Cry, the Beloved Country Essay Example | Topics and Well Written Essays - 750 words

Cry, the Beloved Country - Essay Example The novel’s setting is in South Africa. This article will review a clear plot of the novel by including some short text quotes. The essay will also discuss some of the themes portrayed by the main character in the novel. The novel was published before the apartheid system was implemented in South Africa. Basing on the book, one can tell that the village dwellers led a desolate life. The setting of the story is in South Africa where the main themes of the book are presented. Paton portrays the book as a social gripe against the societal structures that later led to the rise of apartheid (Paton 1). In his view, he tries to establish a purposeful analysis of what is entailed in the black society. According to his judgment, the black society endured from moral concerns and social volatility while, on the other hand, the whites were affected by native crime. These factors were influenced by the breakdown of the tribal organization, crime and migration of individuals to urban center s (Paton 1). The book’s chronicles reveal Paton’s message through themes like reconciliation, inequality, injustice and Christianity. Paton clearly reveals how reconciliation between members of a family is of vitality in reuniting the family members. On the one hand, inequity and injustice are based on the same category whereby, these issues are prevalent in the setting of the book. Paton presents the village life as desolate since the local government was not funding community projects in the area. In essence, the whites had brought tragedy to their homeland. Paton states â€Å"The tragedy is not that things are broken. The tragedy is that they are not mended again. The white man has broken the tribe† (Paton 23). This was a revelation of how tragic the whites had turned out to be even in countries inhabited by the Africans. In addition, Paton also features on the detrimental effects of the characters fear in relation with the South African society. He presents the fear in his characters in chapter 12 where he says, â€Å"For fear will rob him of all if he gives too much†. Even though fear is prevalent in this society, some characters were able to overcome it through their abilities. The portrayal of Stephen Kumalo in the novel depicts his courageous nature while facing worldly challenges. This can be established from his search of Gertrude; his immoral sister, and his son who was involved in murder and other shameful acts in the city of Johannesburg. The book presents this as a journey for Stephen when Paton writes â€Å"The journey had begun. And now the fear back again, the fear of the unknown, the fear of the great city where boys were killed crossing the street, the fear of Gertrude’s sickness† (Paton 13). The narrator shows the Christian religion in the novel as a significant theme that was incorporated in the strangles of injustice. This reveals quite a vital lesson to readers in general. The presentation of Chr istianity in the setting of this publication was unjust and also resulted from the invasion of the whites in the country. Even though the religion factor helped characters like Stephen to face tremendous hardships, the religious world was incorporated in unjust ways. Paton is quick to reveal the unjust acts involved in Christianity. He notes that the black priests were paid less wages as compared to whites. This reveals that even though the white priests were living luxurious lives, they were rooted in injustice. These acts had placed the needy community in the wrong leadership hands. In

Corporate finance Essay Example | Topics and Well Written Essays - 2750 words - 1

Corporate finance - Essay Example The important role of SMBs is evident when the economies of the developing nations are considered. SMBs contribute greatly to the gross domestic product in a country, entrepreneurial skill development, generation of employment and innovation to many developing economies. In light of this, the paper will critically analyze the various sources of financing for small and medium scale businesses Due to the good impact of SMBs in the economy of a country, support schemes and programs have been put forth in institutions by some of the developed and developing countries so as to support them (Prasad, C. 2004). This support includes offering loans, expert counseling on the types of credit so as to avoid credit risk, advice and legal assistance on exports by the government of the United States of America through small business administration. For instance, in the late 80s the Nigerian Government established the Entrepreneur Development Programme through the National Directorate of Employment, the objective of this policy was to reduce unemployment level through providing an opportunity for individuals to acquire entrepreneur skills. Further they would be able to secure loans for themselves so that they can start their own small and medium scale enterprises (Dinesh, 2003). Another case was in Mexico whereby the Mexican Development Fund was established so as to provide an arrangem ent of finance to aid agricultural activities. Despite such efforts, investigations reveal that the SMBs are still facing major challenges. Some of the SMBs cannot easily access funds thus posing a major threat to their existence in terms of growth and survival. Ekpenyong and Nyong (1992) states that in some countries like Ghana for example, financial schemes have been launched. They include Micro-finance, venture capitalist trust, and small loan centers among others. Others are export development, Investment Funds and

Exploration of The Cultural Challenges that French Companies Face in Essay

Exploration of The Cultural Challenges that French Companies Face in Attempts to Penetrate the Italian Market - Essay Example This study tackles significant considerations of the unique characteristics that the French and the Italian markets respectively have, the latter being the new one to be explored and developed. Such process is very necessary in order to determine what effective sales approaches have to be applied in the Italian market. An existing and working marketing scheme in France may not be viable or practicable in Italy. The advertising concepts and drives used by the company in France may not gain acceptance from the people of Italy. The This research study is limited to the presentation and exploration of the cultural issues in international marketing within the selected focus setting and in concept, theory and exemplifying scenarios. The research will be exhaustive in its conceptual thrust as well as in the material used to substantiate presented arguments, claims, points, ideas and perspectives among other positions. The core objective of this study is to illustrate my skills in the domains of marketing and cross-culture communication as a way of soliciting for related career opportunities in the U.S.A, Italy or in any English-speaking country. This study has been made in order to be read and understood by American audience. The endeavor is in tandem with the skills acquired during my course majoring in "international trade and marketing" at ESC Chambery Business School and the MBA pursued at the BMU.

