British Literature Poetry Essay Example | Topics and Well Written Essays - 1000 words

British Literature Poetry - Essay Example Herrick's poem "To The Virgins, To Make Much of Time" is rather short, consisting of four stanzas of four lines each. The very first line of the first stanza draws attention to the transience of youth and beauty. Herrick exhorts the virgins to gather rose-buds "while ye may," for rosebuds do not last too long. The smiling flower of today will, without any doubt, fade away and die tomorrow. Herrick does not have to spell out the fact that the plight of the flower should alert the virgins to their own plight-their beauty, too, is almost as fleeting as that of the flower. The second stanza, in a similar vein, speaks of "the glorious lamp of heaven, the Sun." The higher the sun's position in the sky, the poet says, "the sooner his race will be run." In spite of all the power and glory of the risen sun, the inexorable law, which decides that he then should set, and die from the sky, will inevitably prove stronger than he. Again, Herrick does not need to remind the young virgins that this illustration is actually a metaphor to parallel the precarious state of their own youth and beauty. The last two stanzas express the poet's meaning in a much more explicit manner. The 'first' age of life-youth-is no doubt the best, the poet says in the third stanza, but inevitably, worse times will succeed this first age, and the 'worst' will remain in store till the end. The full force of the poet's intention becomes clear in the message that is quite bluntly spelt out in the last stanza. "Be not coy, but use your time," he tells the girls. He advises them to "go marry," for, once the prime of their life is past, they may perhaps ever tarry, 'virgins' still, but not even assured of the respect which accompanies that title. Herrick presents coyness rather than its opposite as a fatal weakness or a temptation to be strenuously fought and overcome. The natural adult state is the state of marriage, and, though the poet does not use the words, he seems to imply the state of sexual union. Andrew Marvell's poem "To His Coy Mistress" is more personal and direct, because the poem is addressed directly to the poet's 'coy mistress' and not to any generalized congregation of 'virgins.' Marvell begins with the implicit argument that the coyness exhibited by his mistress is nothing short of criminal. It would have been no crime only if they had "but world enough and time"-and which young couple in the world could ever claim a surfeit of these Yet, he good-naturedly assures her that he would have been happy to fall in with her inclinations, if it were only possible. After accusing his mistress of the 'crime' of coyness in the first couplet, Marvell uses the rest of the first stanza to enumerate how he would have gladly spent an eternity wooing her without any complaint, if he did have infinite time at his disposal. In an ideal situation of infinite time, he would have happily let her indulge in the luxury of refusing his love from around the time of Noah's flood till the Day of Judgment. If he had all the time in the world to spare, he would readily let his 'vegetable love' to grow "vaster than empires, and more slow." He could, of course, spend the time quite agreeably. He would with the utmost pleasure, then use a hundred years to praise his mistress's eyes while gazing on her forehead. Likewise, he would take two hundred years to "adore each breast"-but "thirty thousand to the rest"-at the

Research Paper on the emergency response of InternationaL Nashville

On the emergency response of InternationaL Nashville Airport, Tennesse - Research Paper Example There are different types of emergency: natural disasters and man-made situations and disasters. The natural disasters may appear in the shape of hurricanes, tornadoes, and earthquakes while man-made disasters include acts of terrorism, food poisoning or any other issue that may be technical. Based on this assessment, the emergency response plan cannot be absolute or perfect; rather, it may be developed based on the type of the disaster. However, there are certain aviation standards, procedures and protocols essential for all types of emergencies or accidents. In the following parts of this paper, Incident Command System (ICS) has been discussed. It is a national level protocol describing the different aspects and concepts related to emergency. The key concepts inbuilt in it are common terminology, unity of command and so on. It is followed by the part mentioning Nashville International Airport background and different awards (as well as reasons for them) won by the airport. Addition ally, the subsequent paragraph elaborates the basic information relating to the airport. After that part, rules and regulations relating to the Accident Reports and Emergency Conditions have been provided and discussed. These rules and regulations have been taken from Metropolitan Nashville Airport Authority. Before the conclusion part, the analysis of Nashville Airport emergency response exercises has been provided. The exercises have been described in detail to provide different steps taken by different authorities while responding to the emergency situations. The Incident Command System (ICS) is a nationally developed and controlled collection of constructs, procedures and operating practices providing synergistic principles for emergency response agencies (Kenville et al., 2009). This system was initially developed and established in 1970s in numerous formats and has become the widely used de facto standard amongst all agencies, particularly those

College entrance response Essay Example | Topics and Well Written Essays - 250 words

