuation. Institutional concerns also play a role in determining the extent of bias in valuation. For instance, it is an acknowledged fact that equity research analysts are more likely to issue buy rather than sell recommendations,2 i. e. , that they are more likely to find firms to be undervalued than overvalued. This can be traced partly to the difficulties they face in obtaining access and collecting information on firms that they have issued sell recommendations and to the pressure that they face from portfolio managers, some of whom might have large positions in the stock. In recent years, this trend has been exacerbated by the pressure on equity research analysts to deliver investment banking business. When using a valuation done by a third party, the biases of the analyst(s) doing the valuation should be considered before decisions are made on its basis. For instance, a self-valuation done by a target firm in a takeover is likely to be positively biased. While this does not make the valuation worthless, it suggests that the analysis should be viewed with skepticism. The Biases in Equity Research The lines between equity research and salesmanship blur most in periods that are characterized by â€Å"irrational exuberance†. In the late 1990s, the extraordinary surge of market values in the companies that comprised the new economy saw a large number of equity research analysts, especially on the sell side, step out of their roles as analysts and become cheerleaders for these stocks. While these analysts might have been well meaning in their recommendations, the fact that the investment banks that they worked for were leading the charge on new initial public offerings from these firms exposed them to charges of bias and worse. 1This is most visible in takeovers, where the decision to acquire a firm often seems to precede the valuation of the firm. It should come as no surprise, therefore, that the analysis almost invariably supports the decision. 2In most years, buy recommendations outnumber sell recommendations by a margin of ten to one. In recent years, this trend has become even stronger. 4 In 2001, the crash in the market values of new economy stocks and the anguished cries of investors who had lost wealth in the crash created a firestorm of controversy. There were congressional hearing where legislators demanded to know what analysts knew about the companies they recommended and when they knew it, statements from the SEC about the need for impartiality in equity research and decisions taken by some investment banking to create at least the appearance of objectivity. At the time this book went to press, both Merrill Lynch and CSFB had decided that their equity research analysts could no longer hold stock in companies that they covered. Unfortunately, the real source of bias – the intermingling of investment banking business and investment advice – was left untouched. Should there be government regulation of equity research? We do not believe that it would be wise, since regulation tends to be heavy handed and creates side costs that seem to quickly exceed the benefits. A much more effective response can be delivered by portfolio managers and investors. The equity research of firms that create the potential for bias should be discounted or, in egregious cases, even ignored. Myth 2: A well-researched and well-done valuation is timeless The value obtained from any valuation model is affected by firm-specific as well as market-wide information. As a consequence, the value will change as new information is revealed. Given the constant flow of information into financial markets, a valuation done on a firm ages quickly, and has to be updated to reflect current information. This information may be specific to the firm, affect an entire sector or alter expectations for all firms in the market. The most common example of firm-specific information is an earnings report that contains news not only about a firm’s performance in the most recent time period but, more importantly, about the business model that the firm has adopted. The dramatic drop in value of many new economy stocks from 1999 to 2001 can be traced, at least partially, to the realization that these firms had business models that could deliver customers but not earnings, even in the long term. In some cases, new information can affect the valuations of all firms in a sector. Thus, pharmaceutical companies that were valued highly in early 1992, on the assumption that the high growth from the eighties would continue into the future, were valued much less in early 1993, as the prospects of 5 health reform and price controls dimmed future prospects. With the benefit of hindsight, the valuations of these companies (and the analyst recommendations) made in 1992 can be criticized, but they were reasonable, given the information available at that time. Finally, information about the state of the economy and the level of interest rates affect all valuations in an economy. A weakening in the economy can lead to a reassessment of growth rates across the board, though the effect on earnings are likely to be largest at cyclical firms. Similarly, an increase in interest rates will affect all investments, though to varying degrees. When analysts change their valuations, they will undoubtedly be asked to justify them. In some cases, the fact that valuations change over time is viewed as a problem. The best response may be the one that Lord Keynes gave when he was criticized for changing his position on a major economic issue: â€Å"When the facts change, I change my mind. And what do you do, sir? † Myth 3. : A good valuation provides a precise estimate of value Even at the end of the most careful and detailed valuation, there will be uncertainty about the final numbers, colored as they are by the assumptions that we make about the future of the company and the economy. It is unrealistic to expect or demand absolute certainty in valuation, since cash flows and discount rates are estimated with error. This also means that you have to give yourself a reasonable margin for error in making recommendations on the basis of valuations. The degree of precision in valuations is likely to vary widely across investments. The valuation of a large and mature company, with a long financial history, will usually be much more precise than the valuation of a young company, in a sector that is in turmoil. If this company happens to operate in an emerging market, with additional disagreement about the future of the market thrown into the mix, the uncertainty is magnified. Later in this book, we will argue that the difficulties associated with valuation can be related to where a firm is in the life cycle. Mature firms tend to be easier to value than growth firms, and young start-up companies are more difficult to value than companies with established produces and markets. The problems are not with the valuation models we use, though, but with the difficulties we run into in making estimates for the future. 