Classical Music Essay Example | Topics and Well Written Essays - 750 words

Classical Music - Essay Example The Enlightenment Period is characteristic of its close association to the major changes that took place in the arts. It was this period during which balance, order and structure was infused into the arts. Composers were highly impressed and gradually aspired to maintain a perfect order and balance in their music. The Classical Period (1750 - 1820) (Music History) saw artists and musicians slowly wean away from the richly bottom and styles of the Baroque period and adapted a new style that was uncluttered which catered to the realm of elegant music that was made up of a simple but systematic form and structure with good melody and perfect harmony. The music in the Classical period was filled with a lot of emotion and feelings in addition to being lighter and more personal instead of intellectual. This style was a great attraction to the composers of that time who imbibed the Classical music style which possessed greater clarity, depth in addition to simpler structures and formal mode ls. A good example of such a composition was Mozart's creation of the 'Comic Opera' which became very popular during the Classical period. During the period of the Renaissance music took a lot of liberty in making use of the musical form. During the 1300s French and secular music was quite popular. In 1330 An Italian school of music was developed in areas such as Verona, Padua and Florence etc. with composers improvised lyrics to the accompaniment of instruments such as the viola and lute. In course of time such experimentation led to a new development of contrapuntal music. (The Columbia Encyclopedia, Sixth Edition) As humanism spread far and wide, gradually sacred music broke away from the confines of the Papacy which gave birth to a new school of composers who mastered the art of polyphony after having been trained in the Netherlands. Mozart's Contribution to Classical Music It was during the Classical Period that the great composer Wolfgang Amadeus Mozart (Harold C. Schonberg. W. W. Norton, 1997) lived. His father Leopold Mozart (1719 - 1787) who was a great violinist at the court of the Archbishop of Salzburg greatly encouraged his son by enhancing his musical skills. Mozart visit child prodigy who achieved much from a very young age. He was a genius par excel lance who dazzled his audiences. In 1782 Mozart composed the 'Singspiel Die Entfhrung aus dem Serail (The Abduction from the Seraglio), (Jan Swafford, 1992) and thereafter was no turning back as Mozart composed one masterpiece after another in different forms and genres. In fact he is on the composer to have created undisputed masterpieces that belonged to every musical genre of his times. Mozart's 'serenades, divertimenti and dance' written for the nobility became synonymous with the "Classical "age of elegance," His Serenade in G major, which the composer called Eine kleine Nachtmusik (Jan Swafford, 1992) which means 'A little night music', was the highlighted as his best. Mozart's contribution to music during the Enlightenment Period cannot be explained when considering its depth and vastness. He was a regular at the court of Emperor Joseph II (1741-1790) in Vienna where much of his greatest music was the victim. Some of His greatest works include

Combustion of a series of Alcohols Essay Example for Free

Combustion of a series of Alcohols Essay The larger the surface area over which the reaction can occur, and the faster the reaction rate. This is because small particles have a large surface area in relation to their volume more particles are exposed and available for collision this means more collisions take place so the reaction is faster. Oppositely large particles have small surface area in relation to their volume fewer particles are exposed and available for collisions. This means less collisions and a slower reaction. To ensure that my test will be fair I have to keep all these factors the same except for one, the concentration. I will have to control the temperature of the room; the particle size will be same as I will shake the substance so it will be equally diffused. Hypothesis I predict that the higher the concentration of hydrochloric acid the faster the reaction occurs. The lower the concentration the slower the reaction is. Supporting information I base this hypothesis on the collision theory as I know that concentration affects the reaction greatly. This is because when there is a higher concentration the particles are closely packed together and there are more successful collisions occurring, thus making the reaction happen quicker. Preliminary For my preliminary I have used various concentrations of hydrochloric acid and 4cm of magnesium ribbon. The concentrations that I decided to experiment was he reason why I am doing a preliminary experiment is so that I know which concentrations of hydrochloric acid to use that would make my experiment more convenient. For the actual preliminary experiment I reacted hydrochloric acid with magnesium ribbon to see how long it took. I did this by watching when the magnesium ribbon had stopped reacting and disappeared. Although I was just using this method to find out how long a particular concentration took to finish reacting I attached a glass syringe to my conical flask to observe how much hydrogen was being produced, so that I could be prepared when it came to doing my actual experiment. The table below shows the amount of hydrochloric acid and water I used for a certain percent and the time taken for the magnesium ribbon to fully stop reacting. Volume of HCL (ml) Volume of H2O % of concentration Time taken for the mg ribbon to disappear (in seconds). From looking at the information from my preliminary I have decided to use the following concentrations for my actual experiment: 20%, 40%, 60%, 80%, 100%. The reason why I have decided to use these percentages of concentrations is because even though it shows a variety it will not be as time consuming as 10% concentration of hydrochloric acid took 1205 seconds which was approximately 20 minutes. 10% concentration took so long that I didnt have enough time, there for I left it anonymous. I also realised that even though I experiment 20% of hydrochloric acid it will still take long, there for I decided to lower the amount of magnesium ribbon so I decided to use 3. 5cm instead of 4cm. From doing my preliminary I have decided to repeat my experiment 3 times because this will give me a more reliable results to choose from and an average. This also will be less time consuming then repeating it 5 times. The preliminary experiment also helped my produce a better plan because I learnt that for 100% of concentration the reaction takes place quite quickly there for watching the stop watch had to be done very quickly but correctly. Plan: The apparatus that I will be needing for experiment and why: 3. 