...Running head: LONG-TERM INVESTMENT DECISIONS 1 Long-Term Investment Decisions Juanita Bates Professor: Mohammad Sumadi ECO 550 Managerial Economics and Globalization December 5, 2015 Long-Term Investment Decisions 2 Abstract Microwave food have taken place of the traditional family-styled dining in today’s fast-paced society. There are a variety of microwavable food for consumers to choice from. With today’s health conscious society, the microwave food industry have adapted to meet the preferences of the consumers by producing low calorie frozen microwavable foods. With the growth of this market, it is important that companies in this market have a good marketing plan along with a good strategic business plan. An important long-term decision a business can make is whether or not to invest. The process of evaluating the sustainability of long-term investments with a view of distributing financial resources to investments that are profitable is known as capital budgeting. Capital budgeting focuses on investment costs related to the benefits generated during their economic life. This is one of the most important decisions for a company because it helps with the appraisal and selection of investments that are most feasible. It also helps with the decision of accepting or rejecting investment proposals. Evaluating...
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...sdf Calculating Returns: CAPM vs. DCF Kalen Hickey American Military University The Capital Asset Pricing Model (CAPM) and Discounted Cash Flows Method are different techniques for determining returns on an investment. These concepts deal with the time value of money and the other investment factors. “If decisions are made that ignore the interaction of scale and risk, then cash flows are misvalued and suboptimal operations decisions are made” (Lederer & Mehta). Companies use CAPM and DCF to figure out the greatest potential for highest yield of an investment based on average market returns. The Capital Asset Pricing Model (CAPM) takes the two factors of time value of money and market risk into account for determining risk of investment and returns. “One is the risk of being in the market which is called systematic risk. The other-unsystematic risk-is specific to a company’s fortunes” (Burton, p.20). The two risks are married together, otherwise one would expect to see a positive return on every risk which is never the case. The expected rate of return for the CAPM takes into account risk-free interest rate, a stock beta that determines the relationship between the entire market and an individual investment, and an expected return from a typical market such as the Dow Jones. “The formula states that the expected return of a stock is equal to the risk-free rate of interest, plus the risk associated with all common stocks (market premium risk), adjusted for...
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...Decision making is the process of choosing among alternative courses of action for the purpose of attaining a certain goal. In this paper I am going to scrutinise a number of courses offered in four different disciplines within a business school and identify how these courses relate with decision making. The conclusions are presented in tabular form. IVEY Business School and The University of Pennsylvania were my source of information. There school of Business offers many different courses all of them lying under or comprising of the different disciplines that are found in business school. Some of these include: i. Business, Economics and Public Policy Course Relation to Decision making Focus Computerized support Intro to Business Economics Explores the economics and politics of public policy to provide the student with an analytic framework. Policy issues relating to taxation, social security, low-income assistance. High Financing and Managing Government Covers cost-benefit evaluations which influence decision making. Role of public policy in affecting the efficiency of markets and the distribution of resources in society. High. Economic Analysis of Law Teaches students how to think as an economist about legal rules and evaluate alternative legal rules. Interpretation of legal rules Moderate Behavioural Economics, Markets, and Public Policy Applies insights from psychology to the study of economic phenomena and decision making. How psychology plays out in markets, where...
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...of Financial Decision Measures, responsibility accounting, Profit & Investment centers, and highlighting examples relevant to each. • Financial Decision Measures Financial Decisions Financial Decisions are decisions that involve: (1) Determining the proper amount of funds to employ in a firm (2) Selecting projects and capital expenditure analysis (3) Sourcing funds on the most favorable terms possible (4) Managing working capital such as inventory and accounts receivable. Financial Decision Measures There are three fundamental concepts that underlie the process of making many financial decisions. They are also the three fundamental concepts that determine the economic value of any project, investment, or business organization. The three concepts are; a) Time Value of Money b) Risk-Return Relationship c) Cash Flows • Responsibility accounting This is an underlying concept of accounting performance measurement systems. The basic idea is that large diversified organizations are difficult, if not impossible to manage as a single segment, thus they must be decentralized or separated into manageable parts. The objective is to assist in the planning and control of a company’s responsibility centers—such as decentralized departments and divisions. These parts, or segments are referred to as responsibility centers that include: a) Revenue centers b) Cost centers c) Profit centers d) Investment centers This...
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...Managing Financial Principles and Techniques - Financial and Investment analysis Contents 1. Be able to apply cost concepts to the decision-making process 2 2. Be able to apply forecasting techniques to obtain information for decision making 4 3. Be able to participate in the budgetary process of an organization 5 4. Be able to recommend cost reduction and management processes for an organization 7 5. Be able to use financial appraisal techniques to make strategic investment decisions for an organization 8 6. Be able to interpret financial statements for planning and decision making 10 References 12 1. Be able to apply cost concepts to the decision-making process 1.1 explain the importance of costs in the pricing strategy of an organisation The pricing strategy becomes the major element in marketing mix of Dell Computers as it is related to product positioning. When there is a planning for new product launch pricing strategy is important and it requires general sequence of stages involved during pricing the new product. The different steps are as follows: (Daft, 2011) * Developing marketing strategy – helps the company to develop marketing strategy based on market analysis, market segmentation and positioning * Marketing Mix decisions – Defining a product, distribution and its promotional tactics * Estimation of demand curve – Estimating the demand and understand how it varies from quantity wit price * Cost Calculation – Calculation of fixed...
