Debate between a chinese Qing official and japanese meiji official Essay

Debate between a chinese Qing official and japanese meiji official concerning their policy toward the european influence and aggression in east - Essay Example The Western countries exercised hegemonic ambitions and even fought among themselves for prized colonies as their possessions. This period also saw two contrasting approaches in how to deal with the new world order. China had been a regional power for several millennia at around this time and saw no need to modernize itself. It prided itself on its technological, scientific, and military advances, discoveries, inventions, and innovations and thereby did not feel threatened by the growing influx of Western influence into Asia. China got complacent due to this imperial hubris and so did not take the appropriate steps to turn back European aggression into East Asia. Japan before the Meiji Restoration (September 1868 to July 1912) had been always a country that was mainly agricultural (poor), beset with local wars (due to the feudal system in which samurai clans had held attachment to their ancestral lands), weak militarily, and little or no technological development to speak of. Young reformers during the onset of the Meiji era saw Western expansionism as a threat and acted accordingly. They introduced reforms to the countrys political and social systems by adopting Western ideas to modernize Japan. China for several centuries had gotten used to being the regional power in the central Asian region. It had attained a high degree of development in its civilization by a number of world firsts, such as the civil service system, the invention of gunpowder, a unique system of writing, and an imperial system of highly-regarded examinations for entrance to government service. Its Confucian values and centralized, bureaucratic government allowed it to control large tracts of lands and its tributary system allowed it to collect raxes from the neighboring countries to help support its government bureaucracy and imperial treasury. In other words, the high civilization of China was attained without any significant external help or

Tuition reimbursement Essay Example for Free

Tuition reimbursement Essay Introduction According to (Hall, 2000. 30-31), tuition reimbursement refers to a study program for adult learners which involve provision of financial help to meet the cost of education of the adult learners. The organizations for which the adult learners work for are required to meet the educational costs as part of employees’ benefits and growth and development strategy. According to (Hall, 2000. 30-31) tuition reimbursement has several benefits to an organization. First of all, tuition reimbursement increases productivity of the organization in that, with the acquisition of new skills, employees are empowered to perform more complex tasks faster and more efficiently than it is the case whereby employees lack important skills and training.    The second direct advantage of the tuition reimbursement program is the fact that, employees given the opportunity to study become more loyal to the organization and feel more close to the organization and therefore are less likely to quit their jobs. In this way, tuition reimbursement greatly puts employee turnover very low to the advantage of the organization’s growth.   Therefore tuition reimbursement leads to improved employee retention and clearly minimizes the costs associated with the staffing process. This increases profits for the organization. For the organization, tuition reimbursement qualifies the given organization to tax benefits in accordance to the revenues act of 1978 (Rocchi, 1997.87-90). This is beneficial to both the organization and the employees in that, the organization saves a lot in terms of taxes payable to the government, the tuition reimbursement is crucial to the employees in that, they stand to gain promotions easily than their counterparts who may not poses such skills and knowledge.   Tuition reimbursement are important to an organization in that, employees become more skilled and as a result, the organization ends up with a more united work force which is not only effective but also efficient since there is a general feeling of security for the employees and a feeling of being appreciated. Tuition reimbursement is very important to organizations in that it gives a chance to those who missed the opportunity while young but have the willingness and the desire to achieve high academic standards.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Human resources form the engine of an organization. An organization, which wants to achieve its goals and objectives, should invest in knowledge management as it is the heart of empowering employees as well as mentoring their talents. Any organization, which does not take into consideration, the learning needs of employees is bound to fail in its objectives. The greatest challenge facing organizations as far as career growth and development of employee are concerned is increased costs associated with funding employee adult learning courses.   