5cm of magnesium ribbons to react with HCL Stop watch to measure how long it took for the magnesium ribbon to stop reacting. Hydrochloric acid (1m) to react with the magnesium ribbon Measuring cylinder to measure the concentration of H20 and HCL Pipette to measure smaller concentrations of H20 and HCL Retort stand to hold the syringe Conical flast for the reaction Thermometer to measure room temperature Syringe to measure the volume of hydrogen produced Ruler to measure 3. 5cm of magnesium ribbon Scissors to cut the magnesium ribbon Distilled water to add with the concentrations of HCL Sand paper to sand the magnesium ribbon 1. I will firstly collect all the equipment needed for my experiment, then measure them to the exact measurement. I will start with 100% concentration of hydrochloric acid which will contain no distilled water and 10ml concentration. I will then measure my magnesium ribbon to 3. 5cm and sand it 8 times on each side making sure it is fair. Using the measuring cylinder and pipette I will put my hydrochloric acid into the conical flask. 2. To ensure that the magnesium ribbon doesnt get stuck I will coil the magnesium ribbon with a clean sterilised ruler. 3. I will then attach the syringe onto the retort stand. Then I will attach my conical flask with the syringe. 4. Because I want this test to be fair I cannot do it on my own so my partner will start the stopwatch as soon as I drop the magnesium ribbon into the hydrochloric acid. Then I will seal the conical flask with the cork. 5. Every 10 seconds my partner will tell my the time on the stop watch and then I will look at the syringe to see what the volume of gas produced is. I will note this down very quickly. 6. After the reaction has fully stopped. I will empty the conical flask, then start the same process again but for 80% concentration which is 8ml of hydrochloric acid and 2ml of distilled water. This process will happen for all 5 concentrations. 7. After experimenting all 5 concentrations I will repeat the same process 3 times to ensure my results are fair and reliable. Keeping my experiment fair: making sure all equipment is clean from unwanted substances. sanding the magnesium ribbon same times on each side. hile my partner starts stop watch, I quickly drop magnesium ribbon so it is done at the same time. Use the same length of magnesium ribbon, checking it is exactly 3. 5cm. Safety issues:aking sure I wear my goggles at all times. Tying hair up. Tuck in stalls, and stand up during experiment. Making sure I handle all the equipment correctly. If there is any spillage, quickly wiping it with paper towels. Obtaining evidence: 100% Time (sec) Volume 1 Volume 2 volume 3 Average 1.To find my average number of hydrogen produced I added the 3 volumes together then divided by 3. The answer most close I decided was my average. Show preview only The above preview is unformatted text This student written piece of work is one of many that can be found in our GCSE Patterns of Behaviour section.

Benefits of Work Psychology to Employees

Benefits of Work Psychology to Employees Is Work Psychology an Important Factor in Controlling Violence, Safety And Health Conditions In The Working Place? Boodhoo Zohyah Bibi Shaheena Introduction Work psychology refers to the study of human behavior in the working environment. The key role of work psychology is to understand the conduct of employees in order to promote the smooth running of any organization. Understanding work psychology may have a number of benefits to an organization as it focuses on increasing the organization’s productivity and also the psychological and physical wellbeing of employees. The task of a work psychologist is to study worker’s attitudes and also conduct leadership training. Workplace violence, in terms of occupational health and safety, is one of the most important problems of working life. Richards (2003) defined as â€Å"Incidents where staff are abused, threatened or assaulted in circumstances related to their work, including commuting to and from work, involving an explicit or implicit challenge to their safety, well-being or health† Workplace violence includes not only physical but also non-physical violence. For example; workplace violence includes physical assault, homicide, robbery, verbal abuse, bullying/mobbing, swearing, shouting, sexual and racial harassment, name calling, threats, interfering with work tools and equipmentWorkplace violence negatively affects not onlythe direct victims of such behavior, but also thosewho witness such violence. To witness violence of any sort in the workplace may cause concern toworkers that they themselves may face this type of violence in the future. Studies have shown that thefear of violence creates a negative relationship between emotional wellbeing and somatic health There is a certain way individuals behave in a particular situation. No two individuals behave in similar ways. There are individuals who find it difficult to handle stress whereas there are certain individuals who have the ability to face unforeseen circumstances with a smile. Employee behaviour is defined as an employee’s reaction to a particular situation at workplace. Employees need to behave sensibly at workplace not only to gain appreciation and respect from others but also to maintain a healthy work culture. One needs to adhere to the rules and regulations of workplace. Remember, Office is not a place where you can shout on fellow workers, spread rumours, criticize your Boss and so on. You just can’t afford to be rude with your team members. Be polite and speak softly. Do not forget that you are not the only one working; there are other people around as well. Some people have a tendency to have their lunch at their workstations only. Such a behaviour is completely unprofessional. Male employees need to respect their female counterparts. Never ever think of sexually harassing your female team members. Such a behaviour is unethical and not at all acceptable at workplace. One complaint from them and your career is finished. Avoid making lewd comments, physical advances or touching them. An individual’s behaviour has lot to do with his upbringing and family background. A child who has been brought up in a decent family where females are respected and thought to be equal would never even in his wildest dreams think of abusing female colleagues. It is completely unethical to steal office property. Why do you have to take office stationery to home? Office stationery (pens, pencils, stapler, eraser, punching machine, glue and so on) are meant to be used only in offices and nowhere else. Avoid damaging office property. Remember, if you do not respect your organization, you will not get respect in return. Employees need to understand that some information is confidential and should not be discussed with anyone. Never break your