6 Many investors and analysts use the uncertainty about the future or the absence of information to justify not doing full-fledged valuations. In reality, though, the payoff to valuation is greatest in these firms. Myth 4: . The more quantitative a model, the better the valuation It may seem obvious that making a model more complete and complex should yield better valuations, but it is not necessarily so. As models become more complex, the number of inputs needed to value a firm increases, bringing with it the potential for input errors. These problems are compounded when models become so complex that they become ‘black boxes’ where analysts feed in numbers into one end and valuations emerge from the other. All too often the blame gets attached to the model rather than the analyst when a valuation fails. The refrain becomes â€Å"It was not my fault. The model did it. † There are three oints we will emphasize in this book on all valuation. The first is the principle of parsimony, which essentially states that you do not use more inputs than you absolutely need to value an asset. The second is that the there is a trade off between the benefits of building in more detail and the estimat ion costs (and error) with providing the detail. The third is that the models don’t value companies: you do. In a world where the problem that we often face in valuations is not too little information but too much, separating the information that matters from the information that does not is almost as important as the valuation models and techniques that you use to value a firm. Myth 5: To make money on valuation, you have to assume that markets are inefficient Implicit often in the act of valuation is the assumption that markets make mistakes and that we can find these mistakes, often using information that tens of thousands of other investors can access. Thus, the argument, that those who believe that markets are inefficient should spend their time and resources on valuation whereas those who believe that markets are efficient should take the market price as the best estimate of value, seems to be reasonable. This statement, though, does not reflect the internal contradictions in both positions. Those who believe that markets are efficient may still feel that valuation has something to contribute, especially when they are called upon to value the effect of a change in the way a firm is run or to understand why market prices change over time. Furthermore, it is not clear how markets would become efficient in the first place, if investors did not attempt to find under and over valued stocks and trade on these valuations. In other words, a pre-condition for market efficiency seems to be the existence of millions of investors who believe that markets are not. On the other hand, those who believe that markets make mistakes and buy or sell stocks on that basis ultimately must believe that markets will correct these mistakes, i. e. become efficient, because that is how they make their money. This is a fairly self-serving definition of inefficiency – markets are inefficient until you take a large position in the stock that you believe to be mispriced but they become efficient after you take the position. We approach the issue of market efficiency as wary skeptics. On the one hand, we believe that markets make mistakes but, on the other, finding these mistakes requires a combination of skill and luck. This view of markets leads us to the following conclusions. First, if something looks too good to be true – a stock looks obviously under valued or over valued – it is probably not true. Second, when the value from an analysis is significantly different from the market price, we start off with the presumption that the market is correct and we have to convince ourselves that this is not the case before we conclude that something is over or under valued. This higher standard may lead us to be more cautious in following through on valuations. Given the historic difficulty of beating the market, this is not an undesirable outcome. Myth 6: The product of valuation (i. e. , the value) is what matters; The process of valuation is not important. As valuation models are introduced in this book, there is the risk of focusing exclusively on the outcome, i. e. , the value of the company, and whether it is under or over valued, and missing some valuable insights that can be obtained from the process of the valuation. The process can tell us a great deal about the determinants of value and help us answer some fundamental questions — What is the appropriate price to pay for high growth? What is a brand name worth? How important is it to improve returns on projects? What is the effect of profit margins on value? Since the process is so 8 informative, even those who believe that markets are efficient (and that the market price is therefore the best estimate of value) should be able to find some use for valuation models. The Role of Valuation Valuation is useful in a wide range of tasks. The role it plays, however, is different in different arenas. The following section lays out the relevance of valuation in portfolio management, acquisition analysis and corporate finance. 1. Valuation and Portfolio Management The role that valuation plays in portfolio management is determined in large part by the investment philosophy of the investor. Valuation plays a minimal role in portfolio management for a passive investor, whereas it plays a larger role for an active investor. Even among active investors, the nature and the role of valuation is different for different types of active investment. Market timers use valuation much less than investors who pick stocks, and the focus is on market valuation rather than on firm-specific valuation. Among security selectors, valuation plays a central role in portfolio management for fundamental analysts and a peripheral role for technical analysts. The following sub-section describes, in broad terms, different investment philosophies and the role played by valuation in each. 1. Fundamental Analysts: The underlying theme in fundamental analysis is that the true value of the firm can be related to its financial characteristics — its growth prospects, risk profile and cashflows. Any deviation from this true value is a sign that a stock is under or overvalued. It is a long term investment strategy, and the assumptions underlying it are: (a) the relationship between value and the underlying financial factors can be measured. (b) the relationship is stable over time. (c) deviations from the relationship are corrected in a reasonable time period. Valuation is the central focus in fundamental analysis. Some analysts use discounted cashflow models to value firms, while others use multiples such as the priceearnings and price-book value ratios. Since investors using this approach hold a large number of ‘undervalued' stocks in their portfolios, their hope is that, on average, these portfolios will do better than the market. 