...FACTORS INFLUENCING PENSION MANAGERS’ INVESTMENT DECISION A CASE STUDY OF ZANZIBAR SOCIAL SECURITY FUND (Z.S.S.F) By: ABDULAZIZ M. RAMIA REG. NO: ZU/MBA/0001/12 FACULTY OF BUSINESS ADMINISTRATION PROPOSED SUPERVISOR: DR. MASOUD A Concept Paper Submitted in Partial Fulfillment of the Requirement for the Degree of Master of Business Administration in Finance (MBA- Finance) of Zanzibar University 1.0 INTRODUCTION AND BACKGROUND OF THE STUDY 1.1 Introduction In most economies value is presently obtained through a market process where supply meets demand. Here is where finance and financial markets come into play. They provide the tools to optimize the allocation of resources through time and space and to manage risk. Finance is by nature quantitative like economics but it is subject to a large level of risk. It is the measurement of risk and the implementation of decision-making processes based on risk that makes finance a quantitative science and not simply accounting. Pension is a benefit promised to an employee by an employer during employment and is payable on leaving or retiring from the employer’s service. In the developed countries, pension plans are established and managed through creation of trust. In many cases, the fund is invested by the employer and pension is payable from the recurrent revenue of the employer. In general the main purpose of pension is to provide people with an income when they are no longer earning a regular income from employment...
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...Information Technology Investment Decision-Making Learning Objectives After completing this chapter, you should be able to: • • • • • Describe different types of IT investment decisions manager face. Briefly describe some of the methodologies that are used in IT investment decision-making. Explain why IT investment decision-making is important as a subject to study. Explain some of the limitations that should be considered when using IT investment methodologies. Explain the role of IT investment decision-making within organizational planning. Prologue Information technology (IT) investment decision-making impacts all industries but sometimes in different ways. For example, Karadag et al. (2009) explored the importance of IT investment decision-making methodology in lodging industry. The research found that evaluation activities for hotel IT investments have not been performed widely and consistently and that some types of hotels tend to use more financial and non-financial IT evaluation methods, since all investments are expected to show a positive return on investment. The research findings highlight the importance of the use of IT investment evaluation techniques and the 3 4 Information Technology Investment: Decision-Making Methodology major differences in their use require a substantial need for understanding a wide variety of IT investment methodologies to satisfy decision-making needs. To provide useful decision-making in IT investments today requires a broad...
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...Every single investment requires decision making. The result of decision making without certain planning might not end well. One cannot simply make a decision by relying on his/her personal resources as the decision may give an impact to the investments. It is difficult to make decision which is related to the field of investments. Investors have to consider their risks, market condition, rate of return, and others in making their investment portfolio. However, there are many possible physiological biases that make investors become irrational thus making bad decisions for the investment. Illusion of Money This bias refers to investors making decisions based upon nominal terms and not real terms. It means that the confusion between the real and the actual changes in money. Why will this happen? This will happen because the investor lack of the knowledge in finance. They only will see the money that can get by them but never accounting the inflation and the time value of money. As an example, an investor invests their money in a bond and it will yield 10% in the future. It sound attractive but we are get nothing when the inflation are also 10%. This kind of investment will mislead the investor that lack of general knowledge in finance becomes irrational thus making bad decision for the investment. Overconfidence First that is overconfidence. Overconfidence obviously mean in overtrading or switching between investment accounts in an effort to increase returns. Overtrading will...
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...investors (Dunhill, 2009). Government had injected the stimulate package cost RM650 million into the construction sectors by allowing more projects for residents in the mid year 2009 (Khim, 2008). This effort is included in the Ninth Malaysian Plan with ‘Malaysia my second home’, as Malaysian government had eliminated the restriction to promote the foreign investment. In addition, an increase of the output growth has result in the productivity and employment growth. Meanwhile, the higher productivity effect of growth will increase the employment sector as well as increase the income of individual. As the income level and economic condition have been increased, the Malaysian is prepared to commit to more spending such as the purchase of property and making investment. So, it will increase the demand of property and housing sector. Many past studies mostly focused on the pre-decision behavior of decision makers as it is mainly personal characteristics affect the investment decision, the majority of which are in the field of accounting (Biggs, 1983). There is limited number of real estate studies focusing on investment decision-making. French (2001) had done for a series of surveys...
