Animal Testing Is Cruel and Unnecessary Essay Example for Free

Animal Testing Is Cruel and Unnecessary Essay Is the Statement Animal Testing is Cruel and Unnecessary Correct? It is common knowledge that many animals are used in medical and scientific research. These innocent animals are often obliged to undergo countless of cruel processes and endure great suffering as a result. Despite all the disputes and discussions regarding whether or not animal testing is actually necessary, they wouldnt change the fact that it is, in fact, an extremely cruel thing to do. Therefore, it is only to be expected for the need for product testing involving experiments on animals to be strongly debated. The debates themselves usually revolve around scientific, ethical and even political implications, often based upon biased beliefs. For example, an animal lover would clearly be against animal testing. They would, in fact, not care whether it is necessary or not. A doctor desperate for a new research, on the other hand, would clearly think animal testing is necessary, and ignore the fact that thousands of animals are endangered because of it. I personally think animal testing is cruel. It is an inhumane thing to do, as animals too deserve to be treated normally, and not as objects that are just used to test whether a mascara is safe enough for a persons eyelashes or not. Furthermore, it has been proven that about 9% animals such as rats, rabbits and mice end up dying after going through these experiments. Do you honestly think the decreasing number of these animals is worth a new type of blush-on or eyeliner? Regarding the statement Animal Testing is Cruel and Unnecessary, I would have to agree with the first point: Animal testing is, indeed cruel. Nevertheless, as I am not exactly experienced in the medical field, I managed to do some research, and eventually found a rather interesting quote said by two doctors, Ray and Jean Greek, who briefly mentioned the necessity of animal testing in their book Sacred Cows and Golden Geese. They said: Animal experimentation is not necessary. It is expensive. It is inaccurate. It is misleading. It consumes limited resources. And further, it is detrimental to the very species it professes to be working to help humankind. Coming from doctors, I found their explicit quote to be rather surprising. Moreover, even though animal testing is not always accurate, there isnt a definite answer as to whether the term Animal Testing is Cruel and Unnecessary is true or not. Everyone is entitled to their own opinion, to each their own, thus I couldnt help but fathom their statement. With all these advanced technology, knowledge and finances, have we indirectly dehumanized ourselves?

Pokers Popularity Grows Among Teenagers :: essays research papers

In Chicago, Illinois, among many other cities across the nation, a new trend has swept teenagers like a plague. Poker, or the newly named Texas Holdem, has been the new hobby to most kids, boys in particular. Since the football season has been over, one boy even turned his dining room, a place for family time and bonding, into a full fledged poker parlor with chips, and plenty of decks of cards. Texas Holdem came about sometime in the beginning of the decade, and has become more an more popular among teenagers. Launched from TV competitions between everyday people and even celebrities, kids from even our community have become hooked. In fact, some parents condone it. They think that the game teaches strategy, critical-thinking, and math skills. One parent even compared it to smoking pot, saying he’d rather have his children play Holdem than not know where they are. It’s "safer" because unlike drugs that impair your judgments, the child is occupied with something that, if developed, can be cured by just taking it away. Josh Kohnstamm, father of Josh in Mendota Heights, Minnesota, says "it's become the perfect escape for his studious 16-year-old son, Josh, who ‘takes everything too seriously.’ Allowing him to ‘whoop’ the school's best athletes -- computer geek that he is -- and come away feeling lucky when that is a s ensation that rarely happens in his everyday life." But I could only wonder if the game was more about self-fulfillment and confidence, or critical thinking and math skills? Either way, the child is gaining, isn’t he? But then again there are also the adults who think that the game is a bad habit, and develops bad gambling habits. "It's fun. It's exciting. It's glamorized on TV and in the media in a way that other addictions are not," says Keith Whyte, executive director of the National Council on Problem Gambling. "There's the impression that through skill you can beat the odds. But randomness is always going to have a bigger factor in determining the outcome than your skill." The fact is, is that gambling is an addiction and has been known to be hard to overcome. However, I don’t think that anyone can actually say that it is forbidden because I really think that no matter what, every person takes a chance which can be considered gambling. I’m not sure where I stand on this issue.

