Description
Please continue the review of Chapters Nine, Ten and Eleven on the Time Value of Money, Valuation, the Cost of Capital, with project analysis and strategies-The Web Exercise, Chapter Nine p. 287, discusses the time value of money, and the Web Exercise, Chapter Eleven p. 372, concerns Intel. Both of these, the HW assignment on Exxon-Mobil, should be reviewed to develop a perspective, which evaluates and determines the valuation of a project within an organization. Initial posts should include any comments on the Web Exercises, and then expand on your knowledge by reviewing sources on the cost of capital and strategies (see Webliography).
Discuss the concept of WACC financing, please see the link below, when valuing a projects. The link is older, but still relevant for our purposes. There is an additional post on understanding investment strategies by using the formulas for exponential averages.
R1
The 1996 amendment to the initial BIS Capital Accord (Basel I) focused on which one of the following risk categories?
A) Market Risk
B) Operation Risk
C) Liquidity Risk
D) Credit Risk
Suppose you have just entered into a (fixed rate) payer vanilla interest rate swap at the fair swap rate. What is the mark-to-market value of your position at the moment of execution of the contract?
A) Positive
B) Negative
C) It depends on the shape of the yield curve
D) Zero
DQ2
Based on the reading assignment this week, respond to the two of the three following questions:
1. In your opinion; what are the pros and cons of globalization?
2. How has the economic downturn impacted trends in protectionism and nationalism?
3. What is the role of Corporate Social Responsibility (CSR) in global organizations?
http://dx.doi.org/10.1108/IMR-03-2014-0092
Curtis, M. (2015). Discussion of “ethical climate, social responsibility and earnings management”. Journal of Business Ethics, 126(1), 61-63. doi:http://dx.doi.org.ezproxy2.apus.edu/10.1007/s10551-013-2036-0 URL : http://dx.doi.org.ezproxy1.apus.edu/10.1017/S1744552315000154 URL: https://yahoo.brand.edgar-online.com/DisplayFiling.aspx?TabIndex=2&dcn=0000034088-22-000026&nav=1&src=Yahoo
Finance Yahoo. (2022). ExxonMobil – Summary. Retrieved from https://finance.yahoo.com/quote/XOM?p=XOM
Finance Yahoo. (2022). ExxonMobil – Financials. Retrieved from https://finance.yahoo.com/quote/XOM/financials?p=XOM
MarketScreener. (2022). BP – Summary. Retrieved from https://www.marketscreener.com/quote/stock/BP-PLC-9590188/
MarketScreener. (2022) Chevron Summary. Retrieved from https://www.marketscreener.com/quote/stock/CHEVRON…
R3
Pg 287
Rockefeller used the $2000 as a seed to grow an immense, multimillion-dollar fortune. In 1859, oil was discovered in western Pennsylvania. Rockefeller and a business partner became oil refiners. From this small start grew the Standard Oil Company. Rockefeller was one of the wealthiest men in the world at that time (PBS, n.d.). He died in 1937, at the age of 97, and in today’s world, that massive fortune will be different due to inflation in 2022; it would be worth: $28,107,819,444.44 as calculated.
- Rockefeller would be worth $28,107,819,444.44 in 2022 compared to 1937 (SmartAsset, 2022).
- If I were worth 1 million dollars in 1945, it would be worth 16,061,611.11, and that is, the inflation rate would be 1506.2% (SmartAsset, 2022).
- No, the time value of money will change, and it will increase as time goes by because inflation will increase. Then the purchasing power will change, and it will increase significantly over time, so twenty or fifty years from now, the inflation of money will be much more extensive depending on inflation for those years.
Pg 372
Intel is doing great compared to its financial reports, and it seems like it is increasing its selling power and holding its debts pretty well. Stockholders are getting their money’s worth and have a good return. Their annual report and financials look like this company’s profits are increasing, and things are improving for them (Intel Corporation, 2022). Intel’s Long term debt is steady and not increasing by much, which is excellent for the company so that that company can expand for new projects. The total assets are good, and it is growing from the previous years, which will help get more shareholders in. Their products and services demand computer technology, and it is advancing into new technology that enables companies to use their products.