9 2. Franchise Buyer: The philosophy of a franchise buyer is best expressed by an investor who has been very successful at it — Warren Buffett. â€Å"We try to stick to businesses we believe we understand,† Mr. Buffett writes3. â€Å"That means they must be relatively simple and stable in character. If a business is complex and subject to constant change, we're not smart enough to predict future cash flows. † Franchise buyers concentrate on a few businesses they understand well, and attempt to acquire undervalued firms. Often, as in the case of Mr. Buffett, franchise buyers wield influence on the management of these firms and can change financial and investment policy. As a long term strategy, the underlying assumptions are that : (a) Investors who understand a business well are in a better position to value it correctly. (b) These undervalued businesses can be acquired without driving the price above the true value. Valuation plays a key role in this philosophy, since franchise buyers are attracted to a particular business because they believe it is undervalued. They are also interested in how much additional value they can create by restructuring the business and running it right. 3. Chartists: Chartists believe that prices are driven as much by investor psychology as by any underlying financial variables. The information available from trading — price movements, trading volume, short sales, etc. — gives an indication of investor psychology and future price movements. The assumptions here are that prices move in predictable patterns, that there are not enough marginal investors taking advantage of these patterns to eliminate them, and that the average investor in the market is driven more by emotion rather than by rational analysis. While valuation does not play much of a role in charting, there are ways in which an enterprising chartist can incorporate it into analysis. For instance, valuation can be used to determine support and resistance lines4 on price charts. 3This is extracted from Mr. Buffett's letter to stockholders in Berkshire Hathaway for 1993. 4On a chart, the support line usually refers to a lower bound below which prices are unlikely to move and the resistance line refers to the upper bound above which prices are unlikely to venture. While these levels are usually estimated using past prices, the range 10 4. Information Traders: Prices move on information about the firm. Information traders attempt to trade in advance of new information or shortly after it is revealed to financial markets, buying on good news and selling on bad. The underlying assumption is that these traders can anticipate information announcements and gauge the market reaction to them better than the average investor in the market. For an information trader, the focus is on the relationship between information and changes in value, rather than on value, per se. Thus an information trader may buy an ‘overvalued' firm if he believes that the next information announcement is going to cause the price to go up, because it contains better than expected news. If there is a relationship between how undervalued or overvalued a company is and how its stock price reacts to new information, then valuation could play a role in investing for an information trader. 5. Market Timers: Market timers note, with some legitimacy, that the payoff to calling turns in markets is much greater than the returns from stock picking. They argue that it is easier to predict market movements than to select stocks and that these predictions can be based upon factors that are observable. While valuation of individual stocks may not be of any use to a market timer, market timing strategies can use valuation in at least two ways: (a) The overall market itself can be valued and compared to the current level. (b) A valuation model can be used to value all stocks, and the results from the crosssection can be used to determine whether the market is over or under valued. For example, as the number of stocks that are overvalued, using the dividend discount model, increases relative to the number that are undervalued, there may be reason to believe that the market is overvalued. 6. Efficient Marketers: Efficient marketers believe that the market price at any point in time represents the best estimate of the true value of the firm, and that any attempt to exploit perceived market efficiencies will cost more than it will make in excess profits. They assume that markets aggregate information quickly and accurately, that marginal of values obtained from a valuation model can be used to determine these levels, i. e. the maximum value will become the resistance level and the minimum value will become the support line. 11 investors promptly exploit any inefficiencies and that any inefficiencies in the market are caused by friction, such as transactions costs, and cannot be arbitraged away. For efficient marketers, valuation is a useful exercise to determine w hy a stock sells for the price that it does. Since the underlying assumption is that the market price is the best estimate of the true value of the company, the objective becomes determining what assumptions about growth and risk are implied in this market price, rather than on finding under or over valued firms. . Valuation in Acquisition Analysis Valuation should play a central part of acquisition analysis. The bidding firm or individual has to decide on a fair value for the target firm before making a bid, and the target firm has to determine a reasonable value for itself before deciding to accept or reject the offer. There are also special factors to consider in takeover valuation. First, the effects of synergy on the combined value of the two firms (target plus bidding firm) have to be considered before a decision is made on the bid. Those who suggest that synergy is impossible to value and should not be considered in quantitative terms are wrong. Second, the effects on value, of changing management and restructuring the target firm, will have to be taken into account in deciding on a fair price. This is of particular concern in hostile takeovers. Finally, there is a significant problem with bias in takeover valuations. Target firms may be over-optimistic in estimating value, especially when the takeover is hostile, and they are trying to convince their stockholders that the offer price is too low. Similarly, if the bidding firm has decided, for strategic reasons, to do an acquisition, there may be strong pressure on the analyst to come up with an estimate of value that backs up the acquisition. 3. Valuation in Corporate Finance If the objective in corporate finance is the maximization of firm value5, the relationship among financial decisions, corporate strategy and firm value has to be 5Most corporate financial theory is constructed on this premise. 12 delineated. In recent years, management consulting firms have started offered companies advice on how to increase value6. Their suggestions have often provided the basis for the restructuring of these firms. The value of a firm can be directly related to decisions that it makes — on which projects it takes, on how it finances them and on its dividend policy. Understanding this relationship is key to making value-increasing decisions and to sensible financial restructuring. Conclusion Valuation plays a key role in many areas of finance — in corporate finance, mergers and acquisitions and portfolio management. The models presented in this book will provide a range of tools that analysts in each of these areas will find useful, but the cautionary note sounded in this chapter bears repeating. Valuation is not an objective exercise; and any preconceptions and biases that an analyst brings to the process will find its way into the value. 