College entrance response - Essay Example In addition, there are abundant discussion rooms for students and a library for research. The university has abundant recreation facilitates for students. In addition, the students are allowed to participate in inter-university competitions such as sports, drama, debate and many other activities. The education programs offered at NU-Q gives students a chance to participate in leadership at different capacities. In addition, the university management organizes seminars and motivational talks for students. In this regard, students gain essential skills for surviving in the corporate world. The construction of a permanent home for NU-Q is anticipated to be complete by 2015. The new location is designed to offer a more comfortable learning environment for students. The new facilitate is expected to accommodate more student population and offer more opportunities for research and development. In summary, NU-Q emerges as the best media and arts institution in the region. The studies at NU-Q are not exam oriented but student

Seeds in Hard Ground Essay Example for Free

Seeds in Hard Ground Essay Ruth Rosenberg’s article, â€Å"Seeds in Hard Ground: Black Girlhood in The Bluest Eye,† offers a paradigm with which to view the growing-up process portrayed by Toni Morrison in her novel, The Bluest Eye. According to Rosenberg, Morrison’s novel is a landmark in literature because she has succeeded in portraying young, black American girls on their road to womanhood. Before her, no documented case in literature has been recorded that featured these girls in the center stage. Always, Rosenberg quotes Morrison, these girls were the props, set as part of the background, the moving scenery (436). More interestingly, however, it is Rosenberg’s treatment and reading of â€Å"colorism† in the novel that calls for attention (439). Colorism is akin to racism, where division and segregation is based on the color of one’s skin. Color, in fact, plays a crucial and central role in the novel, stealthily moving beyond the question of one’s skin. The most important transition of colorism is in Pecola’s wish to have blue eyes. She absurdly believes that possessing such would render her lovable, thereby eliminating pain from her world: If those eyes of hers were different, that is to say, beautiful, she herself would be different†¦Maybe they’d say, â€Å"Why look at pretty-eyed Pecola. We mustn’t do bad things in front of those pretty eyes. † †¦ Each night, without fail, she prayed for blue eyes. Fervently, for a year she had prayed. Although somewhat discouraged, she was not without hope. (Morrison 40) The longing for blue eyes were eventually destructive for Pecola as her desire for possessing the bluest eyes symbolize her own blindness – and it is this blindness, rather than her skin color, that eventually brings about her insanity and downfall. Pecola’s case is not isolated. The characters that people the novel, themselves perpetrators and victims of colorism, also exhibit their own â€Å"blindness. † Eyes, looking, and gazing all become important symbols in the novel. Despite being able to see, the characters are oftentimes blinded by colorism. As such, the novel underscores a very important theme: the great divide between superficial looking and deeper seeing. For Morrison, the more important way of seeing is painfully missing in the novel, leading to drastic and disastrous consequences. Inside Pecola’s shoe she hides her treasure: three pennies to get her nine Mary Janes. Inside the store, she encounters Mr. Yacobowski, who â€Å"urges his eyes out of his thoughts to encounter her (Morrison 41). † He has blue eyes that are blear-dropped, which he focuses on Pecola as he â€Å"looms up over the counter (Morrison 41). † But Somewhere between retina and object, between vision and view, his eyes draw back, hesitate, and hover. At some fixed point in time and space he senses that he need not waste the effort of a glance. He does not see her, because for him there is nothing to see. How can a fifty-two-year-old white immigrant†¦see a little black girl? (Morrison 42) Pecola immediately recognizes the storekeeper’s stare as â€Å"the total absence of human recognition the glazed separateness. this vacuum is not new to her. She has seen it lurking in the eyes of all white people†¦ (Morrison 42). With the stare Pecola is shamed and angered. Yet, it is not only Pecola’s desire for blue eyes or the white people’s vacant stares that stand for the blindness plaguing the characters caught in the grips of colorism. Consider the case of Maureen Peal, â€Å"the high yellow dream child with long brown hair braided into two lynch ropes that hung down her back (Morrison 52). † Such a description juxtaposes the vicious power that comes with her pretty face. Claudia is at the receiving end, as Maureen often gazes at her with â€Å"unearned haughtiness in her eyes (Morrison 54). † In knowing that she is prettier because she is whiter than the rest, Maureen condescends to them, seeing only their darker skin and eliminating them immediately as people lower than her. In the end, it is only Soaphead Church who listens with sympathy to Pecola’s pleas. He is the only one who sees through the curse of blindness by realizing that Pecola’s wish was â€Å"the most poignant and the one [wish] most deserving of fulfillment. A little black girl who wanted to rise up out of pit of her blackness and see the world with blue eyes (137). † But the price for this was heavy – for only she could see her eyes. Her frustration and disillusion sends her into a downward spiral, from which her friends cannot pull her out of. At the cost of her life, she gained the eyes she wanted. Works Cited Rosenberg, Ruth. â€Å"Seeds in Hard Ground: Black Girlhood in The Bluest Eye. † Black American Literature Forum 21. 4 (1987). 435-445. Morrison, Toni. The Bluest Eye. New York: Washington Square Press, 1970.