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...SHRI RAM COLLEGE OF COMMERCE A STUDY ON FACTORS INFLUENCING INDIVIDUAL INVESTOR BEHAVIOUR Project work Paper No. – CH 6.3 (b) (Submitted for Partial Fulfillment Towards Requirement of B.COM (HONS.) Course) Ashvi Mittal 12BC136 12072204129 E-21 2014-15 UNDER THE SUPERVISION OF Miss Ankita Tomar Assistant Professor Department of Commerce Shri Ram College of Commerce University of Delhi 1 DECLARATION BY STUDENT This is to certify that the material embodied in this study entitled “A STUDY ON FACTORS INFLUENCING INDIVIDUAL INVESTOR BEHAVIOUR” is based on my own research work and my indebtedness to other work/publications has been acknowledged at the relevant places. This study has not been submitted elsewhere either wholly or in part for award of any degree. Ashvi Mittal B.Com(H) Section-E 12BC136 2 DECLARATION BY TEACHER INCHARGE This is to certify that the project titled “A STUDY ON FACTORS INFLUENCING INDIVIDUAL INVESTOR BEHAVIOUR” done by Ashvi Mittal is a part of her academic curriculum for the degree of B.Com(H). It has no commercial implication and is done only for academic purpose. Mrs Aruna Jha Miss Ankita Tomar (Teacher in- charge’s name and signature) signature) 3 (Mentor’s name and Signature) ACKNOWLEDGEMENT I feel great pleasure in expressing my gratitude to my mentor Miss Ankita Tomar of Commerce Department, Shri Ram College of...
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...Introduction Being in a more and more globalized economic world, it’s not easy to make sure any decision would end up with the best reward, for there are a lot of potential problems (competition and market change for instance) may finally lead to a risky situation. This would basically answer the question—do I agree with the notion that “decisions involving huge outlays of capital almost classic gut decisions: they involve risky, inherently ambiguous judgments between unclear alternatives”? However, even I do believe making decisions of most investment would have to face the uncertainty; it is comprehensive to notice some outlays of capital are not so hard to make. This article mainly focuses on illustrating this point of view along with the decision-making theory and some examples from industries. To get away from useless factors, suppose an ideal rational manager acting exactly in line with the decision-making theory, which means one would effectively following six steps(identify a problem, identify decision criteria, allocating weights, developing alternatives, analyze alternatives, and finally follow up and evaluate). It’s quite impossible for any investment to be successful with any of these steps in an ambiguous situation (although personally the third and fifth step reveals its complexity under most cases and is better been taken care of in particular). That’s the reason I believe this statement has its point under most cases, but with the idea of some outlays of capital...
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...Investment is made by the investors to earn money in the form of returns. In the early years, investment was based on performance, forecasting, market timing and so on. This produced very ordinary results, which meant that investors were endowed with very ordinary futures, and little peace of mind. There was also a huge gap between available returns and actually received returns which forced them to search for the reasons. While examining the reasons for the deviations they identified that it is caused by fundamental mistakes in the decision-making process. In other words, they make irrational investment decisions. In recognizing these mistakes and means to avoid them, to transform the quality of investment decisions and results, they realized...
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...IFAC Board Exposure Draft November 2012 Comments due: February 28, 2013 Professional Accountants in Business International Good Practice Guidance Project and Investment Appraisal for Sustainable Value Creation IFAC’s mission is to serve the public interest by: contributing to the development of high-quality standards and guidance; facilitating the adoption and implementation of high-quality standards and guidance; contributing to the development of strong professional accountancy organizations and accounting firms and to high-quality practices by professional accountants, and promoting the value of professional accountants worldwide; and speaking out on public interest issues. The PAIB Committee serves IFAC member bodies and professional accountants worldwide who work in commerce, industry, financial services, education, and the public and not-for-profit sectors. Its aim is to promote and contribute to the value of professional accountants in business. To achieve this objective, its activities focus on: increasing awareness of the important roles professional accountants play in creating, enabling, preserving, and reporting value for organizations and their stakeholders; and supporting member organizations in enhancing the competence of their members through development and sharing of good practices and ideas. Copyright © November 2012 by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please see page...