6The motivation for this has been the fear of hostile takeovers. Companies have increasingly turned to ‘value consultants' to tell them how to restructure, increase value and avoid being taken over. 13 Questions and Short Problems: Chapter 1 1. The value of an investment is A. he present value of the cash flows on the investment B. determined by investor perceptions about it C. determined by demand and supply D. often a subjective estimate, colored by the bias of the analyst E. all of the above 2. There are many who claim that value is based upon investor perceptions, and perceptions alone, and that cash flows and earnings do not matter. This argument is flawed because A. value is determined by earnings and cash flows, and investor perceptions do not matter. B. perceptions do matter, but they can change. Value must be based upon something more stable. C. investors are irrational. Therefore, their perceptions should not determine value. D. alue is determined by investor perceptions, but it is also determined by the underlying earnings and cash flows. Perceptions must be based upon reality. 3. You use a valuation model to arrive at a value of $15 for a stock. The market price of the stock is $25. The difference may be explained by A. a market inefficiency; the market is overvaluing the stock. B. the use of the wrong valuation model to value the stock. C. errors in the inputs to the valuation model. D. none of the above E. either A, B, or C. 0 CHAPTER 2 APPROACHES TO VALUATION Analysts use a wide range of models to value assets in practice, ranging from the simple to the sophisticated. These models often make very different assumptions about pricing, but they do share some common characteristics and can be classified in broader terms. There are several advantages to such a classification — it makes it easier to understand where individual models fit into the big picture, why they provide different results and when they have fundamental errors in logic. In general terms, there are three approaches to valuation. The first, discounted cashflow valuation, relates the value of an asset to the present value of expected future cashflows on that asset. The second, relative valuation, estimates the value of an asset by looking at the pricing of ‘comparable' assets relative to a common ariable such as earnings, cashflows, book value or sales. The third, contingent claim valuation, uses option pricing models to measure the value of assets that share option characteristics. Some of these assets are traded financial assets like warrants, and some of these options a re not traded and are based on real assets – projects, patents and oil reserves are examples. The latter are often called real options. There can be significant differences in outcomes, depending upon which approach is used. One of the objectives in this book is to explain the reasons for such differences in value across different models and to help in choosing the right model to use for a specific task. Discounted Cashflow Valuation While discounted cash flow valuation is one of the three ways of approaching valuation and most valuations done in the real world are relative valuations, we will argue that it is the foundation on which all other valuation approaches are built. To do relative valuation correctly, we need to understand the fundamentals of discounted cash flow valuation. To apply option pricing models to value assets, we often have to begin with a discounted cash flow valuation. This is why so much of this book focuses on discounted cash flow valuation. Anyone who understands its fundamentals will be able to analyze and use the other approaches. In this section, we will consider the basis of this approach, a philosophical rationale for discounted cash flow valuation and an examination of the different sub-approaches to discounted cash flow valuation. Basis for Discounted Cashflow Valuation This approach has its foundation in the present value rule, where the value of any asset is the present value of expected future cashflows that the asset generates. t=n t ? (1+r) t t=1 Value = where, CF n = Life of the asset CFt = Cashflow in period t r = Discount rate reflecting the riskiness of the estimated cashflows The cashflows will vary from asset to asset — dividends for stocks, coupons (interest) and the face value for bonds and after-tax cashflows for a real project. The discount rate will be a function of the riskiness of the estimated cashflows, with higher rates for riskier assets and lower rates for safer projects. You can in fact think of discounted cash flow valuation on a continuum. At one end of the spectrum, you have the default-free zero coupon bond, with a guaranteed cash flow in the future. Discounting this cash flow at the riskless rate should yield the value of the bond. A little further up the spectrum are corporate bonds where the cash flows take the form of coupons and there is default risk. These bonds can be valued by discounting the expected cash flows at an interest rate that reflects the default risk. Moving up the risk ladder, we get to equities, where there are expected cash flows with substantial uncertainty around the expectation. The value here should be the present value of the expected cash flows at a discount rate that reflects the uncertainty. The Underpinnings of Discounted Cashflow Valuation In discounted cash flow valuation, we try to estimate the intrinsic value of an asset based upon its fundamentals. What is intrinsic value? For lack of a better definition, consider it the value that would be attached to the firm by an all-knowing analyst, who not only knows the expected cash flows for the firm but also attaches the right discount rate(s) to these cash flows and values them with absolute precision. Hopeless though the task of estimating intrinsic value may seem to be, especially when valuing young companies with substantial uncertainty about the future, we believe that these estimates can be different from the market prices attached to these companies. In other word s, markets make mistakes. Does that mean we believe that markets are inefficient? Not quite. While we assume that prices can deviate from intrinsic value, estimated based upon fundamentals, we also assume that the two will converge sooner rather than latter. Categorizing Discounted Cash Flow Models There are literally thousands of discounted cash flow models in existence. Oftentimes, we hear claims made by investment banks or consulting firms that their valuation models are better or more sophisticated than those used by their contemporaries. Ultimately, however, discounted cash flow models can vary only a couple of dimensions and we will examine these variations in this section. I. Equity Valuation, Firm Valuation and Adjusted Present Value (APV) Valuation There are three paths to discounted cashflow valuation — the first is to value just the equity stake in the business, the second is to value the entire firm, which includes, besides equity, the other claimholders in the firm (bondholders, preferred stockholders, etc. and the third is to value the firm in pieces, beginning with its operations and adding the effects on value of debt and other non-equity claims. While all three approaches discount expected cashflows, the relevant cashflows and