Questions and Answers on International Capital Budgeting Essay Example

Questions and Answers on International Capital Budgeting Paper 1. Why should the required rate of return for a capital budgeting problem be project specific? Doesn’t the firm just have to satisfy an overall cost-of-capital requirement? Answer: The required rate of return for a capital budgeting problem is project specific because the firm is viewed as a portfolio of projects owned by the shareholders. It is the shareholder’s perspective that matters, and it is their opportunity cost that gives the required rate of return for a project. The question that the managers should ask is the following: If the shareholders were to receive the cash flows from the project directly, what risk would they associate with the cash flows? Notice that this immediately suggests that the required rate of return should be project specific and that it should reflect the market risk that continues to be present when an investor holds a large, well-diversified portfolio. We will write a custom essay sample on Questions and Answers on International Capital Budgeting specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Questions and Answers on International Capital Budgeting specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Questions and Answers on International Capital Budgeting specifically for you FOR ONLY $16.38 $13.9/page Hire Writer 2. What is the conceptual foundation of the flow-to-equity approach to capital budgeting? Answer: In the flow-to-equity approach to capital budgeting, the after-tax cash flows that are available to be paid to equity holders are discounted at the levered equity required rate of return. Hence, the interest costs of debt are subtracted from the earnings of the firm in considering the amount of tax the firm will owe, and the interest payments that the firm must make are taken out of the residual free cash flow. The discount rate for these levered equity flows therefore must reflect the fact that equity is a residual claimant on the cash flows of the firm. 3. What is the weighted average cost of capital? Answer: The weighted average cost of capital (WACC) approach to capital budgeting involves forecasting the all-equity free cash flows of the firm and then finding the value of the levered firm by discounting the all-equity free cash flows at an appropriate WACC. It is a one-step procedure for finding the value of the operating assets plus the value of the interest tax shields. The weighted average cost of capital is the weighted sum of the after-tax required rate of return on the firm’s debt and the required rate of return on the firm’s levered equity. The weight for the after-tax rate of return on the firm’s debt is the ratio of the market value of the debt to the market value of total assets. The weight for the rate of return on the firm’s levered equity is the ratio of the market value of the equity to the market value of total assets. Once the total value of the firm is found, the market value of equity is found by subtracting the market value of the d ebt from the value of the levered firm. 4. Should a firm ever accept a project that has a negative NPV when discounted at the weighted average cost of capital? Answer: One reason we like the adjusted net present value approach to valuation is that it specifies all of the possible sources of value for a project. The WACC approach works well for projects that will support a certain percentage of leverage and that have no other associated features, such as interest subsidies or growth options that might add value to the project. If the only cash flows from the project are the ones that are being discounted and there are no other sources of value, other than the interest tax shields that are included in the WACC analysis, then the WACC approach finds the market value of the levered project. If this is negative, the project should be rejected. 5. Can you do capital budgeting for a foreign project using a domestic currency discount rate? Explain your answer. Answer: The answer to the question is yes; you certainly can do capital budgeting for a foreign project using a domestic currency discount rate. You just have to be careful to match the cash flows with the discount rate. One fundamental principle of capital budgeting is that the discount rate should reflect the currency of denomination of the expected cash flows that are being discounted. If a foreign project is providing expected future foreign currency cash flows, these can be discounted to the present using a foreign currency discount rate that reflects the riskiness of the project. The domestic currency present value of this foreign currency present value can then be determined by converting from the present value of foreign currency into the present value of domestic currency using the spot exchange rate. Alternatively, one can generate expected future domestic currency cash flows in future years by converting expected future foreign currency cash flows into expected future dome stic currency cash flows using expected future spot exchange rates. These expected future domestic currency cash flows should then be discounted to the present using an appropriate domestic currency discount rate. 6. Why might it be important to use period-specific discount rates when doing capital budgeting? Answer: We know that risk free spot interest rates are the appropriate discount rates for cash flows from risk free pure discount bonds. If the term structure of spot interest rates is not flat, that is, if it is upward sloping or downward sloping, using the same discount factor for all the cash flows of a risky project will not be correct. If the term structure is upward sloping, and you use the single long-term rate as the base for your risk adjusted discount rate, you will needlessly penalize the earlier cash flows from the project because short-term spot interest rates are lower than long-term spot interest rates. Conversely, if the term structure is downward sloping, and you use the single long-term rate as the base for your risk adjusted discount rate, you will be incorrectly enhancing the value of the earlier cash flows from the project because the short-term interest rates that should be used to discount near-term cash flows are higher than the long-term rates that should be used to discount longer-term cash flows. 7. Why is it necessary to consider forecasts of real currency appreciation and depreciation when doing an international capital budgeting analysis? Answer: The most important reason to consider forecasts of real currency appreciation or depreciation is that it is likely that a change in the real exchange rate will affect the cash flows of the project. Remember that a real depreciation of the domestic currency makes domestic exporters more profitable and domestic importers less profitable. Also, real appreciations typically reverse themselves somewhat slowly, so that knowledge of the current situation is necessary to know whether the future expected changes in the real exchange rate are going to enhance or detract from the cash flows of the project. Finally, if forecasts of nominal exchange rates are being made with uncovered interest rate parity, these will be somewhat different than forecasts based on relative purchasing power parity. If the market thinks that there will be a real appreciation or depreciation in the future, forecasts of nominal exchange rates based on relative purchasing power parity will not be correct. 8. What is the rate of return on invested capital? How is it calculated? Answer: The rate of return on invested capital is the free cash flow of the firm divided by the firm’s total assets. If the firm is earning its weighted average cost of capital, the rate of return on invested capital should equal its WACC. If we think of an investment that the firm is making, the rate of return on capital expenditure is the incremental free cash flow divided by the CAPX. Here again, it is important for the firm to do investments in which the rate of return on invested capital equals or exceeded the WACC – otherwise the firm is destroying value. 9. If you borrow a foreign currency, what interest deduction would you receive on your taxes? Answer: When you borrow in a foreign currency, you get an interest deduction for the domestic currency value of the foreign interest that you pay. 10. If you borrow a foreign currency, are there any capital gains taxes to worry about? Answer: If you borrow in a foreign currency, there are capital gains taxes to worry about. If the domestic currency has appreciated relative to the foreign currency between when the initial borrowing took place and when the principal is being repaid, it takes less of the domestic currency to repay the foreign currency principal than the amount of domestic currency that you had access to when you borrowed. Thus, you are repaying less than you borrowed and that capital gain is income to you and is taxed by the fiscal authorities. Conversely, if the domestic currency has depreciated relative to the foreign currency between when the initial borrowing took place and when the principal is being repaid, it takes more of the domestic currency to repay the foreign currency principal than the amount of domestic currency that you had access to when you borrowed. Thus, you are repaying more than you borrowed and that capital loss is deductible for tax purposes. 11. Why might a manager accept a high-variance, low-value project instead of a low-variance, high-value project? Answer: Shareholders only gain in good states of the world, and if the variance of the firm is higher, they gain more in those good states. Holders of debt get paid their full amount in good states of the world, and they get the value of the firm in the bad states of the world. By accepting a high variance project, managers may be able to shift some value from bondholders to shareholders. In such a situation the manager is said to have engaged in asset substitution. 12. Why would a manager not accept a positive net present value project? Answer: The value of the project accrues to the firm as a whole. Thus, if the firm has risky debt in its capital structure, some of the value of the project will accrue to the bondholders, and the remainder will accrue to the equity holders. The increase in the value of equity may be less than the equity holders must contribute to finance the investment in the project. Hence, a manager acting in the interests of the shareholders would forego such a project. This situation is referred to as an underinvestment problem.