William Shakespeare’s Hamlet Essay Example for Free

William Shakespeare’s Hamlet Essay William Shakespeare’s Hamlet and Paula Vogel’s How I learned to Drive plays explore the common theme of betrayal through the acts of the protagonist in the 2 literary works. The two plays thus demonstrate several similarities as they build on this theme. For instance, through Hamlet, Hamlet is portrayed as being betrayed by Claudius in whom he has trust. Similarly, How I learned to Drive’s Li’l Bit endures the betrayal of Uncle Peck whom she also trusts. Moreover, both Hamlet and Li’l Bit demonstrate that they are bright persons through their respective actions in the face of betrayal. Another similarity is that both Li’l Bit’s and Hamlet’s families seem to be dysfunctional. The two plays however have a number of differences. For example, Hamlet belongs to royalty while Li’l Bit is a humble girl. In addition, while, Hamlet finally exacts revenge on his tormentor, Li’l Bit finally forgives her detractor. The environments of the 2 characters’ families are also different. While Li’l Bit’s family is surrounded by problems typical of common people, Hamlet’s family is plagued by problems that usually affect the high and mighty. All in all, the 2 plays Hamlet and How I learned to Drive demonstrate that their respective protagonists are betrayed by people they otherwise trust. To begin with, Hamlet suffers from Claudio’s (his uncle’s) malevolence when Claudius murders King Hamlet (Hamlet’s father) and later seeks to murder the young Hamlet himself. In normal circumstances, one’s uncle would not do the heinous act that Claudius does. Claudio’s commission of the offense is thus an outright betrayal of the trust that his nephew has towards the uncle. Hamlet’s doubts that Claudius really murdered King Hamlet testify to the nephew’s trust towards his uncle. After his father’s spirit informs the young Hamlet that Claudius murdered King Hamlet, the young Hamlet is initially not sure of the authenticity of the message (Shakespeare and Edwards 69). To further build the theme of betrayal, after realizing that Hamlet is aware of his evil scheme, Claudius plots to have Hamlet murdered. Queen Gertrude, Hamlet’s widowed and remarried mother, cannot assist the son because she has married Claudius the person who murdered her late husband. Hamlet’s household is thus rather dysfunctional, a factor that accentuates Hamlet’s pain of betrayal. Hamlet is thus betrayed on two occasions by his uncle. Similarly, How I learned to Drive’s Li’l Bit is betrayed by Uncle Peck, a relative whom she trusts and feels close to. For instance, owing to the dysfunctional nature of her family, Li’l Bit does not enjoy the support of her family members. The only person who appears to offer the girl the necessary support and attention is Uncle Peck. The uncle teaches the girls how to drive. Li’l Bit is however disappointed when Uncle Peck’s niceness ultimately proves to be tinged with selfish desires. For instance, the uncle molests Li’l Bit on several occasions. He therefore betrays the trust that the young niece has towards him. In addition, Aunt Mary Uncle Peck’s husband, carries on the theme of betrayal when she refuses to come to the aid of Li’l Bit regarding her molestation ordeals by the uncle. Moreover, Li’l Bit’s mother refuses to confront Uncle Peck with regard to his unhealthy intimacy with Li’l Bit. The mother thus betrays her daughter regarding the daughter’s dashed hope that the mother will come to the daughter’s aid (Vogel 25). Li’l Bit thus resembles Hamlet in that both come from somewhat dysfunctional families and are both betrayed by the people who should be their helpers. Moreover, both the Hamlet and the How I learned to Drive plays show that their respective protagonists are wise in their individual rights. Through such depictions of intelligence, the theme of betrayal continues to play out. For instance, Hamlet stages a drama performance that confirms that Claudius really murdered King Hamlet. This act demonstrates Hamlet’s extreme intelligence and also exposes Claudius’ act of betrayal. Likewise, Lil Bit demonstrates her wisdom by tactfully objecting to Uncle Peck’s indecent sexual advances. The girl does this and still manages to be friends with the uncle. Moreover, her firm refusal to engage in sexual liaisons with Uncle Peck discloses the uncle’s betrayal in seeking to have an incest-like relationship with his niece. In effect, Hamlet and Lil Bit are portrayed as intelligent characters as they seek to contend with the betrayal which they experience. Conversely, Lil Bit and Hamlet have several differences which serve to highlight the betrayal the two persons endure. For example, while Hamlet is of a royal class, Lil Bit has a humble background. The royalty in Hamlet’s family background partially make Claudius betray him. King Hamlet is murdered so as to pave way for Claudius to occupy the throne. On the other hand, Lil Bit’s humble background partially contributes to her betrayal by Uncle Peck. This is because most of Lil Bit’s family members are unreliable. The mother conceived during her teenage years, the father is sexist, while Uncle Peck the molester, is an alcoholic. This situation makes Lil Bit become alienated and thus continue to silently suffer under Uncle Peck. Her continued suffering thus unearths her uncle’s act of betrayal. Moreover, Hamlet finally revenges on Claudius heinous act while Lil Bit chooses to forgive Uncle Peck. The characters’ respective actions thus show that their relatives are betrayers who deserve either punishment of forgiveness. In conclusion, Vogel’s How I learned to Drive and Shakespeare’s Hamlet play explore the theme of someone being betrayed by someone they have always trusted. In How I learned to Drive, Lil Bit is betrayed by Uncle Peck, her mother, and her aunt, all whom she trusts. Conversely, Hamlet’s Hamlet is betrayed by his uncle Claudius, and his mother Queen Gertrude. The two plays however have several differences which however contribute to the theme of betrayal. Works Cited Shakespeare, William and Edwards, Philip. Hamlet, Prince of Denmark. Cambridge, UK: Cambridge University Press, 2003. Vogel, Paula. How I learned to Drive. New York: Dramatists Play Service, 1998.