New Entry to the Market and Game Theory

Consider a firm that is contemplating entry into a new market. What contribution, if any, can game theory make to the analysis of the economic viability of such a strategy? Refer to the critical time line, reaction functions and the Nash premise in your reply. Introduction: Management decisions lack the full information, so they are bounded rationality decisions. Companies are players in a game, and the game dimensions are defined in terms of geography and product. So any new entrant will try to enter the market he will play a game in two dimensions geography and product (example Apple entering the smart phone market).The entrant has to decrease its price from the market price so he can guarantee a portion of the market share (steal market share from the incumbents). The incumbents have two options: either to compete or to accommodate. We introduce the principles of the Game Theory as follows: Critical Timeline: Management can observe behaviour as signals and as patterns in the signa ls. Patterns do emerge in the observed behaviour, patterns in price movements or patterns to do with achieving growth through acquisition. The patterns create a critical timeline (CTL) of observed actions and as the CTL unfolds, it reveals a strategy.The new entrant has to observe these patterns and management types of the incumbents over a considerable CTL, to forecast their reaction to his entry, is it going to be a competitive or accommodative reaction. Incumbents for sure faced previous entrants with some kind of reaction when they tried entry, the new entrant can study and analyze this CTL to forecast the possible reaction of the incumbents especially that firms management usually they repeat their type over and over again especially when it succeeds.Reaction functions: When the new entrant will enter the market, the reaction from the incumbents will be either passive (Cournot model) to balance the quantity in the market, i. e. to adjust his output so that both firms produce th e market need and they both sell all their output so that the price will not go down and the profit does not go down as well. Or, the reaction will be aggressive (Bertnard model) by cutting the price of the new entrant and accordingly start a price war. 1) Cournot model reaction function:In this case, the incumbent will think this way: since the entrant entered the market and already chose a price. If I choose to cut price and enter a price war we will all end up in loss (profit is zero), so the best reaction is to choose an output that will guarantee me a profit-maximizing given the entrant's output. So after the entrant enters, the incumbent will decrease his output as per the Reaction Function diagram shown below. Because the incumbent thinks if he increases his output then the market price will go down and profit will go down with it.Knowledge of the market here is crucial, to reach this profit-maximizing condition the market has to be in which firms must make production decisio ns in advance, are committed to selling all their output. This might occur in the majority of production costs are sunk or it is costly to hold inventories, in this environment firms will do all what it takes to sell all its output. The Cournot equilibrium here makes positive profit for the firms. 2) Bertnard model reaction function:In this case, the entrant when enters the market will enter in a lower price than incumbents to steal their customers and grant a market share for himself. The incumbents will react by reducing the price even more and the rivalry between the firms will go on and will result in a perfectly competitive outcome. In this condition the competition will be fierce because the products are perfect substitutes. If the products are differentiated, price competition is less intense. (Besanko 2010).In this Bertnard model the capacity is not constant as in Cournot. This model pertains to markets in which capacity is flexible that firms can meet all of the demand that arises at the prices they announce. If firms products are perfect substitutes, then each Bertnard competitor believes that it can steal massive amounts of business from its competitors through a small cut in price, when all competitors think this way, in equilibrium, price-cost margins and profits are driven to zero (Besanko 2010)The diagram below shows the Bertnard Reaction function when products are differentiated where both firms reach a Bertnard Equilibrium that are well above marginal cost and so they both make profit, if their products are perfect substitutes to each other then the price will be driven to marginal cost and profit will be zero. Nash Premise: If the incumbents chose the non accommodative approach then either they will reach the zero profit situation if the products are perfect substitutes, or they might reach an equilibrium (Nash) if the products are somehow horizontally differentiated.Nash Equilibrium is reached when both firms reach a situation when each of t hem chose a strategy and no one can benefit by changing his strategy while the other players keep their unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium. i. e. Firm 1 making the best decision it can, taking into account Firm 2's decision, and Firm 2 making the best decision it can, taking into account Firm 1's decision. (Wikipedia. com) Example:Beef-processing industry in the US, there were 4 industry leaders, then came JBS SA from South America and purchased Swift & Co. to form JBS Swift & Co. then the quantity produced increased (excess capacity). Capacity had to drop otherwise the outlook would remain bleak. Tyson decided to close its factory at Emporia, Kansas pulling 4000 head of capacity from the market. After this closure the capacity and the beef prices have stabilized. (Besanko 2010) We can see in this example how when a new entrant emerged (JBS Swift & Co. ) the capacity increased caused the prices to drop.We c onclude that the market capacity here is fixed (Cournot model) and when the incumbents saw that effect they knew for fact that reducing the output will benefit everybody. So, Tyson Co. closed one of its factories, the total output in the market dropped caused the prices to stabilize again. Here this is a kind of Cournot equilibrium that is reached. The incumbents went through an accommodative approach in this case rather than competitive. Conclusion: The entrant has to observe closely the Critical Timeline of the market's incumbents before entering this market.According to his forecast of their reaction (whether it will be accommodative or competitive) he has to build his strategy whether he can survive or not. The entrant has to study the market demand (capacity), is it going to be affected by the new entry by absorbing the extra quantity (can lead to Bertnard) or the demand is fixed (that can lead to Cournot). The entrant's strategy had to be built on the Reaction Functions foreca sted from the incumbents where from there the entrant can calculate the Nash equilibrium value and the possibility to reach it or the other possibility to reach the zero profit condition.