It is approximated that, organizations spent about $1800 to train a single employee annually something which is quite tasking on part of the organization (Spooner, 1999.12-43). Such a huge amount of money evidently causes financial constraints and if managers do not appreciate the importance of career development, it is hard for organizations to sponsor adult learning programs on basis of the huge associated costs. Adult learning has very many advantages in that it determines job performance and the success of a given organization. The fact that learners have had a considerable exposure to job aspects, challenges and real issues implies that, given an opportunity to study, the adult learners stands a great chance of taking theories and concepts to real life issues (Schwartz, 1992.56-98). Adult learners can easily link concepts to issues at work something which implies that, given an opportunity to learn, adult learners can even outperform fresh graduates in terms of connecting class lesson to practicals work situations and are therefore likely to overcome barriers in the work place. While fresh recruits find it hard to link class theories to work situations and challenges, and learners easily associate into work situations what they study in school. When adult when adult learners go into college, they go there with a vision. Perhaps, having seen challenging tasks, which need some knowledge they lacked, they proceed to college with a dream, with some expectations and a clear focus of what to gain in the studies. Usually it is very tough for adult learners to go back to class considering that, they have financial burdens such as families to fend for and many other financial commitments. This implies that, by the time an adult makes the decision to go back to class, the motivation is very high, the expectations are realistic and the drive is genuine. While young learners may end up in schools for a number of different reasons, different sources of motivation, it is rare to get the same case being true for the adults. This is the reason why human resources managers should come up with tuition reimbursement programs for adult learners willing to go back to studies. The company has a moral obligation to nurture the talent in the employees not withstanding the employers’ gains achieved after they have invested in the studies of their employees. Usually employees who are sponsored to schools would rarely quit a job soon after the training something which implies that, the new skills and knowledge learnt in school is likely to benefit the company considering the wealth of evidence linking training to increased job performance. If employees are given the necessary support in terms of sponsorship to attain their academic goals, this is to the employees; a form of empowerment is likely to boost their morale making them to improve their job performance.   Employees who decide to go back for studies after a while and after having a contact with the job environment are more likely to appreciate what education means to their lives and they are also more likely to have the right attitude towards studies (Andrieu, St. John, 1993.44-79). The above implies that the outcome of tuition reimbursement is that; the organization will have focused and knowledgeable human resources. For the organization, it also implies that, they can promote such employees to managerial positions instead of recruiting from outside the organization whenever they need to fill senior job vacancies.   This to the organization is beneficial in that, employees who have been with the organization for longer periods understand the organizations’ environment, external and internal processes in a better way. This are an advantage to the organization in that, the organization will not have to incur the expenses associated with debriefing new employees who carry on organizational cultures from their previous organization to their new organization. Normally, no organization operates in similar manner like any other given organization and therefore employees who are recruited on the strength of their past experience usually face challenges in adjusting to the new organization’s culture. These difficulties in adjusting to new environment may some time take long periods of time and therefore negatively affect job performance in the organization. Tuition reimbursements are the best solution to the prevention of inconveniences and uncertainties of having to recruit certain skills outside the organization. Conclusion Tuition reimbursement programs if well utilized can be beneficial to an organization. The program is however faced with great challenges considering that it can be open to abuse by employers who may use the program as a bait to woo employees in to remaining with the organization against their wishes. However, if well utilized, the program greatly improves productivity, employee motivation and saves the company a lot in terms of tax benefits such organizations enjoy from the government. There is a need for all organization to implement the program so that, any willing employee can enjoy the benefits associated with tuition reimbursement schemes. References Andrieu, S. St. John. E. (1993.44-79). The Influence of Prices on Graduate Student Persistence. Research in Higher Education, Vol. 34, No. 4, pp. 399-425. Hall, K. (2000. 