manager’s trust. Do not disclose your team’s strategies or internal policies to others just because they are your friends. Some people tend to submit fake bills to claim more money than actual. Individuals with such a behaviour find it extremely difficult to survive in the long run. What is the use of submitting wrong bills? Believe me, if you are caught, you will lose in your job in no time. Such a behaviour will not only tarnish an individual’s image but also speak ill of his family background and upbringing. Why do you have to use your office computer for online shopping, watching movies, paying cell phone bills, internet bills and so on? Do not store your personal photographs or information in office computer. Avoid browsing objectionable websites at workplace. If your office people have blocked certain sites, they must have done it for some reasons. Please do not try to open blocked sites using through proxy server and fake passwords. Rather than wasting our energy on unproductive things, it is always good if we concentrate on our work Today, violence is commonly observed in allraces and cultures. Violent incidents in theworkplace which negatively affect employees’health and safety present an important problem of health and safety at work. Being exposed to violentincidents at work or being a witness to violence hasa negative effect on employees’ feelings towardstheir work and the organisation. Additionally thesetypes of violent incidents can be a reason for negative outcomes in the workers’ physical and psychological health.Employees’ perceptions of organisational policies, procedures and practices directed towardscontrolling and removing workplace violence andaggression, stated as violence prevention climate, isan important concept in the effect on workers’health caused by workplace violence.Organisational policies and procedures directedtowards preventing and controlling workplaceviolence and aggression create a positive violenceclimate.According to the results a significantrela tionship was determined between employee jobsatisfaction and the influence directed to thesubdimensions of a violence prevention climate of policies, practices and unsafe practices. A study byKessler et al. (2008) determined a significantrelationship between job satisfaction and these threedimensions [20].While a significant negative correlation wasdetermined between depression and thesubdimensions of violence prevention climate policies and practices, no significant relationship was found between pressure for unsafe practicesand depression. A significant negative correlationwas determined between stress and thesubdimensions of violence prevention climate practices, no significant relationship was found between policies and pressure for unsafe practicesand depression. No significant relationship wasfound between violence prevention climatedimensions anxiety. In a study by Spector et al.(2007) a significant relationship was determined between the perceived violence climate anddepress ion and anxiety [19]. While research byKessler et al. (2008) showed a significantrelationship between practices and pressure, nosignificant relationship was determined between policies and depression [20]. The same studydetermined a significant relationship between practices, pressure and anxiety.Furthermore, the stepwise regression analysisresults determined a significant relationship between practices and pressure for unsafe practicessubdimensions and job satisfaction. According tothis, organisational practices directed towardsreducing violent incidents in the workplace (eginformation and training on the subject of violence)and there being no pressures towards unsafe behaviour (eg violence prevention policies and procedures not being ignored) play a role inincreasing job satisfaction. The stepwise regressionanalysis results also determined a significantrelationship between the dimension of practices anddepression. According to this result, the practice of the organisation giving i nformation and training onworkplace violence prevention is effective inreducing the rate of employee depression. Hawthorne Experiment Details Over the course of five years, Mayo’s team altered the female worker’s working conditions and monitored how the change in working conditions affected the workers morale and productivity. The changes in working conditions included changes in working hours, rest brakes, lighting, humidity, and temperature. The changes were explained to the workers prior to implementation Hawthorne Experiment Results At the end of the five year period, the female worker’s working conditions, reverted back to the conditions before the experiment began. Unexpectedly the workers morale and productivity rose to levels higher than before and during the experiments. The combination of results during and after the experiment (ie the increase in the workers productivity when they were returned to their original working conditions) led Mayo to conclude that workers were motivated by psychological conditions more than physical working condition Psychological Contract There is an unwritten understanding between the worker and employer regarding what is expected from them; Mayo called this the psychological contract. Interest in Workers A worker’s motivation can be increased by showing an interest in them. Mayo classified studying the workers (through the experiments) as showing an interest in the workers. Work is a Group Activity Work is a group activity, team work can increase a worker’s motivation as it allows people to form strong working relationships and increases trust between the workers. Work groups are created formally by the employer but also occur informally. Both informal and formal groups should be used to increase productivity as informal groups influence the worker’s habits and attitudes. Social Aspect of Work Workers are motivated by the social aspect of work, as demonstrated by the female workers socialising during and outside work and the subsequent increase in motivation. Recognise Workers Workers are motivated by recognition, security and a sense of belonging. Communication The communication between workers and management influences workers’ morale and productivity. Workers are motivated through a good working relationship with management. Conclusion The traditional view of how to motivate employees is that you offer monetary rewards (pay increases, bonuses etc) for work completion. However the Hawthorne experiments may suggest that motivation is more complicated than that. Advocates of the Hawthorne Effect will state that the Hawthorne experiment results show that motivation can be improved through improving working relationships and social interraction References Work-related violence: Case studies Managing the risk in smaller businesses HSG229 HSE Books 2002 ISBN 0 7176 2358 0  http://www.hse.gov.uk/pubns/indg69.pdf National Institute for Occupational Safety and Health Education and Information Division  http://www.cdc.gov/niosh/topics/ohp/ S. Aytaà § and S. Dursun / The Effect on Employees of Violence Climate in the Workplace  http://www.academia.edu/1477474/The_effect_on_employees_of_violence_climate_in_the_workplace Munchinsky, P. M. (2000). Psychology applied to work: An introduction to industrial and organizational psychology (6th ed.). Belmont, CA: Wadsworth Wuang, M. (2007). Industrial/Organizational Psychology. In Discovering Psychology (4th ed.). Hockenbury Hockenbury. Worth Publishers: New York. http://psychology.about.com/od/iopsychology/f/organizational.htm