Nike Essay

1.What is the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not? Answer: The cost of capital refers to the maximum rate of return a firm must earn on its investment so that the market value of company’s equity shares will not drop. This is a consonance with the overall firm’s objective of wealth maximization. WACC is a calculation of a firm’s cost of capital in which each category of capital is proportionately weighted. All capital sources – common stock, preferred stock, bonds and any other long-term debt – are included in a WACC calculation. All else equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk. The WACC of a firm is a very important both to the stock market for stock valuation purposes and to the company’s management for capital budgeting purposes. In an analysis of a potential investment by the company, investment projects that have an expected return that is greater than the company’s WACC will generate additional free cash flow and will create positive net present value for stock owners. Thus, since the WACC is the minimum rate of return required by capital providers, the managers in the company should invest in the projects which generate returns in excess of WACC. We do not agree with Joanna Cohen’s calculation regarding the WACC from 3 aspects: 1) When Joanna Cohen computed the weights or proportions of debt and equity, she used the book value rather than the market value. The book values are historical data, not current ones; on the contrary, the market recalculates the values of each type of capital on a continuous basis, therefore, market values are more appropriate. 2) The cost of debt should not be calculated by â€Å"taking total interest expense for the year 2001 and dividing it by the company’s average debt balance. These historical data would not reflect Nike’s current or future cost of debt. 3) She mistakenly used the average Beta from year 1996 to 2001. The average Beta could not represent the future systemic risk, and we should find the most recent Beta as Beta estimate in this situation. 2.If you do not agree with Cohen’s analysis, calculate your own WACC for Nike and be prepared to justify your assumptions. Answer: 1)Weights of equity and debt: Market value of equity = Current share price x Current shares outstanding = $42.09 x 271.5m = $11,427.44m Due to the lack information of market value of debt, we could use the book value for calculation: Market value of debt = Current portion of long-term debt + Notes payable + Long-term debt = $5.4m + $855.3m + $435.9m = $1,296.6m We = $11,427.44m/($11,427.44m +$1,296.6m) = 89.81% Wd = $1,296.6m/($11,427.44m +$1,296.6m) = 10.19% 2)Cost of Debt: We can calculate the current yield to maturity of the Nike’s bond to represent Nike’s current cost of debt. Po=$95.6 N=20Ãâ€"2=40 PAR=$100 PMT=$100Ãâ€"6.75%/2=3.375 By using financial calculator: r=3.58%(semiannual) So Rd=3.58% x 2 = 7.16% 3)Cost of Equity: Use 20-year T-bond rate to represent risk-free rate, as the rate of return of a T-bond with 20 years maturity is the longest rate which is available right now. So Rf=5.74% Use a geometric mean of market risk premium 5.9% as Market Risk Premium As we mentioned in Q1, the most recent beta will most relevant in this respect, so we will use B=0.69 Re=Rf+B(Market Risk Premium) =0.0574 + 0.69Ãâ€"0.059 = 9.81% 4)WACC: Use tax rate = US statutory tax rate + state tax = 35% + 3% = 38% WACC=Wd x Rd x (1-T) + We x Re = 10.19% x 7.16% x (1- 38%) + 89.81% x 9.81% = 9.26% 3.Calculate the costs of equity using CAPM, and the dividend discount model. What are the advantages and disadvantages of each model? Answer: 1)Cost of Equity using CAPM: Market Risk Free Rate (Rf)= 5.74% (20-year yield on US Treasuries) Beta (B) = .69 (most recent beta used as most relevant beta to calculate Nike’s valuation) Market Risk Premium = 5.9% (Geometric Mean used as Historic Equity Risk Premium) Cost of Equity using CAPM = Re = Rf + B(Market Risk Premium) Re = 9.81% = 5.74% + .69(5.9%) Advantages: -CAPM includes systematic risk by incorporating Beta in the Cost of Equity formula. Using the stock’s Beta to calculate equity will provide a return rate based on how risky the stock is perceived by investors. The higher the risk, the higher the Beta will be and will result in a higher required rate of return on the investment. Systematic risk can’t be diversified away, while unsystematic risk can be diversified away by maintaining a diversified portfolio. -CAPM proves to be a better model than others such as the Dividend Discount Model, because the valuation behind CAPM is based on risk and rates of return while the Dividend Discount Model relies heavily on dividends and a growth rate. Disadvantages: -When using CAPM, it can be difficult determining the estimate of Beta. Different investments may involve different risks and the Beta used in calculating CAPM should reflect the appropriate amount of risk relating to the specific investment. -The risk free rates used in calculating CAPM are continually changing as with the values of the investments in the market which make up the market risk premium. The