Service Sequence Essays

Service Sequence Essays Service Sequence Essay Service Sequence Essay Hospitality Training Consultant in a Fine Dining Restaurant Learning Objectives On the completion of this chapter, you will have a good understanding of the following: 0 The sequence of dining room table service from welcoming to bidding guest goodbye 0 The bussing service Introduction the objective of food service procedure is to meet the needs of the guests and to ensure that their dining experience are both pleasurable and memorable. Food service procedures vary Whether an establishment offers different style of service, modern or its own service is of little importance; what matters is that the venue is consistent in the services it offers. Redder of Service Los a sequential checklist of services from the arrival to the departure of the guest. It will differ in detail depending on the style of the establishment and the services it offers. Checklist of Service OH written checklist of service ensures the consistency of the services offered and acts as a guideline to part time and new waiting staff. Delivering Excellence Service in the Restaurant Front of House Perfect service is showcasing attention to detail. Greeting Welcoming Guest 0 Ensure that the restaurant is ready for service. 0 Welcome guest to the outlet. 0 Ask guest preference (smoking or non-smoking) Acknowledge new guests as soon as they arrive. 0 Walk towards guest, smile and make eye contact 0 Approach the guest with appropriate welcome e. G Good Morning! If they wish to eat, ask whether they have a reservation. Check the reservation. If no table has been booked, check that one is available. 0 Guide guest to table preference. Greeting Welcoming the guest 0 When checking the reservation, note that the hosts name usually table have been reserved in the hosts name. It is important to establish who the host is. 0 Be open, friendly and respectful Good morning/afternoon/evening madam/sir, welcome to Locale! May I suggest a table for you? (Guests are led to their table) This way, please (If the guest has reservation) We have prepared a pleasant table for you Mr. / . This way please MS. Seating Guest Assist in seating Guests: Ladies first starting with the oldest and continue working clockwise. Men second starting with the oldest man and continue working clockwise Host last if known. Escort the guests to their appropriate table Pull out the chair and assist Guest to sit by pushing the chair closer to the table. Encourage them to sit. Continue personalized conversation with your Guests. Will this table be all right for you madam / Draping Napkin in Guests Lap 0 Pick up the napkin with your right hand from the guests right. 0 Unfold the napkin from its fold into a triangle Using both hands fold the napkin halfway and place from your Guests left side reaching across your Guest with your right arm.

