Developing a Database System Essay Example | Topics and Well Written Essays - 500 words

Developing a Database System - Essay Example Retailers involved in the sale of PCs are also included for data source. Vendors are another source of data for designing of a database for PC Store. Sales reports kept in manual registers or files are the significant data source for PC Stores database design. Regarding the audience of the inventory management system linked to sales order system include the staff of inventory management, order placement staff, invoicing department, sales management, suppliers, manufacturers, and customers. Requests made by sales department on specific forms are verified by the inventory management staff. Required numbers of items or parts are processed by the order placement staff. Sales’ department collects the customers’ requirements on a specific order forms. Managers manage the day to day activities and analyze the reports and head the meetings to solve the issues. In order to build the inventory management system, information about every product of PCs, customers on every outlet are required to be managed. Customers’ information contains the attributes of name, address, phone number, email, and past transactions. Company can rank its customers on previous purchases of company’s products (Kotler et al., 2009). Product as an entity of database includes information about product name, date of arrival of product, color or model, price, and manufacturer information. It becomes easier to search the information about a product from model, price range, or date. When all data sources have been identified then a developer starts designing the database. Customer, vendor, sales department, suppliers, manufacturers, product, employees; staff and manager are necessary tables. These tables have relations such as customer to sales department, employees to sales department, suppliers to product etc. Some of the constraints like primary key, foreign key and candidate key are also used for tables. After all tables are created, and relations established, then a developer requires

Surveying and mapping Essay Example | Topics and Well Written Essays - 7500 words

Surveying and mapping - Essay Example Designing an effective and efficient survey network is one of the essential aspects in the implement of field surveys. In contrast, the design of a survey network is a complicated and sophisticated task because a survey network needs to meet or exceed specified criteria for precision, reliability, sensitivity, and cost. Other pivotal factors must be taken into account in a feasible design, such as geological criteria, suitability for equipment measurement, long term safety, field time and access costs (Talaya, et al., 1999). Therefore, it is vital to implement the techniques and instruments of the design of the survey network to deal with a variety of current problems. For instance, deformation monitoring network of dam (Gà ¶kalp and TaÅŸÃ §Ã„ ±, 2009), precise levelling of the network (Shahrum and Azhari, 2009), and control the network of construction, have drawn intensive attention for surveyors. The aim of survey network design is understood as creating an optimal network configuration and observation plan that satisfies the postulated network quality criteria (e.g., error ellipses and redundancy numbers) with minimum cost (Amiri-Simkooei and Sharifi, 2004). In other words, survey network design has two aspects: using the current equipment and condition to imbue the layout of the survey network with a higher accuracy, sensitivity and reliability; the cost of the survey network is the lowest when the network meets the precision, sensitivity and reliability.... Increasing amounts of researchers have considered the very pivotal role feedback loops play in the overall progress of network design technology (Mishima 2009; Anderson, and Mikhail, 2003). With the growing need for increased feedback mechanisms to ensure accuracy and reliability, software such as Geolab has emerged to attempt to account for these measures through trial-and-error procedural least square adjustment. Still, the complete potential of such a system remains to be understood. This research advances with a context consideration of this theoretical understanding. 1.2 Classification of survey network design In accordance with Grafarend’s suggestions (Grafarend, 1974), survey network design can be decomposed into four smaller problems. 1) Zero order design (ZOD) The free network that is a known configuration and observation plan will select an optimal coordinate system for the coordinate of control points and their variance. In other words, to determine the coordinates of vector X and the co-factor matrix when the design matrix and weight matrix of observation P is known, so that X is an objective function to extremes. Therefore, ZOD is an adjustment problem. 2) First order design (FOD) Design matrix A will be determined when the observation matrix P is known, so that some elements of the survey network reach a predetermined value or the highest accuracy, or the best approximation to the Coordinate of a given matrix. 3) Second order design (SOD) To determine the weight matrix of observation P when the design matrix P is known, so that some elements can achieve the desired accuracy or the highest accuracy, or coordinate the best approximation of a co-factor matrix given matrix. 4) Third order design