discount rates are different under each. The value of equity is obtained by discounting expected cashf lows to equity, i. e. , the residual cashflows after meeting all expenses, reinvestment needs, tax obligations and net debt payments (interest, principal payments and new debt issuance), at the cost of equity, i. e. , the rate of return required by equity investors in the firm. t=n Value of Equity = where, CF to Equity t (1+k e )t t=1 ? CF to Equityt = Expected Cashflow to Equity in period t ke = Cost of Equity The dividend discount model is a specialized case of equity valuation, where the value of the equity is the present value of expected future dividends. The value of the firm is obtained by discounting expected cashflows to the firm, i. e. , the residual cashflows after meeting all operating expenses, reinvestment needs and taxes, but prior to any payments to either debt or equity holders, at the weighted average cost of capital, which is the cost of the different components of financing used by the firm, weighted by their market value proportions. t=n Value of Firm = where, ? (1+WACC)tt t=1 CF to Firm CF to Firm t = Expected Cashflow to Firm in period t WACC = Weighted Average Cost of Capital The value of the firm can also be obtained by valuing each claim on the firm separately. In this approach, which is called adjusted present value (APV), we begin by valuing equity in the firm, assuming that it was financed only with equity. We then consider the value added (or taken away) by debt by considering the present value of the tax benefits that flow from debt and the expected bankruptcy costs. Value of firm = Value of all-equity financed firm + PV of tax benefits + Expected Bankruptcy Costs In fact, this approach can be generalized to allow different cash flows to the firm to be discounted at different rates, given their riskiness. While the three approaches use different definitions of cashflow and discount rates, they will yield consistent estimates of value as long as you use the same set of assumptions in valuation. The key error to avoid is mismatching cashflows and discount rates, since discounting cashflows to equity at the cost of capital will lead to an upwardly biased estimate of the value of equity, while discounting cashflows to the firm at the cost of equity will yield a downward biased estimate of the value of the firm. In the illustration 4 that follows, we will show the equivalence of equity and firm valuation. Later in this book, we will show that adjusted present value models and firm valuation models also yield the same values. Illustration 2. : Effects of mismatching cashflows and discount rates Assume that you are analyzing a company with the following cashflows for the next five years. Assume also that the cost of equity is 13. 625% and the firm can borrow long term at 10%. (The tax rate f or the firm is 50%. ) The current market value of equity is $1,073 and the value of debt outstanding is $800. Year 1 2 3 4 5 Terminal Value Cashflow to Equity $ 50 $ 60 $ 68 $ 76. 2 $ 83. 49 $ 1603. 008 Interest (1-t) $ 40 $ 40 $ 40 $ 40 $ 40 Cashflow to Firm $ 90 $ 100 $ 108 $ 116. 2 $ 123. 49 $ 2363. 008 The cost of equity is given as an input and is 13. 625%, and the after-tax cost of debt is 5%. Cost of Debt = Pre-tax rate (1 – tax rate) = 10% (1-. 5) = 5% Given the market values of equity and debt, we can estimate the cost of capital. WACC = Cost of Equity (Equity / (Debt + Equity)) + Cost of Debt (Debt/(Debt+Equity)) = 13. 625% (1073/1873) + 5% (800/1873) = 9. 94% Method 1: Discount CF to Equity at Cost of Equity to get value of equity We discount cash flows to equity at the cost of equity: PV of Equity = 50/1. 13625 + 60/1. 136252 + 68/1. 136253 + 76. 2/1. 136254 + (83. 49+1603)/1. 136255 = $1073 Method 2: Discount CF to Firm at Cost of Capital to get value of firm PV of Firm = 90/1. 0994 + 100/1. 09942 + 108/1. 09943 + 116. 2/1. 09944 + (123. 49+2363)/1. 9945 = $1873 5 PV of Equity = PV of Firm – Market Value of Debt = $ 1873 – $ 800 = $1073 Note that the value of equity is $1073 under both approaches. It is easy to make the mistake of discounting cashflows to equity at the cost of capital or the cashflows to the firm at the cost of equity. Error 1: Discount CF to Equity at Cost of Capital to get too high a value for equity PV of Equity = 50/1. 0994 + 60/1. 09942 + 68/1. 09943 + 76. 2/1. 09944 + (83. 49+1603)/1. 09945 = $1248 Error 2: Discount CF to Firm at Cost of Equity to get too low a value for the firm PV of Firm = 90/1. 13625 + 100/1. 136252 + 108/1. 136253 + 116. 2/1. 136254 + (123. 49+2363)/1. 36255 = $1613 PV of Equity = PV of Firm – Market Value of Debt = $1612. 86 – $800 = $813 The effects of using the wrong discount rate are clearly visible in the last two calculations. When the cost of capital is mistakenly used to discount the cashflows to equity, the value of equity increases by $175 over its true value ($1073). When the cashflows to the firm are erroneously discounted at the cost of equity, the value of the firm is understated by $260. We have to point out that getting the values of equity to agree with the firm and equity valuation approaches can be much more difficult in practice than in this exa mple. We will return and consider the assumptions that we need to make to arrive at this result. A Simple Test of Cash Flows There is a simple test that can be employed to determine whether the cashflows being used in a valuation are cashflows to equity or cashflows to the firm. If the cash flows that are being discounted are after interest expenses (and principal payments), they are cash flows to equity and the discount rate that should be used should be the cost of equity. If the cash flows that are discounted are before interest expenses and principal payments, they are usually cash flows to the firm. Needless to say, there are other items that need to be considered when estimating these cash flows, and we will consider them in extensive detail in the coming chapters. 6 II. Total Cash Flow versus Excess Cash Flow Models The conventional discounted cash flow model values an asset by estimating the present value of all cash flows generated by that asset at the appropriate discount rate. In excess return (and excess cash flow) models, only cash flows earned in excess of the required return are viewed as value creating, and the present value of these excess cash flows can be added on to the amount invested in the asset to estimate its value. To illustrate, assume that you have an asset in which you invest $100 million and that you expect to generate $12 million per year in after-tax cash flows in perpetuity. Assume further that the cost of capital on this investment is 10%. With a total cash flow model, the value of this asset can be estimated as follows: Value of asset = $12 million/0. 0 = $120 million With an excess return model, we would first compute the excess return made on this asset: Excess return = Cash flow earned – Cost of capital * Capita l Invested in asset = $12 million – 0. 10 * $100 million = $2 million We then add the present value of these excess returns to the investment in the asset: Value of asset = Present value of excess return + Investment in the asset = $2 million/0. 