30-31). Distance Education: An Insider’s View. AALL Spectrum. Rocchi, B. (1997.87-90). Nine Reasons Why You Should Go To Professional Conferences. NetNexus. 3. Schwartz, A. (1992.56-98) How to Handle Conflict Between Employees. Supervisory Management (37) Spooner, F. (1999.12-43) Student Rating of Instruction in Distance Learning and On-Campus Classes. Journal of Educational Research. (92)

The Narcissistic Condition :: Trust Morals Psychology Essays

The Narcissistic Condition The Narcissistic condition emanates from a seismic break of trust, a tectonic shift of what should have been a healthy relationship with his "primary objects" and the transformation of his self into the subject of love. Some of these bad feelings are the result of deeply entrenched misunderstandings regarding the nature of trust and the continuous act of trusting. For millions of years nature embedded in us the notion that the past can teach us a lot about the future. This is very useful for survival. And it is also mostly true with inanimate objects. With humans the story is somewhat different: it is reasonable to learn from someone's past behaviour about his future behaviour (even though this proves erroneous most of the time). But it is mistaken to learn from someone's behaviour about other people's. Actually, most psychotherapy is nothing but the effort to disentangle past from present, to teach the patient that the past is gone and has no reign over him anymore, unless the patient lets it to. Our natural tendency is to trust, because we trust our parents. It feels good to really trust. It is also an essential component of love and an important test. Love without trust is dependence masquerading as love. We must trust, it is almost biological. Most of the time, we do trust. We trust the Universe to behave itself according to the laws of physics, our army not to go mad and shoot us all, our nearest and dearest not to betray us. When trust is broken, the feeling is that a part of us dies, is hollowed out. Not to trust is abnormal and is the natural result of bitter or even traumatic life experiences. Mistrust or distrust are induced not by our own thoughts, nor by some device or machination of ours - but by life's sad circumstances. To continue not to trust is to reward the people who wronged us and made us distrustful in the first place. These people have long abandoned us and still they have a great, malignant, influence on our lives. This is the irony of the lack of trust . So, some of us prefer not to experience this sinking feeling: not to trust and not to be disappointed. This is both a fallacy and a folly. Trusting releases enormous amounts of mental energy, which could be better invested elsewhere.

Country Report – Italy

Marks and Spencer Group (M&S) is a leading retailer of clothing, foods and home-ware. The company operates in about 34 countries worldwide with UK as its primary market. It is headquartered in London, UK and employs about 52,700 people (approx). The company recorded revenues of i8,588. 1 million during the fiscal year ended March 2007, an increase of 10. 1% over 2006. The operating profit of the company was i1,045. 9 million during fiscal year 2007, an increase of 23% over 2006. The net profit was i659. 9 million in fiscal year 2007, an increase of 26. 2% over 2006. Italy has a growing economy with huge business opportunities, being the 8th largest economy of the world and fourth largest of Europe. It is also one of the main members of the European Union and being an open economy it has no investment restrictions especially for an EU member country. It has also adopted the euro as a currency which might come into play. Fashion being one of the main industries in Italy and this can be seen by the fact, that the trend setter fashion companies for the world like Giorgio Armani, Diesel and Benetton feels home in Italy. The clothing and fashion market is very competitive, foreign companies have not had a great success, moreover it is the only country with only one foreign fashion retailer in the top 10 and that is Zanier (on position 9th in Italy). This shows it has a mature home industry but still the market is not fully competitive and it has its own niches which might need some more exploitation. Marks and Spencer can be a suitable retailer to invest in Italy, With 760 stores in more than 30 countries around the world which shows that the company has a vast experience of doing business in foreign soil. It is one of the most iconic and widely recognized chain stores in the United Kingdom, and is the largest clothing retailer in UK and also an established food retailer. Marks and Spencer has more chances of becoming a lucrative food retailer because of the changing eating habits of Italians, as a result of globalization. The food industry in Italy is very scattered and mostly based on medium sized companies and no firm has absolute market share, this could be an advantage for a firm like Marks and Spencer which could establish its roots in welcoming Italian food market before other giants join the game. The Italian food retail market grew by 0. 