Resistance to Change in an Organisation

Resistance to Change in an Organisation Introduction Change is not an easy factor to go through. Taking in to account that it does not matter if it is a change of rules, space or simple habits. The concept of change involves many other functions. Where the resistance to it, sometimes is hard to adapt or maybe just simple depending the management and organization between one and more individuals, which makes part of an organization structure and affect a whole organization. Organizational change in inevitable Just like anything in life, in addition to this the evolution of the world markets and cultures. Makes the change something that requires constant attention and preparation. In order to be successful in any market, an organization has to be able to transform an evaluate different kind of statements that show the importance of organizational change in the develop of a company. We live in a world in which the nature of organization and the practice, most of people believe that we are in a Constance change. When the difference between theory and practice is completely relevant and plays an important role in management and helps to understand that is a vital in any organization process, which helps to analyze and create structures that help to understand the value of change. The theory of change The theory of change is a strategy or project for achieving large-scale, long-term goals. It identifies the preconditions, pathways and interventions necessary for an initiatives success in different model, where change makes a huge impact in the evolution of a system organization. Theories of change and logic models are vital to evaluate success for a number of reasons. According to Burke, Warner and his book (Organization change, theory and practice). Organizations change all the time, each and every day. The change that happens in organizations commonly is unplanned and gradual, affecting or attributing different aspects where planning is a very important tool to apply and makes this much more easy to understand and shows the importance of change and its crucial participation in the evolution of a company. For a better understanding of change, organizations are created and developed, to continue and during the last. But external factors as environment, plays a very important role in the evolution, because those are discontinuous and can cause destruction but can cause creativity as well. To affront this many others levels in managing as a planning and controlling for example, makes change a Constance factor, which decide the future or develop of any kind of system. However change sometimes could be an internal factor. For example, the change of management that brings new rules, methods and a new different path to assume new emerging markets, makes this theory unpredictable for the good of a system. The paradox of planned organization change. Sometimes when plan is the right way to follow in an organization not always is the option to assume as crucial for the right entrance of change. However this paradox can be implemented as a one of the most analytics methods to follow for a better and capable knowledge of this. According to Michael Powel and referring to the new digital technology, was quoted and saying: it will be messing and it will be confusing and we will get a lot of it wrong and well have to start over. But thats the creative process, thats the evolutionary process. (Naples daily news, 2001, p. 6A.) Mr Powell described change as a very realistic method, where the process is more linear and could be divided by phases, periods or steps and so on. The implementation process is difficult because change the system and of course the way, how the process it was made for, the things dont work well and people do they own way and in some cases the retaliation and revenge is one of the most common things to affront with many others negative aspects that make more difficult to implement a series of changes. Types of organizations change To define organizational change as the process to evaluate and reach the desired goals the first thing to have in mind in change is the concept between evolution versus revolution. The process of resistance is very common and shows the variety of circumstances to affront in management; this contrast might be is actually a very important way to think about the different forms that an organizational system can take and the correct evaluation to it. Organizational change occurs when an organization restructures resources to increase the ability to perform and create effectiveness as the principal method to arrive, similarly, to this the creation of new system of evaluation of a company for the right performance of it. Targets of changes Human resources are for an organizations most important asset, because include investment in training and modification of manage that motivates the personal for a better understanding and approach of it. In addition to it .Human resources plays a very huge impact in companies develop, because involves moral principles and workforce as a combination for the right develop of any system created to evaluate process in a safe work environment. Functional resource can be use to maximize the use of present value. Organizations can change the environment, structure and sometimes the culture of creation but technology is the most important thing to preserve. For example technologies that uses self manage work increased productivity and quality for a better develop in terms of time and production, helping to increased the creation of different products Reducing the use of time and decreasing the value in terms of production. As a result of the right use of change in a company. A technology capability, that helps to provide new products and changing the existing ones, improving the reliability and quality of goods and services of a company. Organizations might be need the restructuration of technology for a correct develop and achieve the results of a new and developing technology. Forces for and Resistance to Organizational Change Organizations and the process of change requires to face two and very important factors for the correct developed of it, one of those is change and the other is the resistance to change. Resistance to change can occur at the organizational level, group level and individual level. For example, managers should be motivated to initiate change because they are concern with improving their organization effectiveness. However, change can be threat to managers and no managerial personal as well. Almost every change requires the cooperation, collaboration, and co-ownership of others, even if that change might be beneficial some people just refused because is a natural way to response and affront. the change as fear of the unknown also to lose something of valuable, believing that change is not good for the organization and provide a different kind of elements damaging the right develop of a company in many levels and misunderstand the process of evolution. Why do people resist changing? An