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...Accounting and Decision Making Techniques Assingment MFP/MBA April 2012 – July 2012 Semester By Pyae Thu Aung Student ID: B0340LSTH0412 Student Name: Pyae Thu Aung Student ID: B0340LSTH0412 Accounting and Decision Making Techniques Table of contents (a) Why is the investment appraisal process so important? ……….......................1 (b) What is the payback period of each project? If AP Ltd imposes a 3year maximum payback period which of these projects should be accepted? ………………………………………………….……..............1 (c) What are the criticisms of the payback period? ................................................2 (d) Determine the NPV for each of these projects? Should they be accepted? Explain why? ……………..…………...….…………………….…2 (e) Describe the logic behind the NPV approach?......……..……………………...3 (f) What would happen to the NPV if: (1) The cost of capital increased? (2) The cost of capital decreased? …………………………………………....3 (g) Determine the IRR for each project. Should they be accepted? ...…………...4 (h) How does a change in the cost of capital affect the project’s IRR? ………….6 (i) Why is the NPV method often regarded to be superior to the IRR method? …6 (j) References ……………………………………………………………….............7 Student Name: Pyae Thu Aung Student ID: B0340LSTH0412 Accounting and Decision Making Techniques (a) Why is the investment appraisal process so important? Decisions on investment, which take time to mature, have to be based on the returns that investment will make...
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...CAPITAL INVESTMENTS: MODELS USED IN DECISION MAKING Capital investments are long-term investments made by companies to eventually enhance profitability and shareholder value. Capital investments normally last a company for a number of years, and they take longer periods of time to implement or enhance within an organization. Some examples of capital investments include, but are not limited too: automation in factories (equipment and software), research and development, equipment to improve quality control, software to test productivity measures, etc. These investments include a great deal of labor, capital and time to implement. Since capital investments can be risky, meaning any losses will be large to the organization considering the amount of time and capital involved, organizations have a process to determine what capital investments they should get involved in, and why. Capital investment decisions are concerned with the process of planning, setting goals and priorities, arranging financing and using certain criteria to select long-term assets. (“Hansen & Mowen,” 2011) Companies may start by listing all the improvements that are to be made to affect profitability in the long run. Since these improvements will consume large amounts of time and capital, it is not feasible for companies to make multiple investments at a time. To assist in deciding which investment to take on first, the company must calculate which will be the most profitable and increase shareholder...
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...not made a good decision about the way she is going to make her decision because first, she limited her financial advisor to presenting her with only two options limiting the alternatives that could have been developed to succeed in resolving her problem. Second Maggie prides herself on being rational and objective in her decision making and allowing an investment decision to be made by her family is not consistent with her beliefs of consistent choices and value maximizing choices. By leaving the decision to her family Maggie will likely end up with a more risky outcome then she may have chosen and been comfortable with herself following the rational decision making process. 2. I would choose investment 2, a moderate-risk mutual fund, because similar to Maggie I am young and able to bear more risk at this stage in my life. The criteria I would consider would be if I have adequate income to meet my current expenses, what my purpose of investment is (i.e. - pay tuition, first house, retirement), and my investment horizon. I would allocate the highest weight to the criteria such as being able to pay my daily expenses and paying tuition and the lowest weight to retirement. The best alternative for me would be to bear the moderate risk for a substantially greater return. 3. I think two important factors would determine which investment people would choose, age and their decision making style. Younger generations would lean toward the moderate-risk investment as they have much...