10 + $100 million = $120 million Note that the answers in the two approaches are equivalent. Why, then, would we want to use an excess return model? By focusing on excess returns, this model brings home the point that it is not earning per se that create value, but earnings in excess of a required return. Later in this book, we will consider special versions of these excess return models such as Economic Value Added (EVA). As in the simple example above, we will argue that, with consistent assumptions, total cash flow and excess return models are equivalent. Applicability and Limitations of DCF Valuation Discounted cashflow valuation is based upon expected future cashflows and discount rates. Given these informational requirements, this approach is easiest to use for assets (firms) whose cashflows are currently positive and can be estimated with some reliability for future periods, and where a proxy for risk that can be used to obtain 7 discount rates is available. The further we get from this idealized setting, the more difficult discounted cashflow valuation becomes. The following list contains some scenarios where discounted cashflow valuation might run into trouble and need to be adapted. (1) Firms in trouble: A distressed firm generally has negative earnings and cashflows. It expects to lose money for some time in the future. For these firms, estimating future cashflows is difficult to do, since there is a strong probability of bankruptcy. For firms which are expected to fail, discounted cashflow valuation does not work very well, since we value the firm as a going concern providing positive cashflows to its investors. Even for firms that are expected to survive, cashflows will have to be estimated until they turn positive, since obtaining a present value of negative cashflows will yield a negative1 value for equity or the firm. (2) Cyclical Firms: The earnings and cashflows of cyclical firms tend to follow the economy – rising during economic booms and falling during recessions. If discounted cashflow valuation is used on these firms, expected future cashflows are usually smoothed out, unless the analyst wants to undertake the onerous task of predicting the timing and duration of economic recessions and recoveries. Many cyclical firms, in the depths of a recession, look like troubled firms, with negative earnings and cashflows. Estimating future cashflows then becomes entangled with analyst predictions about when the economy will turn and how strong the upturn will be, with more optimistic analysts arriving at higher estimates of value. This is unavoidable, but the economic biases of the analyst have to be taken into account before using these valuations. (3) Firms with unutilized assets: Discounted cashflow valuation reflects the value of all assets that produce cashflows. If a firm has assets that are unutilized (and hence do not produce any cashflows), the value of these assets will not be reflected in the value obtained from discounting expected future cashflows. The same caveat applies, in lesser degree, to underutilized assets, since their value will be understated in discounted cashflow valuation. While this is a problem, it is not insurmountable. The value of these 1 The protection of limited liability should ensure that no stock will sell for less than zero. The price of such a stock can never be negative. 8 assets can always be obtained externally2, and added on to the value obtained from discounted cashflow valuation. Alternatively, the assets can be valued assuming that they are used optimally. (4) Firms with patents or product options: Firms often have unutilized patents or licenses that do not produce any current cashflows and are not expected to produce cashflows in the near future, but, nevertheless, are valuable. If this is the case, the value obtained from discounting expected cashflows to the firm will understate the true value of the firm. Again, the problem can be overcome, by valuing these assets in the open market or by using option pricing models, and then adding on to the value obtained from discounted cashflow valuation. (5) Firms in the process of restructuring: Firms in the process of restructuring often sell some of their assets, acquire other assets, and change their capital structure and dividend policy. Some of them also change their ownership structure (going from publicly traded to private status) and management compensation schemes. Each of these changes makes estimating future cashflows more difficult and affects the riskiness of the firm. Using historical data for such firms can give a misleading picture of the firm's value. However, these firms can be valued, even in the light of the major changes in investment and financing policy, if future cashflows reflect the expected effects of these changes and the discount rate is adjusted to reflect the new business and financial risk in the firm. (6) Firms involved in acquisitions: There are at least two specific issues relating to acquisitions that need to be taken into account when using discounted cashflow valuation models to value target firms. The first is the thorny one of whether there is synergy in the merger and if its value can be estimated. It can be done, though it does require assumptions about the form the synergy will take and its effect on cashflows. The second, especially in hostile takeovers, is the effect of changing management on cashflows and risk. Again, the effect of the change can and should be incorporated into the estimates of future cashflows and discount rates and hence into value. (7) Private Firms: The biggest problem in using discounted cashflow valuation models to value private firms is the measurement of risk (to use in estimating discount rates), since 2 If these assets are traded on external markets, the market prices of these assets can be used in the valuation. If not, the cashflows can be projected, assuming full utilization of assets, and the value can be most risk/return models require that risk parameters be estimated from historical prices on the asset being analyzed. Since securities in private firms are not traded, this is not possible. One solution is to look at the riskiness of compara ble firms, which are publicly traded. The other is to relate the measure of risk to accounting variables, which are available for the private firm. The point is not that discounted cash flow valuation cannot be done in these cases, but that we have to be flexible enough to deal with them. The fact is that valuation is simple for firms with well defined assets that generate cashflows that can be easily forecasted. The real challenge in valuation is to extend the valuation framework to cover firms that vary to some extent or the other from this idealized framework. Much of this book is spent considering how to value such firms. Relative Valuation While we tend to focus most on discounted cash flow valuation, when discussing valuation, the reality is that most valuations are relative valuations. The value of most assets, from the house you buy to the stocks that you invest in, are based upon how similar assets are priced in the market place. We begin this section with a basis for relative valuation, move on to consider the underpinnings of the model and then consider common variants within relative valuation. Basis for Relative Valuation In relative valuation, the value of an asset is derived from the pricing of ‘comparable' assets, standardized using a common variable such as earnings, cashflows, book value or revenues. One illustration of this approach is the use of an industry-average price-earnings ratio to value a firm. This assumes that the other firms in the industry are comparable to the firm being valued and that the market, on average, prices these firms correctly. Another multiple in wide use is the price to book value ratio, with firms selling at a discount on book value, relative to comparable firms, being considered undervalued. The multiple of price to sales is also used to value firms, with the average rice-sales ratios of firms with similar characteristics being used for comparison. While these three multiples are among the most widely used, there are others that also play a role in estimated. 