Capital structure and approaches to capital structure

Capital structure and approaches to capital structure It is defined as the mix or proposition of a firms permanent long-term financing represented by debt, preference stock, and common stock equity. Capital structure theory suggests that firms determine what is often referred to as a target debt ratio, which is based on various tradeoffs between the costs and benefits of debt versus equity. The term capital structure refers to the percentage of capital (money) at work in a business by type. Broadly speaking, there are two forms of capital: equity capital and debt capital. Each has its own benefits and drawbacks and a substantial part of wise corporate stewardship and management is attempting to find the perfect capital structure in terms of risk / reward payoff for shareholders. This is true for Fortune 500 companies and for small business owners trying to determine how much of their startup money should come from a bank loan without endangering the business Lets look at each in detail: Equity Capital This refers to money put up and owned by the shareholders (owners). Typically, equity capital consists of two types: 1) contributed capital, which is the money that was originally invested in the business in exchange for shares of stock or ownership and 2)  retained earnings, which represents profits from past years that have been kept by the company and used to strengthen the  balance sheet  or fund growth, acquisitions, or expansion. Many consider equity capital to be the most expensive type of capital a company can utilize because its cost is the return the firm must earn to attract investment. A speculative mining company that is looking for silver in a remote region of Africa may require a much higher  return on equity  to get investors to purchase the stock than a firm such as Procter Gamble, which sells everything from toothpaste and shampoo to detergent and beauty products. Debt Capital The debt capital in a companys capital structure refers to borrowed money that is at work in the business. The safest type is generally considered long-term bonds  because the company has years, if not decades, to come up with the principal, while paying interest only in the meantime. Other types of debt capital can include short-term commercial paper utilized by giants such as Wal-Mart and General Electric that amount to billions of dollars in 24-hour loans from the capital markets to meet day-to-day working capital requirements such as payroll  and utility bills. The cost of debt capital in the capital structure depends on the health of the companys balance sheet a triple AAA rated firm is going to be able to borrow at extremely low rates versus a speculative company with tons of debt, which may have to pay 15% or more in exchange for debt capital. Other Forms of Capital There are actually other forms of capital, such as  vendor financing  where a company can sell goods before they have to pay the bill to the vendor, that can drastically increase return on equity but dont cost the company anything. This was one of the secrets to  Sam Waltons success at Wal-Mart. He was often able to sell Tide detergent before having to pay the bill to Procter Gamble, in effect, using PGs money to grow his retailer. In the case of an insurance company, the policyholder float represents money that doesnt belong to the firm but that it gets to use and earn an investment on until it has to pay it out for accidents or medical bills, in the case of an auto insurer. The cost of other forms of capital in the capital structure varies greatly on a case-by-case basis and often comes down to the talent and discipline of managers. SEEKING THE OPTIMAL CAPITAL STRUCTURE Many middle class individuals believe that the goal in life is to be debt-free. When you reach the upper echelons of finance, however, that idea is almost anathema. Many of the most successful companies in the world base their capital structure on one simple consideration: the cost of capital. If you can borrow money at 7% for 30 years in a world of 3% inflation and reinvest it in core operations at 15%, you would be wise to consider at least 40% to 50% in debt capital in your overall capital structure. Of course, how much debt you take on comes down to how secure the revenues your business generates are if you sell an indispensable product that people simply must have, the debt will be much lower risk than if you operate a theme park in a tourist town at the height of a boom market. Again, this is where managerial talent, experience, and wisdom comes into play. The great managers have a knack for consistently lowering their  weighted average cost of capital  by increasing productivity, seeking out higher return products, and more. To truly understand the idea of capital structure, you need to take a few moments to read Return on Equity: The DuPont Model  to understand how the capital structure represents one of the three components in determining the  rate of return  a company will earn on the money its owners have invested in it. Whether you own a doughnut shop or are considering investing in publicly traded stocks, its knowledge you simply must have. Question on our minds: Can the total valuation of a company (debt+equity) and the cost of capital be affected by changing the financing mix. The imperfections in the market play a vital role in the valuation of a company. This data is of utmost importance to the suppliers of capital. Changes in the financing mix are assumed to occur by issuing debt and repurchasing common stock or by issuing common stock and retiring debt. Example 1. Assume a company whose earnings are not expected to grow and which pays out all of its earnings to its shareholders in the form of dividends. All kinds of market imperfections are not considered in the current example, for simplicity in calculations. We are concerned mainly with 3 different rates of return. The first is The yield on companys debt, ki = = The second rate of return that we are concerned with is ke = = With our assumptions that the firms earnings are not expected to grow and which has a 100 percent dividend payout, the firms earning per price represents the market