constant changes in the market can have negative impacts on the valuation of CAPM. -Another disadvantage in using the CAPM in investment appraisal is that investment appraisal is premised on a long-term time horizon, whereas CAPM assumes a single-period time horizon, i.e. a holding period of one year. While CAPM variables can be assumed constant in successive future periods, market reality often shows that this is not the case. 2)Cost of Equity using the Dividend Discount Model: Growth (g) = 5.5% Dividend (D0) = $.48 Share Price (P0) = $42.09 Cost of Equity using Dividend Discount Model = Re = (D0 x (1+g)/P0) +g Re = 6.7% = (.48 x (1+5.5%)/42.09+5.5% Advantages: -Using the Dividend Discount Model is very easy to calculate because the formula is not complicated. There are no real technical or difficult calculations involved with using this method. -The inputs that are used in the calculations of this model are market information and can be easily obtained. -The Dividend discount model attempts to put a valuation on shares, based on forecasts of the sums to be paid out to investors. This should, in theory, provide a very solid basis to determine the share’s true value in present terms. Disadvantages: -The Dividend Discount Model relies heavily on the growth rate to calculate the rate of return. If growth slows or becomes temporarily negative, it can result in calculations which may not truly represent future expected returns. -This model is calculated using dividends and can’t be used in instances where a company is not paying dividends. This is also a disadvantage for any investment without a reasonably constant growing dividend stream. -The Dividend Discount Model is very sensitive to minor changes in input figures. If the growth rate changes by 1 % the cost of equity will also change by that rate. -The Dividend Discount Model does not explicitly consider the risks which the company faces. 4.What should Kimi Ford recommend regarding an investment in Nike? Answer: In order for Kimi Ford to make a decision regarding an investment in Nike, she must compare an accurately calculated WACC to the sensitivity of equity  value to discount rate chart shown in Exhibit #2. The sensitivity chart in Exhibit #2 states that at a discount rate of 11.17%, Nike’s current share price is fairly valued at $42.09. If a discount rate were to be calculated below 11.17% then the Nike shares would be under-valued in the current market, but if their discount rate were higher than the 11.17% Nike share price would be considered over-valued when compared to the current share price. When we calculated Nike’s discount rate, we determined that their appropriate WACC should be 9.26%. Since this WACC of 9.26% is below 11.17%, we believe that Nike’s shares are currently under-valued in the market. We believe that Nike’s equity value based on the WACC of 9.26% should fall somewhere between $55.68 and $61.25. Kiki Ford should recommend adding Nike sh ares to the NorthPoint Large-Cap Fund based on our analysis. 03/03/2011 CASE OVERVIEW Kimi Ford is a portfolio manager at a large mutual-fund management firm called, NorthPoint Group. Ford is considering the addition of Nike Inc. to the Large-Cap Fund at NorthPoint Group. Nike’s share price has notably declined since the beginning of the year. Her decision whether or not to add Nike to the portfolio should be made by looking at the 2001 fiscal year end 10-K report. In 1997 Nike’s revenues plateaued around $9 billion while net income had fallen from around $800 million to $580 million. Also, from 1997-2000 Nike’s market share in U.S. athletic shoes fell from 48% to 42%. Supply-chain issues and the adverse effect of a strong dollar had negatively affected revenue in recent years. At the June 28, 2001 analyst meeting Nike planned to add both top-line growth and operating performance. One goal was to develop more mispriced ($70-$90) athletic shoes and the other to push its apparel line. At this meeting a target long-term revenue growth rate between 8%-10% was given and an earnings-growth target above 15%. After reviewing all the analysts’ reports about the June 28th meeting Ford  still did not have a clear picture of how to value Nike. Ford then performed her own sensitivity analysis which revealed Nike was undervalued at discount rates below 11.17%. WHAT IS THE WACC? A firm derives its assets by either raising debt or equity or both. There are costs associated with raising capital and WACC is an average figure used to indicate the cost of financing a company’s asset base. More formally, the weighted average cost of capital (WACC) is the rate that a company is expected to pay to debt holders and shareholders to finance its assets. Companies raise money from a number of sources so the WACC is the minimum return that a company must earn on existing asset base to satisfy its creditors, owners, and other providers of capital. WACC is calculated taking into account the relative weights of each component of the capital structure which means it is the proportional average of each category of capital inside a firm. This rate, also called the