10 analysis – price to cashflows, price to dividends and market va lue to replacement value (Tobin's Q), to name a few. Underpinnings of Relative Valuation Unlike discounted cash flow valuation, which we described as a search for intrinsic value, we are much more reliant on the market when we use relative valuation. In other words, we assume that the market is correct in the way it prices stocks, on average, but that it makes errors on the pricing of individual stocks. We also assume that a comparison of multiples will allow us to identify these errors, and that these errors will be corrected over time. The assumption that markets correct their mistakes over time is common to both discounted cash flow and relative valuation, but those who use multiples and comparables to pick stocks argue, with some basis, that errors made by mistakes in pricing individual stocks in a sector are more noticeable and more likely to be corrected quickly. For instance, they would argue that a software firm that trades at a price earnings ratio of 10, when the rest of the sector trades at 25 times earnings, is clearly under valued and that the correction towards the sector average should occur sooner rather than latter. Proponents of discounted cash flow valuation would counter that this is small consolation if the entire sector is over priced by 50%. Categorizing Relative Valuation Models Analysts and investors are endlessly inventive when it comes to using relative valuation. Some compare multiples across companies, while others compare the multiple of a company to the multiples it used to trade in the past. While most relative valuations are based upon comparables, there are some relative valuations that are based upon fundamentals. I. Fundamentals versus Comparables In discounted cash flow valuation, the value of a firm is determined by its expected cash flows. Other things remaining equal, higher cash flows, lower risk and higher growth should yield higher value. Some analysts who use multiples go back to these discounted cash flow models to extract multiples. Other analysts compare multiples 11 across firms or time, and make explicit or implicit assumptions about how firms are similar or vary on fundamentals. 1. Using Fundamentals The first approach relates multiples to fundamentals about the firm being valued – growth rates in earnings and cashflows, payout ratios and risk. This approach to estimating multiples is equivalent to using discounted cashflow models, requiring the same information and yielding the same results. Its primary advantage is to show the relationship between multiples and firm characteristics, and allows us to explore how multiples change as these characteristics change. For instance, what will be the effect of changing profit margins on the price/sales ratio? What will happen to price-earnings ratios as growth rates decrease? What is the relationship between price-book value ratios and return on equity? 2. Using Comparables The more common approach to using multiples is to compare how a firm is valued with how similar firms are priced by the market, or in some cases, with how the firm was valued in prior periods. As we will see in the later chapters, finding similar and comparable firms is often a challenge and we have to often accept firms that are different from the firm being valued on one dimension or the other. When this is the case, we have to either explicitly or implicitly control for differences across firms on growth, risk and cash flow measures. In practice, controlling for these variables can range from the naive (using industry averages) to the sophisticated (multivariate regression models where the relevant variables are identified and we control for differences. ). II. Cross Sectional versus Time Series Comparisons In most cases, analysts price stocks on a relative basis by comparing the multiple it is trading to the multiple at which other firms in the same business are trading. In some cases, however, especially for mature firms with long histories, the comparison is done across time. a. Cross Sectional Comparisons When we compare the price earnings ratio of a software firm to the average price earnings ratio of other software firms, we are doing relative valuation and we are making 12 cross sectional comparisons. The conclusions can vary depending upon our assumptions about the firm being valued and the comparable firms. For instance, if we assume that the firm we are valuing is similar to the average firm in the industry, we would conclude that it is cheap if it trades at a multiple that is lower than the average multiple. If, on the other hand, we assume that the firm being valued is riskier than the average firm in the industry, we might conclude that the firm should trade at a lower multiple than other firms in the business. In short, you cannot compare firms without making assumptions about their fundamentals. b. Comparisons across time If you have a mature firm with a long history, you can compare the multiple it trades today to the multiple it used to trade in the past. Thus, Ford Motor company may be viewed as cheap because it trades at six times earnings, if it has historically traded at ten times earnings. To make this comparison, however, you have to assume that your firm has not changed its fundamentals over time. For instance, you would expect a high growth firm’s price earnings ratio to drop and its expected growth rate to decrease over time as it becomes larger. Comparing multiples across time can also be complicated by changes in the interest rates over time and the behavior of the overall market. For instance, as interest rates fall below historical norms and the overall market increases, you would expect most companies to trade at much higher multiples of earnings and book value than they have historically. Applicability of multiples and limitations The allure of multiples is that they are simple and easy to work with. They can be used to obtain estimates of value quickly for firms and assets, and are particularly useful when there are a large number of comparable firms being traded on financial markets and the market is, on average, pricing these firms correctly. They tend to be more difficult to use to value unique firms, with no obvious comparables, with little or no revenues and negative earnings. By the same token, they are also easy to misuse and manipulate, especially when comparable firms are used. Given that no two firms are exactly similar in terms of risk and 13 growth, the definition of ‘comparable' firms is a subjective one. Consequently, a biased analyst can choose a group of comparable firms to confirm his or her biases about a firm's value. An illustration of this is given below. While this potential for bias exists with discounted cashflow valuation as well, the analyst in DCF valuation is forced to be much more explicit about the assumptions which determine the final value. With multiples, these assumptions are often left unstated. Illustration 2. 