rate of discount that equates the present value of the perpetual stream of expected constant future dividends with the current market price of the common stock. The third rate to be calculated is ko = = These 3 different rates of return affect the amount of financial leverage, which is the debt to equity ratio. ko is defined as the overall capitalization rate of the firm. It is designed as the weighted average cost of capital, and can also be expressed as ko = ki [] + ke [] Calculating A Companys Capital Structure Review your companys most recent financial statements to find all of the capital components. Highlight all of the debt of the company and the equity (including common and preferred shares, capital contributions and retained earnings). Add up the total debt and equity It will be equal to your companys assets on the balance sheet because the debt and equity is what paid for those assets. Your capital structure is the percentage that each funding source represents of your companys total funding. Lets look at an example. Lets say you have the following capital components: bank loan $176,500, retained earnings $54,300, common stock $12,500. That makes your total capital $243,300. To calculate your capital structure, take the dollar amount of each capital source and divide it by the total capital. In the above example, the bank loan is 72.5%, retained earnings 22.3%, capital stock 5.2% for a total of 100%. Monitor your companys capital structure over time. Debt tends to be the most expensive source of capital and, over time, you will determine the most effective blend of debt versus equity financing for your particular situation. Calculating your actual capital structure will allow you to track how closely you are following your ideal capital structure. Factors Affecting Capital Structure The factors that affect the decisions taken regarding capital structure can be divided into three major types: Internal Factors External Factors General Factors INTERNAL FACTORS Cost of Capital The cost of capital is the cost of the companys funds. It consists of debts and equity. When a company raises funds for its operations there are certain costs involved. When decisions regarding the capital structure are taken, managers ensure that the earnings on the capital are more than this cost of capital. In general, the cost of borrowing capital is less than the cost of equity capital. This is because the interest rate on loans and borrowings is less than the dividend rates and also the dividends are a function of the companys profits and not expenditure. Risk Factor When decisions regarding capital structure are to be taken, the risk factors considerations are an important issue. If company raises its funds through debts, the risks involved are of two types: The company has to repay the lenders in a fixed time period and at a fixed rate, whether or not the company makes profit or goes into loss. The borrowed capital is secured capital. Hence, if the company fails to make the payments, the lenders can take possession of the companys assets. If the company goes for funds through equity capital there are minimum risks. As the dividends are an appropriation of the companys profits, if it does not make any profit, it is not obliged to make the payments. In contrast to debt capital, here the company is not expected to repay its equity capital. And also the equity capital is not secured. Control Factor When additional funds are to be raised, the control factors are very essential in deciding the capital structure of the company. When a company decides to issue further equity shares the control of the company may be at stake. Hence, it may not be acceptable to its shareholders and owners. This factor is not vital in case of debt financing, except when financing institutions stipulate the appointment of nominee directors in the Board of Directors of the company. Objects of Capital Structure Planning They are- Maximize profit of the owners Issue transferable securities Issue further securities in a way that does not dilute the holdings of the present owners EXTERNAL FACTORS General Economic Conditions: If the economy is in the state of depression, equity funding is considered as it involves less risk. While, if the economy is booming and the interest rates are forecasted to fall, debt funding is given preference. Interest Rate Levels: If the interest rates are high in the capital market, equity funding is preferred until the interest rate levels fall down. Policy of Lending Institutions: If the terms and policies of the financing institutions are rigid and harsh, debt financing should be ignored and equity financing should be tapped. Taxation Policy: The government has taxation policies which include corporate taxes as well as individual taxes. The government includes individual taxes on both borrowings as well as dividends. Also income tax deductions are offered on interests paid on borrowings. All these factors have to be considered while planning capital structure. Statutory Risks: While planning Capital Structure, the statutory risks given by the Government and other statutes are to be considered. GENERAL FACTORS Constitution of the company: If the company is private limited, the control factors are essential while if the company is public limited, the cost factors are essential. Characteristics of the company: Companies which are small and in the early stage have weak credit standings and bargaining capacity, hence they have to rely on equity financing. While big companies have strong credit standings and they can source their funds from borrowings with acceptable interest rates. Stability of earnings: The companies which have stable earnings and the risks involved are less, go for debt funding as they can handle the high risk factors. While companies whose earnings are forecasted to be fluctuating, usually go for less risky equity funding. Attitude of the Management: For a company with conservative management, the control factor is more important, while a company with a liberal management considers the cost factors to be more important. Approaches to Capital Structure Net Operating Income Approach Traditional Approach Net Income Approach Modigliani Miller