The Importance Of Capital Gearing Finance Essay

The Importance Of Capital Gearing Finance Essay Financing and investment are two major decision areas for a company. In the financial decision, the company concerns with determining the best capital structure. There are only two ways that a business can raise money debt or equity. With the right option, the business can minimize its cost and maximize company value. Bos and Fetherston (1993) described that determining debt and equity is an important financial decision faced by companies. The relationship between debt and equity is considered as capital gearing. Hence, in this report, the gearing ratio and its influence to WACC, company value and shareholder wealth will be assessed through the two major theories. Capital Gearing Capital gearing is a term describing the relationship between debt funding and equity funding in a company (Financial Management, 2007). The simplest formula for gearing ratio = (%) For example, ABC Ltd has  £1,000 of debt and  £2,500 of total assets. Thus, capital gearing of this company is: = 40% According to NGFL Wales Business Studies (2009), a company with high gearing is the one who has most of the funding coming from borrowing. It leads to reduced profits available to shareholders because of the increase in interest rate. Moreover, if interest rate increases, the financial costs of business will also go up, thereby total costs of business will rise. However, if a company has a high gearing, it is not really a bad thing. The company may need more money for their expansion activities, taking the opportunity to invest by borrowing at low rates. By using capital from borrowing, the company can take advantage of tax shields. A company with low gearing is the one who has most of the funding coming from investment of shareholders. It proves that the company is developing through reinvestment of profits, minimizing risk (NGFL Wales Business Studies, 2009). For example, in 2009, Apple Inc had Total debt/equity also known as gearing ratio at 0% (ADVFN, 2010). However, low gearing may indicate that the company is not aggressive enough to survive, and may not be seeking opportunities for growth (Pham, 2009). Thus, according to Accounting for Management (n.d.), the importance level of capital gearing is subject to various views. Effects upon WACC, company value and shareholder wealth Debt and equity Debt and equity are the two major sources of funds for a company. So, using of debt and equity proportions are the measurement tools for capital structure. (Glen and Pinto, 1998) In fact, cost of debt is generally less expensive than cost of equity. Nemethy (2010) provided two major reasons for that. Firstly, debt is a secured loan, which may be seized by the lender when the borrower cannot payment their loans. Meanwhile, equity is an unsecured loan because the shareholder cannot seize anything, they only have the right to vote at a shareholders meeting. Thus, an unsecured loan has to a higher interest rate than a secured loan. In other words, cost of equity is expensive than cost of debt. Secondly, Nemethy (2010) said that when the company issues debt in the form of bonds, they pay interest out to their investors, this interest has to be deducted by taxation. It is also called the debt tax shield. Conversely, when the company issues equity, they pay out dividends. These dividends represent corporate income, and they are subject to double taxation: one time by corporation and another time by shareholders. Thereby, the cost of debt is less than the cost of equity. With the two major reasons above, virtually all companies prefer to use debt than equity. However, the increase of debt leads to the increase of risks because when the company borrows money, they would be dependent on the lenders. UoS (2007) stated that a highly geared company may also experience difficulties in attracting fund from investors, who are not attracted by the risks involved in a high-geared company. At that time, the market price of the companys shares will fall. So, the company should choose debt or equity, and the influence of capital gearing to WACC, company value and shareholder wealth. We will assess this problem based on the two theories. The traditional view Modigliani and Miller The traditional view The traditional view of capital structure theory, based on observation and intuition, suggests that an optimum capital structure exists (Cornelius, 2002). In other words, the capital structure of a company has effected on the cost of capital. The more debt in the capital structure of a company, the lower of WACC is. The weighted-average cost of capital (WACC) represents the overall cost of capital for a company, incorporating the costs of equity, debt and preference share capital, weighted according to the proportion of each source of finance within the business (Cornelius, 2002). The formula to calculate WACC: WACC = [ x ] + [ x ] For example, a company has an issued share capital of 1,000 ordinary  £1 shares. The company wants to buy two machines with the price of a machine as  £1,000. As mentioned above, cost of debt is generally less expensive than cost of equity, so, we can assume that cost of debt = 15% and cost of equity = 20%. To buy two machines, the company needs to have  £1,000 for the second machine. There are two options for the company. Option 1: Issuing share (ungeared company) It means that the company will have 2,000 shares in total with  £1 per share. â‚ ¬Ã‚ ¢ Total equity = 2,000 x  £1 =  £2,000 = Total assets = 0% = 20% x = 20% Option 2: Borrowing (geared company) In this option, the company has  £1,000 from initial issuing shares and  £1,000 from borrowing with 15% of interest. â‚ ¬Ã‚ ¢ Total debt = Total equity =  £1,000 Total assets = Total debt + Total equity = 1,000 + 1,000 =  £2,000 = = 0.5 or 50% = [15% x ] + [20% x ] = 0.075 + 0.1 = 0.175 or 17.5% It is clear that when the gearing capital of a company increases, its WACC will decrease. According to Watson and Head (2006), the market value of a company is equal to the present value of its future cash flows discounted by its WACC. Market value of a company = Thus, when WACC of the company decreases, assuming that other factors are constant, the market value of