Noble Energy, Inc Research Paper Example | Topics and Well Written Essays - 2500 words

Noble Energy, Inc - Research Paper Example Global oil and gas industry includes global presence of extraction, refining, exploration, marketing and transporting the oil and gas products. The largest volume manufactured and distributed products of the industry are gasoline and fuel oil. Petroleum is also used as the raw material for several chemical products, such as solvents, pesticides, plastics, fertilizers and pharmaceuticals. The global oil and gas exploration and production industry is divided into three major parts, such as downstream, midstream and upstream. Midstream operations are generally considered under the downstream category. Description of the Industry Oil and gas energy sources are very much important for several industries. Oil and gas energy resources are considered as the large global energy resources. Middle East is the largest consumer of oil and gas energy resources across the globe. This global region consumes almost 53% of total energy sources. On the other hand, Asia and Europe ranks last in ter4ms o f consumption of oil and gas energy resources. The consumption rate of oil and gas energy of Middle East is higher comparing to other global regions due to several reasons. First of all, the leading number of oil reservoirs is located in the Middle East countries. These countries can consume the oil and gas products in low price range comparing to other global countries. In addition to this, Middle East oil and gas extraction organizations act as cartel regarding pricing and distributing the crude oil to the global market. Strong oil process control is the major reason behind the economic growth of several Middle East countries. Central and South America consumes 44%, North America consumes 40%, Africa consumes 41%, and Europe and Asia consumes 32% of total extracted and produced oil. The world consumes approximately 30 billion barrels on yearly basis (Li 22). The economically developed nations are the largest consumers of oil. In the year 2007, The United State consumed 25% of tota l produced oil which is impressive oil consumption figure. Recent financial crisis and global economic recession affected the global economic environment. People are trying to reduce the consumption level of expensive products due to their low disposable income and limited purchasing power. Especially, the people of middle class income level are trying to find substitute energy resources of oil and gas due to hike in oil and gas price (Shelley 27). Apart from economic issues, the global oil and gas exploration and production industry is suffering from several global political issues. Several under developed and developing countries have to pay high petroleum tax to the oil and gas producing countries in order to improve the crude oil. High tension and critical political conflicts between several countries are affecting the growth of this global oil and gas exploration and production industry. In addition to these, several countries have developed strict regulations regarding the ext raction of oil and gas. Extraction of oil and gas from oil mine requires the uses of several deadly chemicals. It can affect the global ecological balance. Looking into this issue, the government of several countries developed strict rules and regulations regarding the extraction of oil. It is expected that the number of total oil reservoirs and mines

Research paper about an artist and one of his artwork - 1

About an artist and one of his artwork - Research Paper Example This is what David Hockney faced in Bradford, West Yorkshire, where he came from (The Telegraph). He was a young gay guy with fantasies and longings that did not fit with where he was (Dorment). Being gay was not the only trait that made him different. He was also a conscientious objector (The Telegraph). Of course he was also an artist, and it was said that he broke all the rules (Dorment). The early days of his career in art were situated in an interesting time, historically. His art was part of the exhibition that ushered in British Pop Art (The Telegraph). In 1963, he visited New York and connected with Andy Warhol (The Telegraph). He visited Los Angeles, fell in love with it, and he became intrigued with swimming pools and the relaxed Southern California culture (Walker Art Gallery). He painted a series of pool theme pictures, including â€Å"Peter Getting Out of Nick’s Pool† in 1966 (Liverpool National Museums). In a review of an exhibition of this and Hockney’s other Los Angeles works from this period, it is stated that Hockney’s arrival in Los Angeles was like an airplane taking off, the way his career so quickly gathered force and lifted off to become one of the great artistic careers of the 20th century (Dorment). The Hippie movement was happening at the time. The structure of the family, gender roles, sexual expression, standards of privacy and openness were all subjects of experimentation. David was young enough to be influenced by the waves of social change but old enough to be a little more mature than some. The painting perfectly affirmed what he loved and aspects of life he wanted to hold up for the pleasure of others (Dorment). However, he expressed himself honestly while maintaining respect and decorum. One of the main techniques he used to do this was leaving a border or frame of unpainted canvas around the painting. Hockney wanted to emphasise the process of picture-making and the artifice