Cost of Captial
The cost of capital presents the return that a business will need to achieve to justify the cost of a capital project. For example, it is purchasing new equipment or building a new building. This cost of capital encompasses the cost of both equity and debt which is weighted according to the business’s preferred or existing capital structure. This concept is the weighted average cost of capital known as WACC. A business investment decision for newer projects will always get a return that will exceed the business’s cost of the capital used to finance those projects that the company thinks will return a profit. (Hayes, 2022). Otherwise, these projects will not generate a return for investors, which will not be profitable.
References
Hayes, A. (2022, March 5). What does cost of capital mean? Investopedia. https://www.investopedia.com/terms/c/costofcapital…
Intel Corporation. (2022). Filings & Reports. https://www.intc.com/filings-reports
PBS. (n.d.). Freedom: A history of us. Biography. John D. Rockefeller: PBS. Freedom: A History of US. Biography. John D. Rockefeller | https://www.thirteen.org/wnet/historyofus/web10/fe…
SmartAsset. (2022, June 6). Best inflation calculator (2022) – historical & future value. https://smartasset.com/investing/inflation-calcula…
R4
Ques-1 The pros and cons of globalization:
Some applause globalization while others fight the wonder and reprimand it for work misfortune and different ills. Regardless of whether you’re putting resources into developing business sector assets or purchasing things made abroad, you might not have really thought about to the contentions for and against globalization. Is it true that one is side right or is globalization all the more a mishmash? How about we investigate a portion of the upsides and downsides of globalization.
Pro 1: Globalization widens access to products and ventures.
It’s difficult to contend with the point that globalization makes more merchandise and enterprises accessible to more individuals, frequently at lower costs. On the off chance that you have discretionary cashflow and you’re purchasing an item that originates from abroad, you’re profiting by globalization somewhat. Entrepreneurs likewise advantage by approaching a greater market for their merchandise and ventures.
Pro 2: Globalization can lift individuals out of neediness.
The contention that globalization has lifted individuals in creating nations out of neediness is to some degree disputable in light of the fact that suppositions contrast with respect to the amount and quality of the occupations made by globalization. In any case, the general knowledge is that globalization has expanded openings for work in capital-scant, work rich nations, for example creating nations.
Pro 3: Globalization increments social mindfulness.
Globalization’s protectors state it has expanded culturally diverse understanding and sharing. A globalized society helps the rate at which individuals are presented to the way of life, mentalities and estimations of individuals in different nations. That presentation can rouse specialists, fortify ties among countries and hose xenophobia.
Con 1 Globalization has neglected to convey wanted additions in labor rights, human rights and natural security.
In principle, globalization be a chance to spread qualities and practices like environmentalism and work rights all through the world. Practically speaking, that spread has been moderate and flawed. For instance, as opposed to trading the work assurances it maintains in the U.S., an organization may keep settle for less in, state, Bangladesh.
Some contend that globalization has caused a “race to the base” in which organizations effectively look for the nations with the most vulnerable work and ecological assurances and the least wages. And keeping in mind that globalization has expanded the progression of merchandise, administrations and capital, there are still a lot of expense safe houses, implying that a significant part of the worth included by globalization isn’t caught and redistributed by governments.
Con 2: Globalization may add to social homogeneity.
Globalization may prompt increasingly social homogeneity if individuals’ preferences meet. On the off chance that everybody wears pants, learns English and watches Hollywood films we may lose valuable social practices and dialects. A few pundits of globalization stress that it’s making a monoculture.
Con 3: Globalization places more force in the possession of worldwide partnerships.
Another analysis leveled at globalization is that it has enabled worldwide companies to the detriment of governments and residents. This decreases state sway and residents’ capacity to consider their pioneers responsible for conditions in their nations. It’s another explanation that work and natural securities are more diligently to implement than numerous pundits of globalization might want. Global companies may likewise campaign for positive arrangements in exchange understandings (this was a contention summoned against the TPP).
Ques- 2 In the quick consequence of the 2008 worldwide budgetary emergency, policymakers’ accomplishment in keeping the Great Recession from transforming into Great Depression II kept within proper limits requests for protectionist and internal looking measures. Be that as it may, presently the reaction against globalization and the more liberated development of products, administrations, capital, work, and innovation that accompanied it has shown up.