the company increases, in other words, the company value and shareholder wealth increase. The traditional view is usually represented as follows. According to UoS (2007), from all equity financing, WACC first declines because debt financing is cheaper. At higher level of debt (beyond X), cost of equity increases because of higher risks out weights the advantage of cheaper debt financing. Hence after X, the WACC will rise. X will be the optimal debt ratio, where the company will minimize its cost of capital and the company value is maximized. In conclusion, gearing capital is very important because it effects to WACC, company value and shareholder wealth of a company. Modigliani and Miller view In 1958, American academics France Modigliani and Merton Miller (MM), presented a radically different view of capital structure theory. They demonstrated that two companies with identical investments would have the same value, regardless of their gearing capital (Cornelius, 2002). As a result, there is no optimal capital structure for a company. MMs propositions can be presented as follows. MMs proposition (without tax) UoS (2007, p.274) argued that with the same size and the same level of business risks of two companies: one company was ungeared company, another one was geared company. The value of an ungeared company equals value of equity in an identical geared company plus value of borrowings in an identical geared company. Therefore, the only factors that influence the value of a company are risk and return. Returns required by shareholders as reward for risk, , will increase at a constant rate as gearing increases due to the perceived increased financial risk. The rising would exactly offset the benefit of the additional cheaper debt in order for the WACC to remain constant. Lenders have security for their debt so they will not feel at risk whatever the level of gearing; therefore, is constant (ACCA F9 Financial Management: Study Text, 2009). This can be shown as a graph. The WACC, the total value of the company and shareholder wealth are constant and unaffected by gearing levels. No optimal capital structure exists. For instance, there are two companies with the same size and the same level of business risk: one company was ungeared company, another one was geared company. One machine got back  £200 profit yearly. The data of the two companies as follows. Ungeared Company Geared Company Share capital  £1,000  £1,000 Debt  £1,000 Machines 1 2 EPS at  £200 profit level 0.20p 0.25p If the investor in an ungeared company borrows  £1,000 at 15% interest, after buying the second machine, that company has the profit =  £200 x 2 =  £400. â‚ ¬Ã‚ ¢ EPS = = 0.4 p After receiving dividends from ungeared company, that investor has to pay interest for the lender with 15% interest per  £1. Hence, the actual return that investor can receive = 0.4 [15% x 1] = 0.25 p. This is the same return as that expected by shareholder in geared company and it had been created entirely by the ungeared shareholder. Therefore, in this proposition, capital gearing does not effect to the WACC, company value and shareholder wealth. MMs proposition (with tax) Because interest is tax-deductible, the use of debt finance gives rise to a tax saving (Cornelius, 2002). In 1963, MM developed a second version to take account of taxation. MM argued that the value of a geared company was the value of ungeared company plus the present value of any tax shield generated by using debt finance. = + T With:: The value of geared company : The value of ungeared company : The market value of debt T: Corporate tax rate With tax, MM view can be represented as below. According to ACCA F9FM (2009, p.1111), remains constant whatever the level of gearing. Likely as MMs proposition without tax, increases as gearing levels increase to reflect additional perceived financial risk. Because interest on debt is tax-deductible, WACC will fall when gearing increases. And: = x [1 ] = + (1 T) ( ) : cost of equity in an ungeared company : cost of equity in a geared company : cost of debt , : market value of debt and equity in the geared company T: corporate tax rate For example, considering two companies, one ungeared and another geared, both of the same size and level of business risk. Ungeared Company Geared Company  £  £ EBIT 1,000 1,000 Interest (200) PBT 1,000 800 Corporation Tax @25% (250) (200) Dividends 750 600 Returns to the investors Equity 750 600 Debt 200 750 800 Suppose that the business risk of the two companies requires a return of 10% and the return required by the debt holders in geared company is 5%, locking at the table above, tax relief on debt interest (also known as tax shield) in geared company = 800 750 =  £50 For ungeared company Market value of ungeared company will be the market value of equity. It will be the dividend capitalized at the equity holders required rate of return. = 750/0.1 =  £7,500 = 10% For geared company Market value of the equity of geared company is determined by the equity shareholders analysis of their net operating income into its constituent parts and the capitalization of those elements at appropriate rates = [ ] = ] =  £4,500 Market value of debt is determined by the debt holders capitalizing their interest at their required rate of return. = =  £4,000 â‚ ¬Ã‚ ¢ Total market value of geared company = 4,500 + 4,000 =  £8,500 According to MMs proposition with tax, it has: = + T = 7,500 + (4,000 x 25%) =  £8,500 Cost of equity in a geared company: = = = 13.33% = 5% x (1 25%) = 3.75% â‚ ¬Ã‚ ¢ = 13.33% x + 3.75% x = 8.82% According to MMs proposition: = x [1 ] = 10% x [1 ] = 8.82% And = + (1 T) ( ) = 10% + (1 25%) (10% 5%) (4,000/4,500) = 13.33% as per the dividend valuation model above. Thus, under MM theory with tax, there is an optimal gearing level at 100% debt in the capital structure. This is not true in practice because companies do not gear up to 100%. In his research, Cornelius (2002) argued that, in the real world, companies do not raise their gearing ratios to such extreme levels because the high levels of gearing may lead to higher risk of liquidation. Hence, for this proposition, there is no optimal gearing structure, in other words, WACC, company value and shareholder wealth do not depend on the level of capital gearing. The drawback of the two theories According to UoS (2007), both of the two theories may seem to be based on unrealistic assumptions. For traditional view, they ignored taxation, companies have complete choice between debt equity finance, and can change this decision quickly and without cost. It is impossible in the real world. The company could change their decision but it has cost and not quickly. For MM, it was built with assumptions that no transaction costs and individuals or corporations can borrow money at the same rate. In fact, individuals and companies cannot borrow at the same rate, since companies