Article Review Example | Topics and Well Written Essays - 500 words - 16

Review - Article Example For instance, a drug called D-KLAKLAK-2, is known for destroying cancer cells. But it is also effective against Gram-negative a bacterium that fights against anti-biotic. Now scientists have devised a way to fuse this drug with naturally occurring toxins called AMPs. These are like the chemical weapons which bacteria themselves have developed overtime. So here comes the art of war; this AMP is combined with D-KLAKLAK and given to the patient. Now bacteria gets ‘confused’ and can’t predict or see a pattern in the drug that is in the body to kill it. It delivers a knockout punch and dies. In my view this is a brilliant scheme. It is wonderful to know that such innovation is possible in medicine. From research, it is proven that bacteria, over time, can develop highly immune system that can resist a drug that it is fighting. The more drug a patient takes, the more resistive bacteria becomes. To resolve this issue, scientists have developed a method to kill the bacteria by ‘distracting’ it. The drug is combined with naturally occurring toxins so the bacteria unable to ‘read’ the moves of the drug and gets effectively knocked out. In my opinion such innovative methods are must in any field. It is very common to observe that when a patient goes to a doctor and complains about some bacterial infection, usually the bacteria gets stronger, as if it has a mind of its own and practices fighting the drug, and gets stronger in the process. One thing that crossed my mind while reading the article was its effectiveness in proven tests and experiments. How successful has it been on humans/animals so far? This is the question I would like to be answered. The article doesn’t mention anything on this issue. Having said that, I still think that this method is very innovative, it seems theoretically sound. If there is a survey in which civilian opinion is required regarding approval or disapproval of this drug, I