6% in 2004 to reach a value of $91. 9 billion. In 2009 the market is forecast to have a value of $107. 5 billion, representing an increase of 17. 0% since 2004. Supermarkets form the most lucrative market sector, generating 64. % of the market's overall revenues. Italy accounts for 9% of the overall European food retail market. The leading revenue source for the Italian food retail market in 2004 was the supermarket sector, which accounted for 64. 4% of the market's value, generating total revenues of $59. 11 billion in 2004. The company should also do a detail market research before investing and it might need to present itself in a different way by giving it a local touch in order to achieve consumer acceptability but still the business would be competitive. The major competitors would be Coop & Conad and Interdis the company also poses threat form the German giant LIDL which already has 320 stores around Italy. The company can also experiment with its household and furniture at the same time company has a considerable success in this department in the recent past, besides that the concept of home wares is still taking its grip and it could become a cash cow for M&S. In the near future the furniture could also give a positive response if managed properly. Getting back to the clothing which is the main product of Marks and Spencer, though the market is highly competitive and market penetration is a monster of a task there are still some market niches which could be exploited to get the maximum advantage for example, the formal clothing has always been of the highest quality and has a world wide recognition. Since the product is of such high quality it is most likely to be appreciated which could result in high volume of revenue moreover, the company also has a vast experience of penetrating in foreign competitive markets which could be used in this situation. Wine is another product which could be used to attract customers, currently it is a serious competitor in UK. M&S has produced many award winning wines, this is one of the areas which could be very important as Italians are wine lovers and they will always try something new, if the standards are met. It could be a regular revenue generator. Marketing will also hold the key in this situation and retailers who market themselves well are more likely to be successful then the ones who didn't divert much of its resources in this area. Since elections are approaching in Italy so the management should also wait and see how the newly formed government changes its policies especially corporate and tax policies and the company has to see that it is suitable to invest in the country and should analyze the financial pros and cons of expansion. The firm should consider the locations of its outlets; the obvious one would be Milan, Rome and Naples. The company can also open stores in the less developed area like south of Italy, it will attract tax soaps for investing it in less developed areas and providing employment opportunities but consumers in south unlike in the north will be having lower purchasing power and this could be the decisive factor. Investment and expansion decisions are always a bit of a gamble but with the right strategy it can give rewards. One important factor is the goodwill which can come into play as Marks and Spencer's is one of the leading retailers in the world and it is a trusted brand. It is more likely to receive a welcoming response rather that loosing out. The company can use its vast experience of expansion to the maximum and can come up with a positive result. The retail market structure in Italy is also developing and if M&S adopts the right policy it can grow with and could become one of the leading retailers providing quality clothing, food, home ware and wine under one roof. Thus investing a large amount of money in a developed area or a developing area would help an individual/organization/economy to get a strong financial background and right amount of publicity which would enhance the image of the brand and the country. At the same time recognition of the brands reflects the fame of the country.

Capital structure