This new patriotism takes diverse financial structures: exchange hindrances, resource assurance, response against outside direct venture, strategies preferring residential specialists and firms, hostile to movement measures, state free enterprise, and asset patriotism. In the political domain, populist, hostile to globalization, against migration, and at times through and through bigot and racist gatherings are on the ascent.
These powers unwilling the letters in order soup of supranational administration foundations the EU, the UN, the WTO, and the IMF, among others that globalization requires. Indeed, even the web, the exemplification of globalization for as far back as two decades, is in danger of being balkanised as increasingly dictator nations including China, Iran, Turkey, and Russia look to confine access to internet based life and take action against free articulation.
The fundamental driver of these patterns are clear. Weak monetary recuperation hosts gave an opening to populist gatherings, advancing protectionist arrangements, to accuse outside exchange and remote laborers for the delayed discomfort. Add to this the ascent in pay and riches imbalance in many nations, and it is no big surprise that the view of a champ bring home all the glory economy that benefits just elites and contorts the political framework has gotten boundless. These days, both propelled economies (like the United States, where boundless financing of chose authorities by monetarily incredible business premiums is just authorized debasement) and developing markets (where oligarchs regularly command the economy and the political framework) appear to be run for the couple of.
For the many, paradoxically, there has been just common stagnation, with discouraged business and deteriorating compensation. The subsequent financial uncertainty for the working and white collar classes is generally intense in Europe and the eurozone, where in numerous nations populist parties mostly on the extreme right beat standard powers in a weekend ago’s European parliament political decision. As during the 1930s, when the Great Depression offered ascend to dictator governments in Italy, Germany and Spain and a comparative pattern presently might be in progress.
Indeed, even in the US, the monetary frailty of an immense white underclass that feels undermined by migration and worldwide exchange can be found in the rising impact of the extraordinary right and Tea Party groups of the Republican party. These gatherings are described by financial nativism, against migration and protectionist leanings, strict zeal, and international noninterference.
In Asia, as well, patriotism is resurgent. New pioneers in China, Japan, South Korea, and now India are political patriots in areas where regional questions stay genuine and since quite a while ago held recorded complaints putrefy. These pioneers just as those in Thailand, Malaysia, and Indonesia, who are moving in a comparable patriot course must address major basic change difficulties in the event that they are to restore falling monetary development and, on account of developing markets, maintain a strategic distance from a center salary trap. Monetary disappointment could fuel further patriot, xenophobic propensities and considerably trigger military clash.
The Middle East stays an area buried in backwardness. The Arab spring activated by moderate development, high youth joblessness, and across the board monetary franticness has offered path to a long winter in Egypt and Libya, where the options are an arrival to tyrant strongmen and political confusion. In Syria and Yemen, there is affable war; Lebanon and Iraq could confront a comparative destiny; Iran is both flimsy and risky to other people; and Afghanistan and Pakistan look progressively like bombed states.
In these cases, monetary disappointment and an absence of chances and trust in poor people and youthful are fueling political and strict fanaticism, hatred of the west and, at times, out and out fear based oppression.
During the 1930s, the inability to forestall the Great Depression enabled tyrant systems in Europe and Asia, in the end prompting the subsequent universal war. This time, the harm brought about by the Great Recession is exposing most exceptional economies to common stagnation and making major basic development challenges for developing markets.
This is perfect territory for financial and political patriotism to flourish and prosper. The present reaction against exchange and globalization ought to be seen with regards to what, as we probably am aware as a matter of fact, could come straightaway.
Ques-3 The role of Corporate Social Responsibility (CSR) in global organizations:
The term corporate social obligation (CSR) first showed up in response to the worldwide difficulties, for example, environmental change, money related emergencies, increasing exchange and ventures, that began to advance in the universal circle. Organizations have started to understand that other than increasing monetary benefit they should assume liability and join activities into their plans of action to tackle neighborhood or even worldwide issues and improve social prosperity.
Definition: Corporate social obligation is self-guideline by an organization with the goal of grasping duty regarding the organization’s activities and making a positive effect through its exercises on its clients, workers, networks and nature. An organization may incorporate with its strategic, and regular activities components that serve to advance explicit objectives, for instance, utilizing reused paper or natural hand cleanser in the workplaces to help spare the earth.