discount rate, is used in evaluating whether a project is feasible or not in the net present value (NPV) analysis, or in assessing the value of an asset. WACC = [Wdebt * Kdebt * (1-t)] + [Wequity * Kequity] + [Wpreferred * Kpreferred] K = component cost of capital W = weight of each component as percent of total capital t = marginal corporate tax rate WHY IS IT IMPORTANT TO ESTIMATE A FIRM’S COST OF CAPITAL? The cost of capital is an important issue from the perspective of management while taking a financial decision. We can list some basic issues related to the importance of WACC and its interpretation by firms: * The importance of the WACC is in its relation to the evaluation of projects. For a project to be feasible, not just profitable, it must generate a return higher than the cost of raising debt (Kd) and the cost of raising equity (Ke). WACC is affected not only by Re and Rd, but it also varies with capital structure. Since Rd is usually lower than Re, then the higher the debt level, the lower the WACC. This partly explains why firms usually prefer issuing debt first before they raise more equity. As part of their risk management processes, some companies add a risk factor to the WACC in order to include a risk cushion in their project evaluation. * The cost of capital is also important for the management while taking a decision about capital budgeting. Naturally, the project which gives a higher (satisfactory) return on investment compared to the cost of capital incurred for its financing would be chosen by the management. Cost of capital is the key factor in deciding which project to undertake out of different opportunities. * The cost of capital is significant in designing the firm’s capital structure. It will direct the management about adopting the most appropriate and economical capital structure for the firm which means the management may try to substitute the various methods of finance to minimize the cost of capital so as to increase the market price and the earning per share. * The cost of capital is also an important factor for taking a decision about the soundest method of financing for the company whenever the company requires additional finance. The management may try to catch the source of finance which bears the minimum cost of capital. * The cost of capital can be used to evaluate the financial performance of the top management by comparing actual profitability’s of the projects and the projected overall cost of capital and an appraisal of the actual cost incurred in raising the required funds. DO WE AGREE WITH JOANNA COHEN’S WACC CALCULATION? WHY OR WHY NOT? We do not completely agree with Joanna Cohen’s calculation of WACC. There are  several problems in her calculation; * In Cohen’s calculation, she used the book value for the weights of each capital structure component (debt and equity). Book value of equity should not be used when calculating cost of capital. Instead she should have calculated the market value of equity. Also, she should have discounted the value of long-term debt that appears on the balance sheet to find the market value of debt (even if the book value of debt is accepted as an estimate of market value). * Also, she should have considered the preferred stock while calculating the weights of the components of capital structure (the redeemable preferred stock is relatively small in Nike’s capital structure so it doesn’t affect the weights). * Another problem with her calculation is about the cost of debt. Cohen used a cost of debt which is even lower than treasury yield. In common sense, a company, even it might be a large AAA firm, should be risky than US government. Cost of debt should be calculated by finding the yield to maturity on 20-year Nike Inc. debt with current coupon rate paid semi-annually instead of by taking total interest expense for 2001 and dividing it by the company’s average debt balance. USING SINGLE OR MULTIPLE COSTS OF CAPITAL IS APPROPRIATE FOR NIKE INC.? Even Nike Inc. has multiple business segments such as footwear, apparel, sports equipment and some non-Nike-branded products (which accounts for relatively small fraction of revenues), we assumed Nike Inc. to have a single cost of capital since its multiple business segments are not very different and would experience similar risks and betas. WHICH EQUITY RISK PREMIUM SHOULD BE USED TO DETERMINE THE COST OF CAPITAL? For the cost of capital, the geometric mean is a better alternative to the arithmetic mean. Furthermore, the geometric mean is a more conservative  measure to use compared to the arithmetic mean. The average market risk premium has fluctuated by large amounts in short time periods from 1926-1999. 