Approach Net Operating Income Approach David Durand proposed the net income approach to capital structure. This approach looks at the consequence of alterations in capital structure in terms of net operating income. Under this approach, on the basis of net operating income, the overall value of the firm is measured. Therefore this approach is identified as net operating income approach. The NOI approach entails that: Largely the value of the firm does not depend on the degree of leverage in capital structure and hence whatever may be the change in capital structure the overall value of the firm is not affected. In the same way, the overall cost of capital is not affected by any change in the degree of leverage in capital structure. The overall cost of capital is independent of leverage. Under the net income approach, the overall cost of capital is unaffected and remains constant irrespective of the change in the ratio of debts to equity capital when the cost of debt is less than that of equity capital whereas it is assumed the overall cost of capital must decrease with the increase in debts. How is this assumption justified? With the increase in the amount of debts the degree of risk of business increases. As a result the rate of equity over investment in equity shares thus on one hand the WACC decreases with the increase in the amount of debts; on the other hand cost of equity capital increases to the same tune. Therefore the benefit of leverage is mopped away and the overall cost of capital remains at the same level. In other words there are two parts of the cost of capital. Interest charges on debentures. The increase in the rate of equity capitalization resulting from the increase in risk of business due to higher level of debts. OPTIMUM CAPITAL STRUCTURE This approach suggests that whatever the degree of indebtedness of the company, market value remains constant. Despite the change in the ratio of debt to capital in the market value of its equity shares remains constant. This means that there is no optimal capital structure. Each capital structure is optimal in approach of net operating income The market value of the firm is determined as follows:   The value of equity can be determined by the following equation and   The Net Operating Income Approach is based on the following assumptions: Example: ABC Ltd., is expecting an earnings before interest tax of Rs.1,80,00,000 and belongs to risk class of 10%. You are required to find out the value of firm % cost of equity capital if it employs 8% debt to the extent of 20%, 35% or 50% of the total financial requirement of Rs. 90000000. Solution Statement showing value of firm and cost of equity capital   20% Debt 35% Debt 50% Debt Earnings before interest tax EBIT ($) 18000000 18000000 18000000 Overall cost of capital 10% 10% 10% Value of firm (V) = EBIT Cost of Capital{EBIT/Cost of Capital} 180000000 180000000 180000000 Value of 8% debt (D) 18000000 (20% ÃÆ'- 90000000) 31500000 (35% ÃÆ'- 90000000) 45000000 (50% ÃÆ'- 90000000) Value of equity (V D) 162000000 148500000 135000000 Net profit (EBIT Interest) 16560000 (18000000 1440000) 15480000 (18000000 2520000) 14400000 (18000000 3600000) (Cost of equity (Kc) 10.22% 10.42% 10.66% (Net profit/value of equity) ÃÆ'- 100 (16560000/ 162000000) ( 15480000/ 148500000) ( 14400000/ 135000000) It is apparent from the above computation that the overall cost of capital value of firm; re-constant at different levels of debt i.e., at 20%, 35% and 50%. The benefit of debt content is offset by increase in the cost of equity. The overall cost of capital (k0) remains constant and can be verified as follows: Overall Cost of Capital k0 = kd   (D/D+S) + Ke   (S/D+S) 20% Debt K0 =   $4,00,000/$40,00,000   ÃÆ'-8% + $36,00,000/$40,00,000 X   10.22% = 0.008 + 0.092 = 0.10 or 10% 35% Debt K0 = $7,00,000/$40,00,000   ÃÆ'-8% + $33,00,000/$40,00,000 X   10.42% = 0.014 + 0.0859 = 0.0999 Or 10% 50% Debt K0 = $10,00,000/$40,00,000   ÃÆ'- 8% + $30,00,000/$40,00,000 X   10.66% = 0.02 + 0.07995 = 0.0995 or 10% Traditional Approach Traditional approach is a  middle-way approach between net operating income approach the net income approach. According to this approach: (1) A best  capital structure  does exist. (2) Market value of the firm can be increased and average cost of capital can be reduced through a prudent manipulation of leverage. (3) The cost of debt capital increases if debts are increases beyond a definite limit. This is because the greater the risk  of business  the higher the  rate of interest  the creditors would ask for. The rate of equity capitalization will also increase with it. Thus there remains no benefit of leverage when debts are increased beyond a certain limit. The cost of capital also goes up. Traditional Approach Thus at a definite level of mixture of debts to equity capital, average cost of capital also increases. The  capital structure  is optimum at this level of the mix of debts to equity capital. The effect of change in  capital structure  on the overall cost of capital can be divided into three stages as follows; First stage In the first stage the overall cost of capital falls and the value of the firm increases with the increase in leverage. This leverage has beneficial effect as debts as debts are less expensive. The cost of equity remains constant or increases negligibly. The proportion of risk is less in such a firm. Second stage A stage is reached when increase in leverage has no effect on the value or the cost of capital, of the firm. Neither the cost of capital falls nor the value of the firm rises. This is because the increase in the cost of equity due to the assed financial risk offsets the advantage of low cost debt. This is the stage wherein the value of the firm is maximum and cost of capital minimum. Third stage Beyond a definite limit of leverage the cost of capital increases with leverage and the value of the firm decreases with leverage. This is because with the increase in debts investors begin to realize the degree of financial risk and hence they desire to earn a higher rate of return on equity shares. The resultant increase in equity capitalization rate will more than offset the advantage of low-cost debt. It follows