2. The potential for misuse with comparable firms Assume that an analyst is valuing an initial public offering of a firm that manufactures computer software. At the same time, the price-earnings multiples of other publicly traded firms manufacturing software are as follows:3 Firm Adobe Systems Autodesk Broderbund Computer Associates Lotus Development Microsoft Novell Oracle Software Publishing System Software Average PE Ratio Multiple 23. 2 20. 4 32. 8 18. 0 24. 1 27. 4 30. 0 37. 8 10. 6 15. 7 24. 0 While the average PE ratio using the entire sample listed above is 24, it can be changed markedly by removing a couple of firms from the group. For instance, if the two firms with the lowest PE ratios in the group (Software Publishing and System Software) are eliminated from the sample, the average PE ratio increases to 27. If the two firms with the highest PE ratios in the group (Broderbund and Oracle) are removed from the group, the average PE ratio drops to 21. 3 These were the PE ratios for these firms at the end of 1992. 14 The other problem with using multiples based upon comparable firms is that it builds in errors (over valuation or under valuation) that the market might be making in valuing these firms. In illustration 2. 2, for instance, if the market has overvalued all computer software firms, using the average PE ratio of these firms to value an initial public offering will lead to an overvaluation of its stock. In contrast, discounted cashflow valuation is based upon firm-specific growth rates and cashflows, and is less likely to be influenced by market errors in valuation. Asset Based Valuation Models There are some who add a fourth approach to valuation to the three that we describe in this chapter. They argue that you can argue the individual assets owned by a firm and use that to estimate its value – asset based valuation models. In fact, there are several variants on asset based valuation models. The first is liquidation value, which is obtained by aggregating the estimated sale proceeds of the assets owned by a firm. The second is replacement cost, where you evaluate what it would cost you to replace all of the assets that a firm has today. While analysts may use sset-based valuation approaches to estimate value, we do not consider them to be alternatives to discounted cash flow, relative or option pricing models since both replacement and liquidation values have to be obtained using one or more of these approaches. Ultimately, all valuation models attempt to value assets – the differences arise in how we identify the assets and how we attach value to each asset. In liquidation valuation, we look only at assets in place and estimate their value based upon what similar assets are priced at in the market. In traditional discounted cash flow valuation, we consider all assets including expected growth potential to arrive at value. The two approaches may, in fact, yield the same values if you have a firm that has no growth assets and the market assessments of value reflect expected cashflows. Contingent Claim Valuation Perhaps the most significant and revolutionary development in valuation is the acceptance, at least in some cases, that the value of an asset may not be greater than the present value of expected cash flows if the cashflows are contingent on the occurrence or 15 non-occurrence of an event. This acceptance has largely come about because of the development of option pricing models. While these models were initially used to value traded options, there has been an attempt, in recent years, to extend the reach of these models into more traditional valuation. There are many who argue that assets such as patents or undeveloped reserves are really options and should be valued as such, rather than with traditional discounted cash flow models. Basis for Approach A contingent claim or option pays off only under certain contingencies – if the value of the underlying asset exceeds a pre-specified value for a call option, or is less than a pre-specified value for a put option. Much work has been done in the last twenty years in developing models that value options, and these option pricing models can be used to value any assets that have option-like features. The following diagram illustrates the payoffs on call and put options as a function of the value of the underlying asset: Figure 2. 1: Payoff Diagram on Call and Put Options Net Payoff on Call Option Net Payoff on Put Option Break Even Strike price Value of Underlying asset Maximum Loss Break Even An option can be valued as a function of the following variables – the current value, the variance in value of the underlying asset, the strike price, the time to expiration of the option and the riskless interest rate. This was first established by Black and Scholes (1972) and has been extended and refined subsequently in numerous variants. While the Black-Scholes option pricing model ignored dividends and assumed that options would 16 not be exercised early, it can be modified to allow for both. A discrete-time variant, the Binomial option pricing model, has also been developed to price options. An asset can be valued as an option if the payoffs are a function of the value of an underlying asset. It can be valued as a call option if the payoff is contingent on the value of the asset exceeding a pre-specified level.. It can be valued as a put option if the payoff increases as the value of the underlying asset drops below a pre-specified level. Underpinnings for Contingent Claim Valuation The fundamental premise behind the use of option pricing models is that discounted cash flow models tend to understate the value of assets that provide payoffs that are contingent on the occurrence of an event. As a simple example, consider an undeveloped oil reserve belonging to Exxon. You could value this reserve based upon expectations of oil prices in the future, but this estimate would miss the two nonexclusive facts. 1. The oil company will develop this reserve if oil prices go up and will not if oil prices decline. 2. The oil company will develop this reserve if development costs go down because of technological improvement and will not if development costs remain high. An option pricing model would yield a value that incorporates these rights. When we use option pricing models to value assets such as patents and undeveloped natural resource reserves, we are assuming that markets are sophisticated enough to recognize such options and to incorporate them into the market price. If the markets do not, we assume that they will eventually, with the payoff to using such models comes about whe