A review of capital structure theories 1. 0 Introduction One of the most contentious flnancial issues that have provoked intense academic research during the last decades is the theory of capital structure. Capital structure can be defined as a ‘Mix of different securities issued by a firm' (Brealey and Myers, 2003). Simply speaking, capital structure mainly contains two elements, debt and equity.In 1958, through combining tax and debt factors in a simple model to price the value of a company, Modigliani and Miller firstly begin to explore a modern capital structure theory, and their work inspired this area study. However, the MM theory has no practical use because It lacks of direct guidance for companies to determine capital structure In real Ilfe (Baxter, 1967; Sarlg and Warga, 1989; Vernimmen et al, 2005).During the past years, researchers strived to establish a more reasonable capital structure theory that can be put into practices efficiently, and they attempted to expand debt ratio and tax advantage factors Into a new area. Myers (1984) states that only practical capital structure theories, which Introducing adjustment cost that includes agency cost and information asymmetry problems, ould provide a useful guidance for firms to determine their capital structure.However, from recent studies, Myers (2001) believes that how information differences and agency costs Influence the capital structure Is still an open question. From this perspective, it is very important to review the development of these two factors which make theoretical research having a strong relationship with reality. Thus, this project will summarize the capital structure theories orientated by agency cost and asymmetric Information from extant literature. Also some gaps and conflicts among heories of capital structure will be found and discussed In order to further Improve this area study.The rest of this project is arranged as follows. Section 2 will present the theories based on a gency costs that causes the conflicts between equity holders and debt holders or managers. Section 3 will Illustrate from two areas, Interplay of capital structure and Investment, followed by signal effect of debt ratio, to show the theories based on asymmetric information. In conclusion, Section 4 will summarize the entire essay and suggest further research direction of capital structure theory. 0 Capital structure theories based on agency costs Although Berry and Means (1931, cited in Myers, 2001) state an adverse relationship between the separated ownership and corporate control status, it commonly admits that Jensen and Meckling (1976) firstly conducted the research in how agency costs determine capital structure (Harris and Ravlv, 1991 Over the past decades, researchers have tried to add agency costs to capital structure models (Harris and Raviv, 1991). The perfect alignment between firm investors and firm agencies, such as managers, does not exist (Myers, 2001 ).According to J ensen and Meckling (1976), company agents, the managers, always emphasize on their own interests, such as high salary and reputation. Also these company agents use ‘entrenching investments', which make the asset and capital structure orientated by the 1 OF3 company holders (Chen and Kensinger, 1992). However, Myers (2001) believes that the firm holders can reduce such transferred value through using different kinds of methods of control and supervising, but he further points out the weakness that these methods are expensive and reduce returns.As a result, the perfect monitoring system is out of work, and agency costs are produced from these conflicts. According to Jensen and Meckling (1976), the conflicts between investors and agencies are generally divided into two types. The first conflict occurs between debt holders and equity holders, and the second conflict is from between equity holders and managers. Consequently, all the capital structure theories based on agency costs can be also classified based on these two conflicts. In the rest of this section, each individual conflict will be separately discussed. 1 Conflicts between Debt holders and Equity holders Jensen and Meckling (1976) point out that agency costs problems happen in determining the structure of a firms' capital when the conflict between debt holders and equity holders is caused by debt contracts. Similar to Jensen and Meckling's conclusion, Myers (1977) observes that since equity holders bear the whole cost of the investment and debt holders get the main part of the profits from the investment, equity holders may have no interest in investing in value-increasing businesses when ompanies are likely to face bankruptcy in the short term future.Thus, if debt occupies a large part of firms' capital, it will lead to the rejection of investing in more value-increased business projects. However, in 1991, Harris and Raviv cast a contrasting opinion to adjust the capital structure theory based on this conflict. They point out that most debt contracts give equity holders a push power to invest sub- optimally investment project. If the investment fails, due to limited liability, debt holders bear the consequences of a decline of the debt value, but equity holders get ost of yields if