Advantages for the Company: Albeit direct impacts haven’t been demonstrated and much analysis has ascended around CSR, organizations distinguish some undeniable advantages. Actualizing the qualities and objectives of CSR improve the judgment and notoriety of the business among clients. In a solid, serious market it likewise makes the business stand apart from its opponents. CSR may likewise provoke current and possible representatives to subscribe to the organization and advance its qualities in their private lives
R5
Class,
Globalization like anything else has its own set of pros and cons. On the outside, globalization can be given credit for opening boarders while connecting cultures and politics. On the other hand, it can be viewed as a problem that has disrupted local economies and has eliminated jobs (Burlacu, et al, 2018) Globalization benefits both businesses and individual people by making goods and services more readily available at lower prices. What I have seen viewed as a controversial topic is that globalization can reduce poverty in developing countries. On one side, globalization does create jobs for developing countries but on the other side comes the arguments regarding the quality and quantity of jobs created. Globalization has done a great job connecting the world together and increasing cultural awareness and values of people in other countries across the world. When looking at the cons for globalization, the main topic that comes to mind or I hear most referenced, is that workers can lose their jobs to countries who can provide lower labor costs. Given that globalization occurs throughout most of the world, is has yet to establish permanent protective labor or human rights within the system.
Corporate social responsibility (CSR) is self-regulation by a global company with the objective of embracing responsibility for the company’s actions and creating a positive impact through its activities on its customers, employees, communities, and the environment (Contributor, 2020). CSR plays a crucial role in a companys brand perception; attractiveness to customers, employees, and investors; talent retention; and overall business success.
– Kevin
References:
Contributor, C. (2020, September 4). Corporate Social Responsibility in international marketing. Small Business – Chron.com. Retrieved June 6, 2022, from https://smallbusiness.chron.com/corporate-social-r…
Sorin Burlacu, Corneliu Gutu, & Florin Octavian Matei. (2018). GLOBALIZATION PROS AND CONS. Calitatea, 19(S1), 122125.
R7
When I went to the Bureau of Labor and Statistics website for the inflation calculator, I received an error saying to reduce the number to less than $10,000,000. The website I was able to find the data on said that 1.4 billion dollars in 1937 is worth $28,107,819,444.44 today (in2013.com, n.d). The average inflation rate over the past 85 years is approximately 3.59% annually (in2013.com).
I was able to use the Bureau of Labor and Statistics for this calculation because it was under $10,000,000. To maintain the same purchasing power today as $1,000,000 in 1945 you would need to have $16, 242,078.65 today (BLS.gov, n.d.).
$1 in 2052 will be worth $6.98 if the inflation rate remains the same 6.69 percent for the next 30 years (in2013.com, n.d.). Seeing how inflation has risen over the past few years has been really eye opening. I knew that the cost for everyday items has increased significantly but seeing it calculated is crazy!
References:
$1,400,000,000 in 1937 ? 2022 | Inflation calculator. (n.d.). U.S. Inflation Calculator: 1635?2022, Department of Labor data. Retrieved June 8, 2022, from https://www.in2013dollars.com/us/inflation/1937?amount=1400000000
2052 inflation prediction | Future inflation calculator. (n.d.). U.S. Inflation Calculator: 1635?2022, Department of Labor data. Retrieved June 8, 2022, from https://www.in2013dollars.com/us/inflation/2022?endYear=2052&amount=1&future_pct=0.0669
CPI inflation calculator. (n.d.). U.S. Bureau of Labor Statistics. Retrieved June 8, 2022, from https://www.bls.gov/data/inflation_calculator.http
R8
Weighted Average Cost of Capital (WACC) is an organizations average capital from all sources. The sources of capital come from stocks, bonds, and other debts which in turn lets the organization what their rate of return should be. Weighted Average Costs are used by organizations to determine the best source of acquisition or procurement sources for a project.
The higher the WACC is, shows that the organizations credit history is shaky or has some issues, meaning the risk and cost is much higher. A lower WACC indicates the organization has good or excellent credit which in turn provides investors with low risks and costs.
Reference:
Hargrove, M. (2022, May 2). How to calculate the weighted average cost of capital (WACC). Investopedia. Retrieved June 8, 2022, from https://www.investopedia.com/terms/w/wacc.asp#toc-who-uses-weighted-average-cost-of-capital