usually have a higher credit rating. Therefore, personal debt usually costs more than corporate debt and is riskier. Moreover, the theory does not mention the issue of bankruptcy costs and other agency costs, as well as personal income tax. Conclusion In conclusion, according to traditional view, gearing capital is very important because the changing of gear may lead to changes of WACC as well as company value and shareholder wealth. If gearing capital increases, WACC will fall. It leads to the increase of profits, in other words, company value will increases. Theoretically, there is an optimal capital structure, in which, the company will minimize its cost of capital and the company value is maximized. In fact, it hasnt found an optimal capital structure yet. Conversely, based on MM theory, it argued that the two companies with the same size and the same level of business risk would have the same value. It does not depend on their gearing. In other words, the level of capital gearing is not quite important for WACC, company value and shareholder wealth. Part B: Explain then critically compare and contrast two investment appraisal techniques indicating their merits and limitations in aiding the sound financial management of a company Introduction Nowadays, investing is very important for a company to survive. According to UoS (2007, p.63) an investment involves the outflow of cash at a point in time in order to obtain benefits in the future. Companies make these investment decisions in order to increase the value of the firm and maximizing shareholders wealth. However, funds are limited, thereby, companies cannot invest in all projects, they must choose between alternative investments. There are four commonly techniques for appraising capital investment projects. Payback Accounting rate of return (ARR) Net present value (NPV) also known as Discounted Cash Flow or DCF Internal rate of return (IRR) also known as Discounted Cash Flow technique In this report, we will look at payback and NPV as two investment appraisal techniques to find out how they can inform future projects, their merits and limitations, and which technique the company would prefer. Explanation of two investment appraisal techniques Payback Payback is the number of years required to recover the original cash flow outlay investment in a project (Brealey, Myers and Marcus, 2001). If the cash flows are constant, the formula is: Payback period = If the cash flows are not constant, the calculation must be in cumulative form. The payback is a commonly used method of evaluating investment proposals. Among alternative investments, the company should decide to invest in the project which payback period is shorter, in other words, this is a project which can recover the initial investment quicker (Ross et al., 2007). For example, ABC Ltd has two projects A and B which cash flows as follows. Year Cash flows from Project A ( £) Cash flows from Project B ( £) 0 (100,000) (100,000) 1 10,000 20,000 2 30,000 20,000 3 40,000 30,000 4 20,000 20,000 5 30,000 50,000 Using cumulative form, we have: Year Cash flows from Project A ( £) Cumulative ( £) Cash flows from Project B ( £) Cumulative ( £) 0 (100,000) (100,000) 1 10,000 (90,000) 20,000 (80,000) 2 30,000 (60,000) 20,000 (60,000) 3 40,000 (20,000) 30,000 (30,000) 4 20,000 0 20,000 (10,000) 5 30,000 30,000 50,000 40,000 It is clearly that after 4 years, project A has recovered all original investment and it will begin making the profit for the company from the firth year, so payback period of project A is 4 years. As for project B, after 5 years, the original investment has recovered and it also generates  £40,000 of profits, so the payback period of this project is: Payback period of project B = 4 + = 4.2 years Thus, following the rule of payback period method, ABC Ltd should invest into project A because payback period of project A is shorter than project B. It means that the company can recover the original investment quicker if they decide to invest into project A. Net present value (NPV) Based on Professional Management Education (2010), The net present value (NPV) method is the classic economic method of evaluating the investment proposals. It is discounted cash flow technique that explicitly recognizes the time value of money. It correctly postulates that cash flows arising at different time periods differ in value and are comparable only when their equivalents present values are found out. The formula to calculate NPV is: NPV = Initial Investment + = Initial Investment + With r is the rate of interest It should be made clear that the acceptance rule using the net present value (NPV) method is to accept the investment project if NPV is positive, to reject it if NPV is negative and consider accepting the project when NPV is zero. For instance, using the same data with example above, in additional, the original proposal of ABC Ltd uses a discount rate of 10%. Using discounted cash flow technique to the present value, we have: Year Cash flows from Project A ( £) Present value ( £) Cash flows from Project B ( £) Present value ( £) 0 (100,000) (100,000) (100,000) (100,000) 1 10,000 9,091 20,000 18,182 2 30,000 24,793 20,000 16,529 3 40,000 30,052 30,000 22,539 4 20,000 13,660 20,000 13,660 5 30,000 18,628 50,000 31,046 NPV NPV (A) = -3,776 NPV (B) = 1,956 > 0 Because NPV of project A is negative and that of project B is positive, in accordance with the acceptance rule, ABC Ltd should choose project B to invest because this project will bring more profits. Analyzing of two investment appraisal techniques Compare and contrast In every company, payback period and NPV are very important to evaluate the value of a proposed project before investing on it. Both of two investment appraisal techniques can measure the sustainability and value of long-term projects. From that, the company can make sound financial decisions. (DifferenceBetween.net, 2010) Regarding calculate technique, payback period is used to calculate a period within which the initial investment of a project is recovered (UoS, 2007). It is equal to the initial net investment divided by annual expected cash flows. For example, a company wants to invest  £10,000 in a new project and they expect to have annual cash flows of  £2,000, so the payback period of this project will be = 10,000/2,000 = 5 years. The shorter the payback period, the better investment is. A long payback period means that the investment will be locked up for a long time, thereby this project is relatively ineffective. Meanwhile, net present value (NPV) uses the time value of money to appraise long-term projects. According to UoS (2007), NPV uses the opportunity cost of capital to discount the flows of cash in and out, over the life of a project to give their value at the present day. NPV method focuses on the present value (PV) because NPV equates to the sum of present values of