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...wished, and even on sales within the company; so divisions were expected to meet the going market price if they wanted the business. Early in the year, its Northern Division designed a special retail display box in conjunction with the Thompson Division, which was equipped to make the box. Thompson, as one of Birch’s four producing divisions converted paperboard output into corrugated boxes. It also printed and colored the outside surface of the boxes. Birch’s Southern Division will supply the lineboard and corrugating medium to Thompson Division in the event the latter got the order from Northern. 2. Decentralization Policy The Company observes the practice of decentralization where the responsibility and authority in all decision-making for the divisions’ operations lie in its respective division managers, except those relating to overall company policy. For several years, top management felt that the decentralization concept had been successfully...
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...Access Pricing Principles — Telecommunications July 1997 Preface Part XIC of the Trade Practices Amendment (Telecommunications) Act 1997 introduces a new regime governing access to services in the telecommunications industry. A key component of this regime is the pricing of access which, in part, is to be administered by the Australian Competition and Consumer Commission. The purpose of this document is to outline the approach the Commission will adopt, in the usual case, when considering access pricing issues under Part XIC. A draft of this document was released for public comment in February 1997 and a public forum was held in April 1997. The Commission wishes to thank all parties who made submissions or participated in the public forum. This document reflects the Commission’s views after consideration of all relevant submissions and representations. The Commission also wishes to thank AUSTEL, Treasury, the Department of Communications and the Arts and the Bureau of Transport and Communications Economics for their assistance in preparing this document. The views expressed in this document are those of the Commission. ii Contents Preface ............................................................................................................................ ii Introduction ....................................................................................................................1 Legislative criteria ..................................................
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...Introduction Recently being named the CEO of Quasar Computers, decisions have to be made on operational and business strategies in a wide variety of market conditions. The world’s first all optical notebook computer, the “Neutron” sets the pricing strategy, marketing efforts and revenues. These decision making processes of management have been described in different market structures and the use of economic tools making managerial decisions becomes vital throughout the simulation. Quasar’s product lifecycle is reviewed through the phases of Monopoly, Oligopoly, Monopolistic Competition and finally Perfect Competition. Each decision that is made provides instant results and how this directly affects the product. Monopoly Grant (2010) defines that a monopoly exists when an organization is protected by high barriers to entry whereby it optimizes profits by maximizing its value creation activities to the fullest potential. Quasar has emerged as the only player in the market for the unique all optical notebook, the Quasar. Within this monopolist market structure, maximizing profit tends to occur at the point where marginal cost equals marginal revenue based on the result shown by toggling the demand curve. In the initial scenario, it was presented that Quasar had the patent rights on all-optical technology for three years from the launch year leaving the company faced with the objective of maximizing profit in this monopolistic situation. In order to accomplish this, the price...
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... (CMI) faced a pricing and channel marketing decision for metal pile cushions utilized during pile driving. CMI’s approach to metal pads has significant efficiency advantages over currently used pads available in the market. However, CMI has to take into account several barriers to entry into this market. The primary barrier is that most companies viewed role of pads as a necessary accessory or tangent item instead of viewing them as a potentially value adding or cost reducing part of pile driving. In order to penetrate the market, CMI has to alter the point of view of pile driving pads for the opinion leaders, engineering firms, and contractors involved in the decision process. There is several stakeholders to consider, first CMI that need a new successful product to the continued success of the company. The decisions regarding pile cushions could greatly increase the company’s revenues and profits. There are also several secondary stakeholders in the pile driving industry. Secondary stakeholders include pile hammer manufacturers, architectural consulting engineers, soil consultants, pile hammer distributing/renting companies, engineering/construction contractors, and independent pile driving contractors. The workers who drive piles are also stakeholders since the current pads may be hazardous to their health due to heat related injuries and weight. The following table summarizes some of the stakeholders; their projected importance to CMI’s marketing decisions, and their projected...
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...A pricing strategy is an important element of marketing mix since apart from being related to the positioning of the product, it has effects on other elements of marketing mix including channel features, promotions and product features. The strategy in its development has some general steps that necessitate following including developing a market strategy, making market mix decisions, estimating the demand curve, calculating the cost, understanding the environmental factors, setting price objectives and determining the price without necessarily following the order. The various pricing strategies include cost- plus , target return , value- based and psychological pricing. In cost- plus pricing, the price is set at the cost of production in...