individual is likely to resist change for three reasons principally: uncertainty, concern over personal loss, and they believe that the change is not in the organizations best interest. In adtion to this a common example of resistance for change is giving in a normal college. Where the student are suggested and have the obligation to attend because are the rules and when they leave the college they will have to trade the known for the unknown. Some examples of resistance in organizations is when the introduction of a new analysing system means that employees will have these new methods. Some employees who are accustomed to their work routines or who have inadequate math and statistics backgrounds may fear that they will be unable to meet the system demands. They may therefore, develop a negative attitude because dont know how to use it, and prefer to judge before accept any kind of change just for fear and inclusion of different process that makes changes crucial in the develop of a company. In some case the resistance is fear for the unknown but what happens when change comes with a new structure of elements that become inconvenience for the personal? What do we should do to minimize the impact of resistance? And keep the tolerance and the right balance between employees and employers. How to break that huge wall that separates fear and commitment in the companies?. Some techniques for reducing resistance to organizational change. When management sees resistance to change as a dysfunctional, what action as a manager should I take? Several strategies have been suggested for use by managers, but in some cases the change is so extreme that brings a lot of resistance and is not enough to divide and propose steps to come in with new ideas. Is better if including tactics that helps to understand the process of change and find mediation between managers and employees. According to Barbara Senior and Steve Wailes, the resistance of change evaluate the process how the company has been created and proves the management as vital tool for the right develop and creation of strategies that helps to affiance the resistance of change and mediate between many different elements. One important step to follow in management is the implementation of education and communication, facilitation and support, negotiation and manipulation, co-optation and coercion, these tactics help to summarized and helps us to have a better look of management and understanding in how this tactics help for mediation and confront of a such a wide open variable. That involves techniques and strategies, which help to have a better understanding in the managerial concept. Tactics and strategies to reduce the resistance in organizational change Education and Communication Can help to mediate the resistance of change by helping the employees to see the logic process of change. This technique of course helps to minimize the impact of misinformation or poor communication and give the chance to aport new ideas to the system for a better compression and implementation of this. For example the correct use of communication Between agent of change and personal showing elements to improve and the importance for the good of the company but demonstrating the right benefits for the process which normally interact in the productivity and effectiveness of a company. Participation This tactic involves those individuals directly affected by the purpose of change into the decision making process. This kind of method allows expressing their feelings, increasing the quality of the process and increase employee commitment for final decision. For example, create tools for the evaluation of the process that help to understand better the inclusion of strategies showing the important of evaluation for both sides of views. Facilitation and support Involve helping employees deal with the fear and anxiety, associated with the change effort, this help could be include employee counselling and new skills training for a better use of tactics and facilitation trough the process of change. Negotiation Involves a bargain between something value for an agreement to lessen this hard process of change that sometimes can be stressful by both sides. This resistance method can be very useful, when the confrontation comes from a powerful source and shows the importance of negotiation in the process. Additionally, there is the risk that, once a change agent negotiates with one party to avoid resistance, he or she is open to the possibility of being blackmailed by other individuals in positions of power. When misunderstanding and lack of communication, makes part of the process that commonly happens in different types of organization. Manipulation Refers to cover attempts to influence others about the process of change. Sometimes involves twisting and distortion of facts to make the change appear more attractive and comprehensive. One of the common tactics to use is this particular case is creating false rumours is an example of manipulation. According to the international journal of managements reviews the use of manipulation in a change process could be illegal and immoral, because use the misunderstanding as a tool for manipulate and distort the right compression of different factors that helps to use the correct develop of tactics. Minimizing the resistance of change. Co-optation In this kind of method it is form by both manipulation and cooptation and it seeks to buy the leaders of the resistance, giving them a key role in the change decision. The last two methods are relatively inexpensive for the organization and are the easy ways to gain the support of adversaries. In addition to this sometimes this method can demonstrate that if they note this, can be sing of tricked or used. Once discovered the agent creditability may drop to cero and in the future might be a sign of confrontation and retaliation. Coercion The coercion tactic can be used to deal with the resistance fact, involves the use of different threats or force against the resisters. According to Stephen Robbins,ÂÂ  Organizational Behaviour, different organizational methods as coercion sometimes involves the use of bad recommendations and negative perform evaluation. This method should only be used when speed is of the essence or when the other person themselves has taken to public and damaging actions. Those methods listed above show the importance of management and the correct use of it. In addition to this tactics, the resistance of change in organization has different approaches that show the incursion of several strategies can be completely illegal and may undetermined change agents credibility. Being this stops the improvements in the organization. Conclusions Organizations operate in multiple environments, as a temporal, external and internal. They key task for organizations is work through a series of process or steps for mediate the impact of different factor to evaluate. Achieving External adaptation and internal integration. In addition to this, they need to anticipate and give opportunities to eliminate