1926-1929 saw high market risk premiums; however, the 1930s and 1970s saw very low market risk premiums. Therefore, we use the geometric mean since it is a better measurement compared to arithmetic mean when the measured period is longer and contains more fluctuations. VALUE OF EQUITY, VALUE OF DEBT AND WEIGHTINGS OF EACH COMPONENT | Value(in millions $)| Weight| Current Portion of Long term Debt| 5.40| 0.04%| Notes Payable| 855.30| 6.73%| Long-Term Debt| 416.72| 3.28%| Total Debt| 1,277.42| 10.05%| Equity| 11,427.44| 89.95%| Table 1. The weight of debt and equity in total capital of Nike CALCULATION OF THE COST OF EQUITY UNDER DIFFERENT METHODS AND ADVANTAGES AND DISADVANTAGES OF EACH METHOD 1. Capital Asset Pricing Model (CAPM) Under CAPM we can find the cost of equity as; Ke = Rf + Betai * Equity Risk Premium The first issue is to find an appropriate risk-free rate. We think the 20-year yields on treasures would be the one because NIKE is assumed to be operated for such long time, according to the revitalizing strategy proposed by the management and the long-term debt issued. Next is to determine the beta. The historic betas has been generally decreasing, and we assume it is the market condition and management`s purpose that make NIKE to be a defensive company. Furthermore, we find that the competitors such as K-Swiss and Lacrosse also have beta less than one.  So rather than the average, we use the YTD beta into calculation. On the other hand, since the beta has been found to be on average closer to the mean value of 1, which is the beta of an average-systematic-risk security, we calculate the adjusted beta, giving two-third weight to the YTD beta and one-third weight to 1. Regarding the risk premium, we use the geometric mean since it is a better measurement compared to arithmetic mean when the measured period is longer and contains more fluctuations. Combining the above information, we calculate the cost of equity as follows: Using YTD Beta => 5.74% + 0.69*5.9% = 9.81% Using Adjusted Beta => 5.74% + [(2/3)*0.69 + (1/3)*1)]*5.9% = 10.42% Advantages: * It provides an economically grounded and relatively objective procedure * It concentrates on the systematic risk that investors can`t avoid, rather than unsystematic risk that can be avoided through diversification * It is suitable for company that doesn`t pay dividend * It is widely used. Disadvantages: * The assumptions may not be realistic. For example, investors may not be all risk averse and rational that holds efficient portfolio * Investors may concern more than just market risk. 2. Dividend Discount Model (DDM) Under DDM we can find the cost of equity as; Ke = (D1/P0) + g Ke = (0.48*1.055/42.09) + 5.5% = 6.70% Here we assume NIKE will pay dividend at constant growth rate of 5.5% which forecasted by Value Line, so we use the Gordon growth model to derive required rate of return. Advantages: * It is simple and widely used * Can be used to infer implied required rate of return * It is helpful to perform a sensitivity analysis on the inputs Disadvantages: * It is not suitable for company that doesn`t pay consistent dividends or the dividends are not tied to profitability * It is suitable for only matured company 3. Earnings Capitalization Ratio (ECM) Under ECM we can find the cost of equity as; Ke = E1/P0 Ke = 2.32/42.09 = 5.51% Advantage: * Simple Disadvantages: * It assumes the earnings would be the same in the future, which may not be true * It doesn`t take the growth of company into consideration. Cost of Equity| | | CAPM| | | | Risk-free Rate| 5.74%| | Equity Risk Premium| 5.90%| | Year-to-Date Beta| 0.69| | Adjusted Beta| 0.79| | Cost of Equity with YTD Beta| 9.81%| | Cost of Equity with Adjusted Beta| 10.42%| | | | DDM| | | | Current Dividend| 0.48| | Growth Rate| 5.50%| | Current Stock Price| 42.09| | Forecasted Dividend| 0.5064| | Cost of Equity| 6.70%| | | | ECM| | | | Consensus Earnings Estimate| 2.32| | Current Stock Price| 42.09| | Cost of Equity| 5.51%| | | | Build-up Method| | | | Risk-free Rate| 5.74%| | Equity Risk Premium| 5.90%| | Cost of Equity| 11.64%| Table 2. Cost of Equity under different methods WHICH RATE AS RISK FREE RATE IS BEST FOR NOTES PAYABLE AND LONG-TERM DEBT? For long term debt, the 20-year yield on U.S. Treasuries is best as the risk free rate. Considering the long time horizon of Nike, a 20-year bond is property. And also, it is comparable to the current 25-year bond which Nike issued 5 years ago. Although Nike’s current bond is 25 years, we could consider it as a 20-year bond issued this year, and use the current price to calculate the 20-year bond YTM. And for short term debt, because the note payable was a major portion in the debt structure, the 1-year treasuries would be preferred as risk free rate. COST OF DEBT CALCULATION FOR NIKE We could not agree with Cohen’s analysis. Because Cohen used a cost of debt which is even lower than treasury yield. In common sense, a company, even it might be a large AAA firm, should be risky than US government. First, Cohen’s emphasis that last year, the effective cost of debt of Nike was less than treasury yield due to its Japanese Yen notes. However, the rates of debt based on currency change are unstable and non-repeatable. We could reasonable consider that Nike’s last year’s low cost of debt is a kind of arbitrage by chance. Second, to calculate the cost of debt, market value of debt should be used rather than the book value used by Cohen. The market value of debt is compounded by the current portion of long-term debt, notes