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...and cost figures. Please be aware of the influence of unreliable cost and revenue data in regards to the pricing, production, and marketing recommendations presented in this study. However, it must also be noted that many of the discrepancies are legitimate differences in data collection methods and tests used in the case. Introduction Cumberland Metals faced a both a pricing and channel marketing decision for metal pile cushions utilized during pile driving. Cumberland’s approach to pile cushions had significant efficiency advantages over other asbestos methods that were currently available in the 1979 market. However, Cumberland faced several barriers to entry into the pile cushion market. The primary barrier was that most companies viewed role of cushions as a necessary accessory or tangent item instead of viewing cushions as a potentially value adding or cost reducing part of pile driving. In order to penetrate the market, Cumberland would have to alter the lackadaisical view of pile driving cushion pads for the opinion leaders, engineering firms, and contractors involved in the decision process. Key Stakeholders There were several stakeholders in the both in the pile driving industry and within Cumberland Metals. First, Cumberland Metals and the welfare of its employees were major stakeholders in the pile driving cushion pricing...
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...[pic] Master in Business Administration COURSE SYLLABUS Investment Banking And Structured Finance Analytics Course Code: IBSFA Faculty: Prof. E. B. Perez Course Description This is an advanced finance course suited for finance majors. However, the focus is on the practice and business of investment banking. Corporate finance skills are assumed, as well as concepts regarding structured finance. Grading Class Participation 50% Class Presentation 50% Course Outline |Session |Cases, Readings and Exercises | | | | |1 |Case: CML Group, Inc. (A) and (B) | | | | | |Session 1 CML Group, Inc. (A) and (B); the (C) for class distribution. | | |2 Hutchison-Whampoa LTD - Yankee Bond Offering | | |3 Chase's Strategy for Syndicating the Hong Kong Disneyland Loan (A) ...
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...Session 14 - International Taxation � Provide an overview of the taxation of international tax rules � Introduce the FTC � Provide an overview of transfer pricing 15.518 Fall 2002 Session 14 International tax systems � Territorial - no tax is generally due on income earned outside of the country in which the parent is located � Worldwide - all income is subject to taxation by the country in which the parent is located # US taxes worldwide income of citizens and permanent residents US taxes worldwide income of domestic corporations US taxes the US source income of nonresident aliens US taxes the US source income of foreign corporations # # # 15.518 Fall 2002 Session 14 Withholding � In addition to taxes imposed on earnings, transfers (interest payments, dividends, royalties, etc.) between a corporation and its foreign shareholders (individuals or corporations) are generally subject to withholding taxes. � The general withholding rate imposed by the U.S. is 30% of the payment amount. This rate can be reduced by tax treaties between the various jurisdictions 15.518 Fall 2002 Session 14 Some definitions � A domestic corporation is one incorporated in one of the 50 US states � A foreign corporation is one that is not a domestic corporation � We will focus on taxation of corporations rather than individuals or partnerships 15.518 Fall 2002 Session 14 U.S. Framework � Worldwide taxation � Elimination of double taxation � Deferral � “Arm's-Length” related party...
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...PRICING AND PRICING POLICIES PRICING Pricing is the process whereby a business sets the price at which it will sell its products or services. It is a method adopted by a firm to set its selling price. It usually depends on the firm's average costs, and on the customer's perceived value of the product in comparison to his or her perceived value of the competing products. Different pricing methods place varying degree of emphasis on selection, estimation, and evaluation of costs, comparative analysis, and market situation. See also pricing strategy. PRICING POLICIES Pricing policy refers how a company sets the prices of its products and services based on costs, value, demand, and competition Pricing Policies provide the framework and consistency needed by the firm to make reasonable, practicable, and effective pricing decisions. Although policies in any area of management are difficult to develop, firms with a well-established set of pricing policies usually make consistently better pricing decisions than firms without such policies. STEPS IN SETTING A PRICING POLICY 1.) Selecting the Pricing Objective – it is where the company wants to position its product a. Survival b. Maximum Current Profit - estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit, cash flow, or rate of return on investment. c. Maximize Market Share/ Market Penetration – low price d. Maximum Product Skimming...
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...Discuss potential explanations for the Security Market Line has been flatter than the Capital Asset Pricing Model (CAPM) would predict. Student Name: Jiaxin Shen Student Number: 100103708 Word count: 1227 Discuss potential explanations for the Security Market Line has been flatter than the Capital Asset Pricing Model (CAPM) would predict. The Capital Asset Pricing Model is based on asset portfolio theory and capital market theory. It emphasizes on the study of the relation between the expected return of asset and risky asset in the securities market. As one of prediction models based on the balance of risky asset expected return, CAPM elaborates on the formation of market equilibrium in the case of investors through Markowitz’ theory to investment management. (Pennacchi, 2008) It shows that a sample liner relation about expected return of asset and expected risks. In the model, beta is a significant parameter, since it measures the expected risks of assets. The Capital Asset Pricing Model has been widely adopted by investors, however, it has some limitation. The relation between beta and average return is too flat is confirmed in time-series tests. It is described by the the Security Market Line. Black, Jensen and Scholes (1972) concentrated their attention on the security market line. If the portfolio is efficient, which means there is a positive relation between beta and expected return. The study of Fama and MacBeth (1973) mainly focus on predicting the future returns...
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