that the cost of capital is a function of the degree of leverage. Hence, an optimum  capital structure  can be achieved by establishing an appropriate degree of leverage in  capital structure. Net Income Approach This approach states that, the cost of debt and the cost of equity do not change with a change in the leverage ratio(when D/E changes), due to which it is observed that there is a weakening in the cost of capital as the leverage increases. The cost of capitalcan be calculated by the use Net income approach; weighted average of cost of capitalcan be explained by the following equation; http://lh6.ggpht.com/cemismailsezer/R4_ZkNJ-ThI/AAAAAAAAADY/RZYaGVynnUw/image%5B5%5D where: Ko: average cost of capital Kd: cost of debt Ke: cost of equity B: market value of debt S: market value of equity As we know that cost of debt is less than cost of equity (Kd http://lh6.ggpht.com/cemismailsezer/R4_ZlNJ-TjI/AAAAAAAAADo/de5aDk2tbUo/image%5B8%5D The Net Income Approach assembles the investment structure of the firm which has a major influence on the value of the firm. Therefore, the use of control will change both the worth of the organisation cost of capital. Net Income is exploited in approaching the market value that firm possesses. In this analysis Ka decreases when the D/E ratio increases as the proportion of debt, cheaper source of finance, increase in the capital structure vice versa. Assumptions of net income approach the perception of risk is not altered by the use of liability for the investors; as a result, the equity capitalisation rate i.e. ke, and the debt capitalisation rate kd, remain constant with changes in leverage The debt capitalization rate is less than the equity capitalization rate The corporate income taxes are not considered. Numerical example: Assume that a firm has an expected annual net operating income of Rs.2, 00, 000, an equity rate, ke, of 10% and Rs. 10, 00,000 of 6% debt. The value of the firm according to NET INCOME approach: Net Operating Income NOI 2, 00,000 Total cost of debt Interest= KdD, (10, 00,000 x .06) 60,000 Net Income Available to shareholders, NOI I 1, 40,000 Therefore: Market Value of Equity (Rs. 140,000/.10) 14, 00,000 Market value of debt D (Rs. 60,000/.06) 10, 00,000 Total 24, 00,000 Note: The cost of equity and debt are respectively 10% and 6% and are assumed to be constant under the Net Income Approach Ko = Kd (D/V) + Ke (S/V) = 0.06 (10, 00,000/24, 00,000) + 0.10 (14, 00,000/24, 00,000) = 0.025 + 0.0583 = 0.0833 or 8.33% Modigliani Miller (MM) Approach Assumptions of the MM Approach Capital market is perfect. It is so when: Information is freely available Problem of asymmetric information does not exist Transaction cost is nil There is no bankruptcy cost Securities are fully divisible 100% payout ratio Investors and managers are rational Managers act in interest of shareholders Combination of risk and return is rationally chosen Expectations are homogenous Equivalent risk class No taxes Investors can borrow in personal A/C at same terms of firm. Proposition I Value of the form is equal to the expected operating income divided by discount rate appropriate to its risk class. It is independent of capital structure i.e. where, V = Market Value of the Firm D = Market Value of the debt E = Market value of the equity O = Expected Operating Income r = Discount rate applicable to risk class to which firm belongs Proposition I is almost similar to the Net Operating Income Approach. MM used arbitrage argument to prove this approach. MM argues that identical assets must sell for same price, irrespective of how they are financed. Arbitrage Process If the price of a product is unequal in two markets, traders buy it in the market where price is low and sell it in the market where price is high. This phenomenon is known as price differential or arbitrage. As a result of this process of arbitrage, price tends to decline in the high-priced market and price tends to rise in the low-priced market unit the differential is totally removed. Modigliani and Miller explain their approach in terms of the same process of arbitrage. They hold that two firms, identical in all respects except leverage cannot have different market value. If two identical firms have different market values, arbitrage will take place until there is no difference in the market values of the two firms. Example: Let us suppose that there are two firms, P and Q belonging to the same group of homogenous risk. Firm P is unlevered as its capital structure consists of equity capital only Firm Q is levered as its capital structure includes 10% debentures of Rs.10,00,000 According to traditional approach, the market value of firm Q would be higher than that of firm P. But according to M-M approach, this situation cannot persist for long. The market value of the equity share of firm Q is high but investment in it is more risky while the market value of the equity share of firm P is low but investment in it is safe. Hence investors will sell out equity shares of firm Q and purchase equity shares of firm P. Consequently the market value of the equity shares of firm Q while fall, while the market value of the equity shares of firm P will rise. Through this process of arbitrage therefore, the market values of the firms P and Q will be equalized. This is true for all firms belonging to the same group. In equilibrium situation, the average cost of capital will be same for all firms in the group. The opposite will happen if the market value of the firm P is higher than that of the firm Q. In this case investors will sell equity shares of P and buy those of Q. Consequently market values of these two firms will be equalised. Proposition II MM Proposition II states that the value of the firm depends on three things: Required  rate  of return on the firms assets (ra) Cost of debt of the firm (rd) Debt/Equity ratio of the firm (D/E) An increase in financial leverage increases expected Earnings per Share (EPS) but not share prices. Proposition II states that an expected rate of return of shareholders increases with financial leverage. Expected ROE is equal to expected rate of return on assets plus premium. The formula for re is: re = ra + (ra-rd)x(D/E) Implications of Proposition II- rd is independent of D/E and hence re increases with D/E. The debt crosses an optimal level, the risk of default increases and expected return on debt rd increases. Limitations of MM Approach- Leverage irrelevance theory of MM is valid if perfect market assumption is correct but actually it is not so. Firms are able to pay taxes and investors also pay taxes. Bankruptcy cost can be very high. Managers have their own preference of a type of finance. Managers are better informed than shareholders i.e. asymmetry of information exists. Personal leverage is not possible to be substitute of corporate leverage. 