payable, and long- term debt discounted at Nike’s current coupon. Therefore, we would like to recalculate the cost of debt. Cost of debt was calculated by using the current liquidated 20-year bond of Nike, Inc. with a 6.75% coupon semi-annually. Then we obtain a cost of long term debt before tax as 7.17%, and cost of short term debt before tax as 5.02%. As shown above in Table 1, short term debt took a significant portion in Nike’s debt structure; therefore, we use a weighted cost of debt to combine both long term and short term debt effects as in following equation: Here is the weight of short-term debt, while is the weight of long-term debt. And both cost of short-term and long-term debt are after tax. Cost of Debt| | | Long Term Debt| | | | Coupon Rate| 6.75%| | Time to Maturity| 40| | Current Stock Price| $95.60| | Cost of Debt| 7.17%| | After Tax Cost of Debt| 4.44%| Short Term Debt| | | | 20-year Yield| 5.74%| | 1-year Yield| 3.59%| | Risk Premium| 1.43%| | Tax Rate| 38.00%| | Cost of Debt| 5.02%| | After Tax Cost of Debt| 3.11%| Final Weighted Cost of Debt After Tax| 0.36%| Table 2. Cost of debt WHAT IS OUR WACC CALCULATION FOR NIKE? Under different methods, we would obtain different cost of equity, then, definitely different WACCs which range from 5.31% to 10.83%. However, no matter which method we use, the stock price of Nike is undervalued currently. WACC| | | | Under CAPM with Adjusted Beta| 9.73%| | Under CAPM with YTD Beta| 9.18%| | Under DDM| 6.39%| | Under ECM| 5.31%| | Under Build-up Method| 10.83%| Table 4. Weighted Average Cost of Capital As shown in Table 5, the actual implied discount rate by current price is 11.17%, which is significantly beyond the range of WACCs we calculated and presented in Table 4. Therefore, in our analysis, Nike’s price would be considered as undervalued. Discount Rate| Equity Value| 8.00 %| $ 75.80| 8.50 %| 67.85| 9.00 %| 61.25| 9.50 %| 55.68| 10.00 %| 54.92| 10.50 %| 46.81| 11.00 %| 43.22| 11.17 %| 42.09| 11.50 %| 40.07| 12.00 %| 37.27| Table 5. Sensitivity test on WACCs RECOMMENDATION This graph shows the estimated value provided under different WACCs, and NIKE is currently trading at 42.09 with corresponding 11.17% WACC. So if the calculated WACC is below 11.17%, the estimated value would be higher than the current price and NIKE is undervalued; if the calculated WACC is beyond 11.17%, the estimated value would be lower than the current price and NIKE is overvalued. After adjusting the possible mistakes that Joanna made, the table shows the calculated WACC under each method: Method| WACC| CAPM (Adjusted Beta)| 9.73%| CAPM (YTD Beta)| 9.18%| DDM| 6.39%| ECM| 5.31%| Build-up| 10.83%| We can see none of them is above 11.17%, indicating NIKE is currently undervalued and Ford should add NIKE to the NorthPoint Large-Cap Fund. However, it is important to keep monitoring the revitalizing strategy that the management offered, since the future market condition may have huge impact on this strategy and hence, predicted future economic income. NorthPoint Group is a mutual fund management firm who has the preference on investing in Fortune 500 companies, such as EXXONMobil, GM, McDonald’s 3M and other large-cap. If we look back to a decade ago, the fund had performed extremely well compared to the market in general (we refer S&P500 to represent the market). Kimi Ford was the portfolio manager in NorthPoint Group, who was concerned about whether or not to add Nike, Inc. shares into her fund. Since net income and market share had been fallen from 1997, a new strategy was proclaimed by the Nike management team during the meeting held in June, 2001: First, highly priced products are no longer their only target, now they would develop the midpriced segment so that more customers will be able to afford it. Second, another way to boost the revenue is to focus on its apparel line, which they found out to be profitable. Finally, Nike needs to reduce its costs by exerting more effort on expense control. Company executives were optimistic about the long-term revenue, expecting an 8%~ 10% growths and earnings growth above 15%. Analysts had different opinion about the company prospects; Lehman Brothers suggested a strong buy while UBS and CSFB recommended a hold. Meanwhile, Ford wanted to make her own forecast so she developed a discount cash flow to determine that, at a discount rate of 12%, Nike was overvalued at its current price $42.09 and undervalued if the discount rate was below 11.17%. She asked her assistant, Joanna Cohen, to calculate the company’s cost of capital precisely. On the report, Joanna Cohen used WACC to calculate the cost of capital, where she adopted book values to obtain a proportion of 27% of debt and 73% of equity. For cost of debt, she took total interest expense divided by average debt balance which resulted lower than treasury yields. For cost of equity, she used 20-year Treasury bond as risk-free rate and 5.9% as market premium. Moreover, she divided each division by revenue, deciding to use one overall WACC. At the end, she came to a conclusion that the cost of capital for Nike, Inc was 8.4%.