individual cash flows. For example, a project invests  £1,000 and it will bring cash flows of  £2,000 in the next year, so PV of  £2,000 = 2000/(1+0.1) =  £1,818 with discount rate of 10%. Thus, the NPV of this project = -1000 + 1,818 =  £818. When choosing between alternative investments, NPV can help to define the project with highest present value, and also apply the acceptance rule of NPV, if NPV>0 accept the investment, if NPV Ross et al. (2007) stated that NPV method removes the time element in weighing alternative investment, while payback period focuses on the time required to recover the initial investment. From that, payback period method does not assess the time value of cash, inflation, financial risks, etc. as opposed to NPV, which measures the investments profitability. In addition, although payback period method indicates the acceptable period of investment, it does not take into account what will happen after the payback period and their impact on total incomes of this project. But it is contrary to NPV. Thereby, NPV will provide better decisions than payback when the company makes capital investments. In fact, companies use more often NPV than payback period method. Merits and limitations Merits The most significant merit of payback period is that it is simple to understand and easy to calculate than other appraisal investment techniques (UoS, 2007). Comparing with NPV method, payback method uses fewer costs and less analysts time than NPV. For this method, an investor can have more favorable short term effects on earnings per share by setting up a shorter standard payback period. Professional Management Education (2010) believed that payback period can control investment risks because the longer it takes to recover the initial investment, the more uncertainties there will be during the recovery period. In addition, payback method focuses on the time to recover of the initial investment, so it gives an insight into the liquidity of the project. The shorter payback period, the higher liquidity is. On the other hand, Brealey et al. (2001) stated that NPV is more accurate and efficient as it uses cash flow, not earnings and results in investment decisions that add value. By discounting the flows, NPV can create the comparison between alternative investments, and then, making right capital decisions. NPV method is always consistent with the long-term objective of the shareholder value maximization. We can say that this is the greatest merit of this method. Limitations Payback Consider XYZ Ltd with two projects A and B. It has the same three years payback period, whose flows are as follows. Year Cash flows from Project A ( £) Cumulative ( £) Cash flows from Project B ( £) Cumulative ( £) 0 (100,000) (100,000) (100,000) (100,000) 1 20,000 (80,000) 50,000 (50,000) 2 30,000 (50,000) 30,000 (20,000) 3 50,000 0 20,000 0 4 30,000 30,000 100,000 100,000 Payback Period (Year) 3 3 Ross et al. (2007) stated that the first limitation of payback method is the timing of cash flows within the payback period. Looking at the table above, from year 1 to year 3, the cash flows of project A increase from  £20,000 to  £50,000, while the cash flows of project B decrease from  £50,000 to  £20,000. Because the large cash flow of  £50,000 comes earlier with project B, its NPV must be higher. However, as mentioned above, the payback periods of the two projects are identical. Thus, the problem with the payback period is that it does not consider the timing of the cash flows within payback period. It also shows that the payback method is inferior to NPV because NPV method discounts the cash flows properly. The second limitation is payment after the payback period (Ross et al., 2007). Lets consider projects A and B in the same three years payback period, project B is clearly preferred because it has a cash flow of  £100,000 in the fourth year. Thus, a problem here is that payback method ignores all cash flows occurring after the payback period. For the short-term orientation of the payback method, some valuable long-term projects may be rejected. NPV method does not encounter this problem because this method uses all the cash flows of the project. Because of the first two limitations, the payback method cannot maximize shareholders wealth. According to UoS (2007), the payback period method ignores inflation and discriminates against large capital-intensive infrastructure projects with long times, because it only focuses on the earliest time to recover the initial investment. Net present value (NPV) NPV is the true measure of an investments profitability. But, in practice, it still has some problems. The first limitation of NPV method is cash flow estimation (Professional Management Education, 2010). The NPV method is easy to use if forecasted cash flows are known. However, it is quite difficult to obtain the estimates of cash flows due to uncertainty. The second limitation of NPV is unrealistic assumptions (UoS, 2007). Under NPV method, there is a single market rate of interest for both borrowing lending and an individual can borrow or lend any amount of money at that rate. It is unrealistic, in practice, the interest rate for borrowing and lending is different and everyone has to follow the interest rate for each kind. For example, for Vietnam market in 2011, the interest rate for borrowing at 9% and for lending at 17% per year (Trading Economics, 2012). NPV also ignores transaction costs or taxes. Conclusion In a survey carried out by Graham and Harvey (2001), it was found that 74.9% of respondent companies use net present value (NPV) and 56.7% use payback period method when they appraise the investment projects. It means that in fact, NPV method is used more than payback period method. Techniques % Always or Almost Always Internal Rate of Return (IRR) 75.6 Net present value (NPV) 74.9 Payback period 56.7 Accounting rate of return 30.3 Source: Graham and Harvey, The theory and practice of corporate finance: Evidence from the Field, Journal of Financial Economics 60 (2001), based on a survey of 392 CFOs According to the survey of Graham Harvey (2001) and Sandahl (2003), payback period method is often used in small size companies. The major reason for this can be that payback period method is more simple, cheaper and easier to calculate. Small companies are only interested in the shortest time to recover initial investment because they often lack the source for fund. Moreover, the complexity of the other investment appraisal methods is always a barrier for the small company. However, net present value (NPV) is often used in medium and large size companies (Graham and Harvey, 2001). The major reason for this can be that these companies are interested in the profitability and time value of money than the payback period. They have the source of funds and consider maximizing shareholders wealth as their long-term objective.