100% payout ratio is not possible normally. Analysis of Companies TVS Motors: TVS Motors hold one of the top ten two wheeler manufacturer and number three positions in Indian market, with turnover of $1 billion in 2008-2009 and is the flagship division of TVS group which is of worth $4 billion. TVS Motors manufactures wide range of two wheelers ranging from two wheelers for domestic use to two wheelers for racing. Manufacturing units are located at Housar and Mysore Himachal Pradesh Indonesia Has production capacity of 2.5 million units per year with strength in design and development TVS has recently launched 7 new products. Till now TVS has sold more than 15 million two wheelers and has employed 40000. TVS motor is the only Indian company to win Deming award for quality control in 2002. TVS Network spans over 48 countries. Particulars 2007-08 (in crores) 2008-09(in crores) OPERATING INCOME 45.31 121.08 INTEREST ON DEBT( I) 11.47 64.61 EQUITY EARNING 33.84 56.47 COST OF EQUITY (Ke) 4.13% 4.21% MARKET VALUE OF EQUITY 819.37 1341.33 COST OF DEBT (Kd) 1.72% 7.13% MARKET VALUE OF DEBT 666.34 905.98 VALUE OF FIRM 1485.71 2247.31 COST OF CAPITAL (Ko) 3.05% 5.39% WACC Calculation: For 2007-08 WACC= weke + wdkd We = E/(D+E) Wd = D/(D+E) = 1/(1.84) x 0.413 + 0.84/(1.84) x 0.172 = 0.2284 +0.078 = 3.051% For 2008-2009 WACC= weke + wdkd We = E/(D+E) Wd = D/(D+E) = 1/(2.11) x 4.21 + 1.11/(2.11) x 7.13 =1.995 +3.750 = 5.75% Hero Honda: Hero Honda Motors Limited is largest and most successful two wheeler manufacturers in India and it is India based. Hero Honda was a joint venture between Hero group and Honda of Japan till 2010 when Honda sold its entire stake to Hero. In 2008-09 Hero Honda sold 3.7 million bikes with 12% growth rate and captured 57% of Indian markets share. Hero Honda Splendor is worlds largest selling motorcycle sold more than 1 million units in 2001-03.C:UsersAAdityaDesktopindex.jpg In December 2010, the Board of Directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero Group of India would buy out the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not sell into international markets and the termination would mean that Hero Group can exploit global opportunities now. Since last 25 years the Hero Group relied on their Japanese partner Honda for R D for new bike models. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint Venture alone. WACC calculation: For 2007-08 WACC= weke + wdkd We = E/(D+E) Wd = D/(D+E) = 1/(1.07)x34.73%+0.07/(1.07) x 8.33% = 33% For 2008-09 WACC= weke + wdkd We = E/(D+E) Wd = D/(D+E) = 1/(1.04)x32.41%+1.04/(1.04)x10.20% = 31.55% Particulars 2007-08 (in crores) 2008-09 (in crores) OPERATING INCOME 1201.96 1367.77 INTEREST ON DEBT( I) 13.76 13.47 EQUITY EARNING 1188.22 1354.3 COST OF EQUITY (Ke) 34.73% 32.41% MARKET VALUE OF EQUITY 3421.25 4178.65 COST OF DEBT (Kd) 8.33% 10.20% MARKET VALUE OF DEBT 165.18 132.05 VALUE OF F

Legalizing Marijuana Essay -- Drugs Weed Legal Argumentative Essays

Legalizing Marijuana Drugs are a major influential force in our country today. The problem has gotten so out of hand that many options are being considered to control it or even solve it. Ending the drug war seems to be a bit impossible. The war on drugs seems to be accomplishing a lot but this is not true. Different options need to be considered. Legalization is an option that hasn't gotten a chance but should be given one. Although many people feel that legalizing marijuana would increase the amount of use, marijuana should be legalized because it will reduce the great amounts of money spent on enforcement and it will increase our country’s revenue. There are also many benefits that can be uncovered to help people if legalization of marijuana is given a chance. Legalizing marijuana would increase our economy's revenue. During Prohibition alcohol use was still sold and used, but people were doing it illegally. The 21st amendment repealed prohibition and alcohol taxes were increased. The same thing should happen with drugs. Marijuana should be taxed heavily to increase our revenue. Marijuana and other drugs would be made by the same people who make aspirin so the quality would be assured, containing no poisons or adulterants. Sterile hypodermic needles will be readily available at corner drug stores. These could be taxed heavily because the users will be assured of "clean drugs." Making drugs legal will reduce the great amounts of money spent on enforcement every year. Drug dealers and users are one step ahead on the enforcement process. If one drug lord is caught, another one will show up somewhere else. We cannot win. â€Å"In 1987, 10 billion dollars were spent alone just on enforcing drug laws. Drugs accounted for about 40... ...on on the amount spent on law enforcement efforts to apprehend and prosecute users and sellers of marijuana. The drug enforcement authorities might reduce their budget requests, or, more likely, focus more intensely on hard drugs and violent crimes. The courts would be relieved of hearing some drug cases, as well. The most important gain would be in the quality of government. The sorts of temptations and opportunities that lead to corruption would be significantly minimized. The illogical pattern of law enforcement, which now treats marijuana as more dangerous as alcohol, would end. It would set more achievable goals for law enforcement, and this would lend strength and credibility to the government. In the essay â€Å"drugs,† Vidal states, â€Å"It is possible to stop most drug addiction in the United States within a very short time, Simply make all drugs available.