Rachel Carson Opinion essays

Rachel Carson Opinion essays There is no point in beating around the bush, explaining how the movie was laid out, her background, or what her objectives were. Rachel Carson was nothing short of a modern day super woman. Not unlike super heroes we read about in comic books, the things she went through for other people and creatures was phenomenal. There aren't a whole lot of people who can truly say they dedicated their life to the well being of others, and I'm not only talking about humans. If anything, we were her last concern. With proper knowledge and testing, we would have known better than to use those pesticides in such an abundant manner. Granted, pesticides seemed insects, but people had to have been noticing the affects these dangerous chemicals were having on the wildlife and people most commonly exposed. Man truly stepped on his own foot in this episode. It must have been so lonely for her to be, what must have felt like, the only person in the world who knew what was really going on. Rachel Carson seemed to be a most remarkable woman. She fought through the slander, the barriers of school, and the governments twisted way of getting things done. She exposed pesticides for what they truly were and for that I know I am grateful. We assume that if a major company or our government is doing something odd, that it is with good reason or at least its been tested. This goes to show us that even our government is only made up of man. Man, who doesn't necessarily know everything. Rachel Carson Video Regarding Pesticides. 1994 ...

Sample Weak Supplemental Essay for Duke University

Sample Weak Supplemental Essay for Duke University What should you avoid when writing a supplemental essay for college admission? Duke Universitys Trinity College offers applicants the opportunity to write a supplemental essay that answers the question: Please discuss why you consider Duke a good match for you. Is there something in particular at Duke that attracts you? Please limit your response to one or two paragraphs. The question is typical of many supplemental essays. Essentially, the admissions folks want to know why their school is of particular interest to you. Such questions often generate remarkably bland essays that make common  supplemental essay mistakes. The example below is one example of what not to do. Read the short essay, and then a critique highlighting some of the mistakes made by the author. Example of ​aWeak Supplemental Essay I believe the Trinity College of Arts and Sciences at Duke is an excellent match for me. I believe college should not be merely a gateway to the work force; it should educate the student in a variety of subjects and prepare him or her for the range of challenges and opportunities that lie ahead in life. I have always been a curious person and enjoy reading all kinds of literature and nonfiction. In high school I excelled in history, English, AP psychology, and other liberal arts subjects. I have not yet decided on a major, but when I do, it will almost certainly be in the liberal arts, such as history or political science. I know that Trinity College is very strong in these areas. But regardless of my major, I want to receive a broad education that spans a variety of areas in the liberal arts, so that I will graduate as not only a viable job prospect, but also as a well-rounded and learned adult who can make diverse and valuable contributions to my community. I believe Duke’s Trinity College will help me grow and become that kind of person. Critique of the Duke Supplemental Essay The sample supplemental essay for  Duke  is typical of what an admissions office frequently encounters. At first glance, the essay may seem just fine. The grammar and mechanics are solid, and the writer clearly wants to expand his or her education and become a well-rounded person. But think about what the prompt is actually asking: discuss why you consider Duke a good match for you. Is there something  in particular at Duke  that attracts you? The assignment here is not to describe why you want to go to college. The admissions office is asking you to explain why you want to go to Duke. A good response, then, must discuss specific aspects of Duke that appeal to the applicant. Unlike a  strong supplemental essay, the sample essay above fails to do so. Think about what the student says about Duke: the school will educate the student in a variety of subjects and present a range of challenges and opportunities. The applicant wants a broad education that spans a variety of areas. The student wants to be well-rounded and to grow. These are all worthwhile goals, but they dont say anything that is unique to Duke. Any comprehensive university offers a variety of subjects and helps students to grow. Also, by talking about the student and using phrases such as him or her, the author makes clear that the essay is presenting generalities rather than creating a clear and specific relationship between Duke and the applicant. A successful supplemental essay must clearly articulate what specific features of the school make it the right match for your personality, passions, and professional goals. The admissions folks need to see a clear and sensible reason for your desire to transfer. Is Your Supplemental Essay Specific Enough? As you write your supplemental essay, take the global replace test. If you can take your essay and substitute the name of one school for another, then you have failed to address the essay prompt adequately. Here, for example, we could replace Dukes Trinity College with the University of Maryland or Stanford or Ohio State. Nothing in the essay is actually about Duke. In short, the essay is filled with vague, generic language. The author demonstrates no specific knowledge of Duke and no clear desire actually to attend Duke. The student who wrote this supplemental essay probably hurt his or her application more than helped it.

Rubric Activity Essay Example | Topics and Well Written Essays - 500 words

Rubric Activity - Essay Example are that students should never lose interest in reading habit [ since drawing a picture to emphasize the meaning of the lesson will remain in their mind at the time recollecting what they have learned], once the students feel easy to recollect and understand what they have learned they will not get distracted by other activities , this will also improve their ability to explain things that they face new, finally students will be encouraged gradually to develop their reading habit in terms of making them flexible to understand the meaning of what they read new. A rubric has to be formulated to assess their learning development. The categories that are to be included with this rubric are Drawing pictures while teaching a new concept, asking them to guess what it represents before going into detail, teaching the concept and asking them what they have understood, linking the picture and explaining, finding out the response from the students, linking the resources used, finally to make them do the same by giving a new task in the class itself. This will show a good result