The Fat Girl, Andre Dubus

The Fat Girl, Andre Dubus To accept the others, first we have to accept ourselves and accept who we are The Fat Girl is a short story about a girl that tries to fit in todays standards and satisfies her parents as well. The author , Andre Dubus , shows how trying to fit in the society standards , individuals have the pressure of conforming to a superficial image. This idea is developed through the early years of Louise , her weight change and new life , and back to the old habit. First of all, Andre Dubus, takes us into the life of a young girl whose mother is convincing her that she will become fat and how hard is to make friends. We can see this after the mom tell her daughter , You must start watching what you eat, her mother would say. I can see you have my metabolism. As the mother doesnt want that, she puts Louise onto a strict diet. In order not to displease her mother, but still satisfy her hunger, Louise started eating food when no one was watching. While her mother was strict and caring, on the other side her father was loving and misguided. Louise didnt have a lot of friends. Her two childhood friends, Joan and Marjorie were both thin but they felt as a social outcast in other ways. Louise only feels comfortable in the presence of others who were also insecure and unhappy. Ironically Louise intentionally chooses friends who are not heavy because she worries about the way others will see her. I was always thinking about what people saw when they loo ked at me and didnt want them to see two fat girls. It appears that Louise finds her weight issues to be bigger than her friends insecurities. She chooses to exclude those who are heavy from her life while welcoming those with different negative issues. In addition to her self-image issues, Louise also doubts her ability to find happiness in an intimate relationship. Her mother put in her head some negative perceptions such as In five years youll be in high school and if youre fat the boys wont like you; they wont ask you out . This quote shows the overall feeling of the people who dont meet todays standards. Louise continues down this negative road when she decides to go to an all-girl college so she can avoid rejection from guys. Up until this point her only contact with a boy was at a picnic with a drunken kiss . Once in college , Louise shows us how changing and losing weight makes a lot of difference in someones life. Louise continues her self-loathing into college where the only close friend she makes is this thin girl with emotional issues. In the story we can see a strong friendship between the two girls, which leads to the important point where Louise decides to go on a diet, and it is only because her best friend Carrie convinces her that she needs to become thin so that some boy will love her as Carrie does. Carrie pleads, I want you to be loved the way I love you. Louise, if I help you, really help you, will you go on a diet?. Although Carrie is trying to help her best friend, she is actually reinforcing Louises views of her own body. She starts losing fat and her mother starts threating her differently. She finds her way more beautiful and starts buying all kinds of stuff .As Louise progresses with her new diet, she becomes more and more irritable and unhappy with life. In all her l ife she had never been afflicted by ill temper and she looked upon it now as a demon which, along with hunger, was taking possession over her soul .With this quote the author wants to show us that Louise is being pressed into losing weight for strictly superficial reasons, and so she can get accepted into society and fit todays standards. This can be further seen when Louise feels shame and embarrassment when she goes to Carries house for thanksgiving, all because she is aware Carries parents know she is dieting. Louise is uncomfortable and feels excluded in partaking of the many dishes the other thin people can comfortably enjoy. In the end , we cant forget our old habits and sometimes we should accept who we are and stay the way we are. After college, the new thin Louise meets a young lawyer named Richard, who finds her attractive and has no knowledge of her life before. Louise is sure he would never have looked at her if she had still been heavy. They get married and Louise becomes a housewife. While Louise struggles to keep herself thin, her husband can eat anything he wants and still remain fit. She makes him all kind of Italian food that she is unable to consume. It is ironic that she marries a person who has the metabolism of a pencil sharpener when Louise must watch every calorie she eats. The next five years shows a Louise who is thin with new friends, a loving husband, and an active lifestyle, which is by most accounts a perfect life. In her fifth year of marriage, Louise becomes pregnant and her eating begin to become uncontrollable. The new changes in her body frighten her as Louise remarks that sh e is starting to gain weight but she told herself it was only the baby, and would leave with its birth. But at other times she knew quite clearly that she was losing her discipline she had fought so hard to gain during her last year with Carrie. A baby is born, but Louise has now returned to her bad habits and though she cares for her child, she continues to alienate her husband. They fight at nearly every dinner over her appetite and weight gain . Andre Dubus finishes his story with a surprised Louise enjoying a candy bar and shocked to discover her husband Richard is still there. In conclusion, The short story The Fat Girl by Andre Dubus shows many of the negative aspects associated with eating disorders, fat people, and the way society addresses them. Todays standards are too high and people who dont fit in them are getting rejected and they feel sad about their body. Sometime they try changing , but sometimes is better to be who you are and accept yourself.

Considering Dysarthria: A Speech Disorder On the Margins :: Biology Essays Research Papers

Considering Dysarthria: A Speech Disorder 'On the Margins' The goal of this paper is to portray dysarthria, a language impairment, as a disorder that is "on the margins" of the category of speech disorders. The argumentation will be that since dysarthria shares common underlying neurological causes with motor diseases rather than with other language impairments, it is set apart from other language impairments and evidence for the overlap of the motor modality with the language modality. Language is arguably one if not the most complex functions produced by the human brain, and one that is all but transparent as to the underlying neurological structures and processes in that so much is going on at the same time that it is hard to tell what is what. What we do know is that there are different areas of representation for different aspects of language. An area in the left hemisphere above the perisylvian fissure in the frontal lobe anterior to the motor cortex roughly controls production and fluency of speech; another area, in the temporal lobe of the same hemisphere roughly controls comprehension and word retrieval. Other regions next to and between these areas carry related functions, and lesioning to them results in variations of the symptoms caused by lesioning one of the central regions described above(1).. These areas are known to us as the "language areas." However, they can be completely intact in a person that is suffering from severe language impairment. Are there other "language areas" then? Strictly speaking, no, loosely speaking, yes. Language is more than a mental function where structures are established, words are retrieved and sound associations are made. The final execution of language is purely a question of complex motor control. Disruption of this complex interaction of motor signals towards the formation of speech is known as dysarthria (2). It is sometimes confused with impairment resulting from injury to the "language areas" (1), illustrating the point that the process of producing language is multi-layered, and that it is often hard to tell what is what. The symptoms of dysarthria may be slurred speech, nasality of sound, or quiet and slow speech (3).. These different impairments reflect the sub-sections in the 'motor symphony' that produces speech: The lips, tongue, teeth and jaw shape specific sounds; the soft palate channels air into either the nasal or oral cavity, producing different sound qualities; the larynx (voice box) makes the air vibrate through the vocal folds to create voice; and finally, the respiratory system powers this process (3).