the investment could generate returns above the debt par value.In order to prevent debt holders from receiving unfair treatment, equity holders normally get less for the debt than original expectation from debt holders. Thus, the agency costs are created by equity holders who issue the debt rather than debt holders' reason (Harris and Raviv, 1991). Tradeoff capital structure theory has a basic and strong relationship with this type of agency costs. However, different researchers hold various explanations of the relationship.Myers (1977) points out the debt cost eason, Green (1984) announces that convertible bonds can reduce the asset substitution problem which comes from the tradeoff theory, Stul z and Johnson (1985) consider about collateral effect. In the end, only Diamond model (1989) is widely accepted. If Equity holders do not consider reputational reason, they are willing to trade relatively safe projects, but this activity will lead to less debt financing (Diamond, 1989; Mike et al, 1997). Diamond model (1989) assumes two tradeoffs, risky and risk-free, to show that the debt repayment should consider both possible nvestment plans.Furthermore, Mike et al (1997) use empirical evidence to indicate how to use debt to trade off these two optional investment plans. Moreover, in 1991, Harris and Raviv expanded Diamond's model to three investment choices. They point out that one choice of investment can only contain the risk-free project, one option In fact, since the reputation factor is vital for a manager, managers are willing to choose risk-free investment projects that have more possibility of success. Consequently, the amount of debt is often reduced by managers. Capital Structure CAPITAL STRUCTUREQ1. Which of the following statements is/are correct? (MRQ)The cost of equity is higher than the cost of debtWACC is inversely proportional to the market valueAn increase in the cost of equity leads to an increase in share price Debt is less risky as interest is always received but paid at last in an event of liquidation (2 marks) Q2. Which of the following statements is not a part of the traditional theory of capital structure? (MCQ)There must be no taxes as it's a perfect capital market As the gearing level increases it's an indication of an increase in the cost of debt When the cost of equity increases the effect is translated on to the gearing level of the company resulting in its decreaseThe WACC will be at optimum when the market value of the company is at its lowest (2 marks) Q3. The Manager of Alpha believes that there is an optimal balance of debt and equity. The Manager of Zeta believes that the gearing decisions have no effect on the business value. Which theories are the managers relating to? (P&D)Manager Alpha Manager Zeta MM THEORY(with Tax) MM THEORY(without Tax) TRADITIONAL THEORY(2 marks) Q4. Select the appropriate option in relation to the capital market. (HA)Taxes are inapplicable PERFECT MARKET IMPERFECT MARKETHigh chances of bankruptcy PERFECT MARKET IMPERFECT MARKETBorrowing is up to a limited level PERFECT MARKET IMPERFECT MARKET(2 marks) Q5. Which of the following relates to the high level of gearing? (MRQ)Agency CostTax ExhaustionDifferences in risk tolerance levels between shareholders and directorsNo borrowing limits are specified(2 marks) Q6. Bache Co. leaves its operating risk unchanged after including the increased debt finance in its capital structure. Which of the following correctly describes the effect on the company's cost of capital and market value assuming perfect capital market with corporation tax? (HA)WACC INCREASE DECREASE UNAFFECTEDCost of Equity INCREASE DECREASE UNAFFECTEDTotal market value INCREASE DECREASE UNAFFECTED(2 marks) Q7. Rearrange the hierarchy of sources of finance for Pecking Order Theory? (P;D) Preference Shares 1Equity Finance 2Straight Debt 3Retained Earning 4Convertible Debt 5(2 marks) Q8. Quarto Co is considering acquiring Datum Co. Quarto Co wants to use its own cost of capital but is confused as in which circumstances their weighted average cost capital will remain unchanged. Which of the following is/are appropriate circumstances? (MRQ)Historic proportions of debt and equity are not to be changedOperating Risk of the company remains unchangedThe acquired company is small that any changes are insignificantProjects are financed from a pool of funds(2 marks) Q9. Eduardo Co is an all-equity financed company which wishes to invest in the new project in a new business area. Its existing equity beta is 1.4. The debt to equity ratio is 35% and 65% respectively ; the average equity beta for the new business area is 1.9. The government security in the market gives a return of 4% and market risk premium is 3%. If the tax is ignored, what is the risk-adjusted cost of equity for the new project using the capital asset pricing model? (MCQ) 6.73%7.71%8.2%9.7%(2 marks) Q10. Identify the weaknesses of risk-adjusted the weighted average cost of capital? (MCQ)It is difficult to identify