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...Clark Paints Capital Budgeting Decision Clark Paints should consider making cans in house by purchasing new machine and recruiting 3 new employees. Supporting statements and cash flows are given in separate spreadsheet. Make or Buy Worksheet shows that company would save $72,540 per year if made instead of purchasing. Company should accept the proposal to make the cans. Annual Cash Flows, Payback period, Annual Rate of Return, Net Present Value and Internal Rate of Return statements support the decision of making cans. Annual Cash Flows Cash flow is defined as revenue or expense that changes cash account over a given period. Annual cash flows prepared assuming company would make paint cans and how much company would save based on this decision. Expected Annual Cash flows are positive for making the paint cans instead of purchasing. Positive cash flow of $58,351 per year does support the decision of making cans in house. Payback Period Payback period refers to the period of time required for the return on new investment to cover the original investment. Payback period for making cans in factory is 3.4 years or 3 Years and 5 Months. As per the given assumptions new machinery will serve the company to make 5.5 Million cans and based on company expectations of making 1.1 Million cans per year, machinery will serve company 5 years. Before the end of life of machine company would be able to recover original investment made on machine. Annual Rate of Return Annual Rate of Return...
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...manager is to decide which, if any, projects or investments opportunities the organization should undertake. The task of analyzing and comparing financials is a daunting task, but when utilizing the tools of capital budgeting, the process of this type of business decision making can be quite useful. This paper will define capital budgeting and discuss some of the components of this decision making tool. It will also discuss some of the concerns that go along with Capital Budgeting. The Basics of Capital Budgeting What is Capital Budgeting? Organizations looking to expand their business through asset acquisition create a capital budget (Paden, n.d.). Capital budgets exclusively are associated with real estate, equipment and other potential assets used to evaluate asset impact and the potential benefit to the organization. Capital Budgeting is the process in which a business determines whether a project or investment venture are worth pursuing. It is the process of analyzing investment opportunities and deciding which one to accept (Berk & DeMarzo, 2014). Potential ventures are evaluated and the potential expenditures or investments are ranked. Usually, these types of business decisions are for large purchases or investments. Steps of Capital Budgeting There are seven steps involved in capital budgeting (Hofstrand, 2013). They are: 1. Identify long-term goals of the organization 2. Identify potential investment prospects for meeting long-term goals identified...
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...business environment, making investment decisions are among the most important and multifaceted of all management decisions as it represents major commitments of company’s resources and have serious consequences on the profitability and financial stability of a company. It is important to evaluate the proposals rationally with respect to both the economic feasibility of individual projects and the relative net benefits of alternative and mutually exclusive projects. It has inspired many research scholars and is primarily concerned with sizable investments in long-term assets, with long term life. The growing internationalization of business brings stiff competition which requires a proper evaluation and weight age on investment appraisal issues viz. differing project life cycle, impact of inflation, analysis and allowance for risk. Therefore financial managers must consider these issues carefully when making capital budgeting decisions. Inflation is one of the important parameters that govern the financial issues on capital budgeting decisions. Managers evaluate the estimated future returns of competing investment alternatives. Some of the alternatives considered may involve more risk than others. For example, one alternative may fairly assure future cash flows, whereas another may have a chance of yielding higher cash flows but may also result in lower returns. It is because, apart from other things, inflation plays a vital role on capital budgeting decisions and is a common fact...
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...calculations used for making capital budgeting decisions. NPV and IRR lead to the same decisions with investments that are independent. With mutually exclusive investments, the NPV method is easier to use and more reliable. Introduction To this point neither of the two discounted cash flow procedures for evaluating an investment is obviously incorrect. In many situations, the internal rate of return (IRR) procedure will lead to the same decision as the net present value (NPV) procedure, but there are also times when the IRR may lead to different decisions from those obtained by using the net present value procedure. When the two methods lead to different decisions, the net present value method tends to give better decisions. It is sometimes possible to use the IRR method in such a way that it gives the same results as the NPV method. For this to occur, it is necessary that the rate of discount at which it is appropriate to discount future cash proceeds be the same for all future years. If the appropriate rate of interest varies from year to year, then the two procedures may not give identical answers. It is easy to use the NPV method correctly. It is much more difficult to use the IRR method correctly. Accept or Reject Decisions Frequently, the investment decision to be made is whether to accept or reject a project where the cash flows of the project do not affect the cash flows of other projects. We speak of this type of investment as being an independent investment. With the IRR...
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