similar operating characteristics of other firms Estimates of beta are wholly accurate Betas may differ due to debt capital being risk-free It ignores earning a potential of the company (2 marks)Q11. Arco Co has an equity beta of 0.89 and it is being considered to be acquiring by Draco Co. Arco Co is financed by 79% equity and Draco Co is financed by 80% equity. Calculate the Risk-adjusted beta if the tax rate in the market is 30% up to two decimal places? (FIB)4521202667000Be (2 marks) Q12. What is the correct procedure for calculating risks adjusted the weighted average cost of capital? (P;D)Converting proxy asset beta into risk-adjusted beta using investing company capital structure 1Calculate the risk-adjusted weighted average cost of capital 2Converting proxy equity beta into asset beta 3Calculate the risk-adjusted cost of equity 4(2 marks) Q13. Tito ; Toto are identical in every respect apart from their capital structure. Tito has a debt: equity ratio of 1:4 and an equity beta of 1.6. Toto has a debt: equity ratio of 2:6. Corporation tax is 30%. What is an appropriate equity beta for Toto? (MCQ)2.563.934.224.51(2 marks)CAPITAL STRUCTURE (ANSWERS)Q1. The cost of equity is higher than the cost of debt ; WACC is inversely proportional to the market value are correct statements.An increase in the cost of equity leads to a decrease in share price rather than increasing the share price as WACC increases market value decreases, hence incorrect Debt is less risky as interest is always received but paid at last in an event of liquidation. In the event of liquidation banks are paid first as they are creditors with fixed charges, hence statement is incorrect. Q2. DThere must be no taxes as it's a perfect capital market (Correct)As the gearing level increases it's an indication of an increase in the cost of debt (Correct) When the cost of equity increases the effect is translated on to the gearing level of the company resulting in its decrease (Correct) The WACC will be at optimum when the market value of the company is at its lowest. The market value should be at its highest to make WACC at the optimum level which it is at the lowest, hence the statement is incorrect Q3. Manager Alpha TRADITIONAL THEORYManager Zeta MM THEORY(without Tax)Traditional theory states that WACC will be optimum when it's at the lowest pointMM (with Tax) states there is no need for a balance of equity and debt assuming 100% gearing is optimal MM (without Tax) states WACC is unaffected as the benefit received from debt cancels with the cost of equity Q4.Taxes are inapplicable PERFECT MARKET High chances of bankruptcy IMPERFECT MARKETBorrowing is up to a limited level IMPERFECT MARKET Q5.Agency Cost: Providers of debt finance are likely to impose restrictive covenants hence is a problem due to high gearing (Correct) Tax Exhaustion: As companies increase their gearing they may reach a certain point where there are not enough profits from which to obtain all available tax benefits hence is a problem due to high gearing (Correct)Differences in risk tolerance levels between shareholders and directors: The directors have high risk in the company rather than shareholders as they have well-diversified portfolios hence is a problem due to high gearing (Correct)No borrowing limits are specified: Restrictions are specified in the articles of association for company's ability to borrow hence the statement is not related to high gearing (Incorrect) Q6. WACC DECREASE Cost of Equity INCREASE Total market value INCREASE In a perfect capital market, the theories of Modigliani ; Miller on gearing apply Q7.Retained Earning 1Straight Debt 2Convertible Debt 3Preference Shares 4Equity Financing 5 Q8. All options are correct as under all circumstances the company can use its own weighted average cost of capital. Q9. B(A) De-gearing the equity beta of Eduardo Co Ba= 1.4 Ãâ€" 0.65 = 0.91Ke= 4 + (3 Ãâ€" 0.91) = 6.73%(B) De-gearing the equity beta of the new business gives Ba= [0.65 à · (0.65+0.35)] Ãâ€"1.9 = 1.235Ke= 4 + (3 Ãâ€" 1.235) = 7.71% (C) Using equity beta of Eduardo Co. Ke= 4 + (3 Ãâ€" 1.4) = 8.2%(D) Using the de-geared average equity beta Ke= 4 + (3 Ãâ€" 1.9) = 9.7% This means the new average equity beta for the new business area was not de-geared Q10. AIt is difficult to identify similar operating characteristics of other firms (Weakness) Estimates of beta are wholly inaccurate Betas may differ due to debt capital not being risk free It ignores earning potential of the company (Disadvantage of DVM) Q11. Be = 0.88Ba = [79 à · (79 + (21 Ãâ€" {1-30%})] Ãâ€" 0.89 = 0.750.75 = [80 à · (80 + (20 Ãâ€" {1-30%})] Ãâ€" Be Be = 0.88 Q12. Converting proxy equity beta into asset beta 1Converting proxy asset beta into risk-adjusted beta using investing company capital structure 2Calculate the risk-adjusted cost of equity 3Calculate risk-adjusted weighted average cost of capital 4 Q13. CBa = [4 à · (4 + (1 Ãâ€" {1-30%})] Ãâ€" 1.6 = 1.361.36 = [2 à · (2 + (6 Ãâ€" {1-30%})] Ãâ€" Be Be = 4.22