any possible problem or unpredictable surprises. In conclusion to this change is a very important factor to keep in mind, because if the organization doesnt have the knowledge to achieving o good process. The company can be affected and damaging the develop of a company. For that reason the implementation of strategies that allow risk evaluation and possible changes must be planned before the execution of any kind of process. Finally the use of tactics to prevent the resistance of company, while is in changing process is vital for the correct use and future develop. Because, demonstrate that organizational changes are crucial factors that involve the moral as a key to be fair with the others and the correct use of managing for good of an organization. Resistance to Change in an Organisation Resistance to Change in an Organisation Develop a plan to address below the surface resistance to change. With the research you have done so far in the course, how would you, as a manager, facilitate and manage a major change in your organization? Our company has established procedures and policies created from both a technological perspective (how to do the task) to mutual agreements with the staff leading to policies on expected behaviour etc. For changes and improvements to be successfully implemented, there needs to be not only compliance, but buy-in from staff. In order to implement a major change, a project team would be created. In the NHS, it is often standard to employ the Prince2 project management framework and depending on the nature of the project, this approach would be the probable method. Assembling the optimum project team with the correct skill mix is paramount to the successful execution and implementation of the project. Bareil (2013), defined resistance to change as a change-specific behavioural response towards a change initiative normally identified by a leader and identified it as the primary reason for change failures. Maurer (1996) described resistance as an inevitable response to change as individuals felt compelled to maintain the status quo especially if they fail to understand the rationale behind the changes in question. Maurer focussed on the poor presentation of changes as being a more significant catalyst for resistance outlining that the assumption of the manager that their change is the only possible direction and the concept that the workforce must be forced to comply would promote resistance among organisation members. According to Kruger, (xxxx), the principle issue is the established personnel change barriers which require recognition in order to be dealt with effectively. These may be company wide i.e. endemic across the workforce especially in climates with strong culture. In order to demonstrate the issue, Kruger developed a pictorial representation-the Change Management Iceberg which displays the evident and more importantly, the unseen barriers to changes within a company. Kruger lists three management issues that must be addressed in order to achieve successful implementation- Issue Management, Management of Perceptions and Beliefs and Power and Politics Management. Issue Management: This represents the top of the iceberg. Key factors are time, cost and quality. Management of Perceptions and Beliefs: It is essential to have an empathy for both the evident and covert perceptions of the workforce. Power and Politics Management: These can play a pivotal role in the change process and can influence the perceptions and beliefs significantly. According to McPheat (2014), the optimum approach is to recognise that the change will impact on all personnel at every level within the company and that they will inevitably align into one of four types: Promoters-employees who will support the changes and buy-in. Potential promoters-probable recruits to the cause however may require further convincing. Opponents-those who visibly oppose the change Hidden opponents-those who verbally support the changes however secretly oppose it. This suggests that one of the primary focuses is to develop trust and promote an honest transparency by which to increase buy-in. Middaugh and Robertson (2005) wrote that in order to succeed politically, it is imperative to use expertise wisely, in order to persuade others to buy-in. To empathize with other individuals perceptions of the managers expertise. A manager may consider something to be obvious however understanding that others may not see it as so, facilitates dialogue and change. Involving staff in the implementation of change is paramount to success. Trust cannot be assumed and is developed over a period of time. Showing integrity, treating people fairly and keeping promises over a period of time will build a healthy culture based on trust. Half (2016) suggested that it was imperative to focus on the benefits of the team in the workplace in order to persuade the employees to buy in and outlined the key points to emphasize. There are tangible benefits that are unique to each team that can be bought to the table. If the goal of the team is clearly stated along with the means by which the individual members can contribute, buy-in is more probable. The assignment requires clarity and transparency. The importance and significance of the change needs to be emphasized along with the level of prioritisation against the existing workload. Exception reporting needs to be explained so if help is required, it can be sought. Prioritisation aside, knee-jerk reactions and decisions are to be avoided and reflection advised as there may be a cosmopolitan make-up in the teams construct and empathy and understanding must be the norm to avoid conflict within the team. References: Bareil, C., (2013). Two Paradigms about resistance to change. Organization Development Journal.31.3 (Fall 2013): 59-71. Half, R., (2016, April 29). How (and why) to get employee buy-in. Retrieved March 04, 2017, from https://www.roberthalf.com/employers/hiring-advice/employee-retention/teamwork/team-buy-in Maurer, R., (1996). Using resistance to build support for change. The Journal for Quality and Participation.19.3 (Jun 1996): 56. McPheat, S., (2014, July 03). The change management iceberg. Retrieved March 04, 2017, from http://www.mtdtraining.com/blog/change-management-iceberg.htm Middaugh, D., Robertson, R. (2005). Politics in the workplace. Medsurg Nursing.14.6 (Dec 2005): 393-4.

Kazuo Ishiguros Remains of the Day Essay -- Kazuo Ishiguro Remains of

Kazuo Ishiguro's Remains of the Day Kazuo Ishiguro's Remains of the Day gives an eloquent treatment of the issue of how a stoic English butler's unemotional reaction to the emotional world around him is damaging and painful, and how he resolves to make the best of the "remains of the day";the remainder of his life. Ishiguro explores some of the differences between the old English Victorian culture;that of the stiff upper lip, no show of emotion, and repression of personal opinion; and the no-holds-barred American culture of free expression of opinion and emotion. The American culture's spread into England is hastened with the two world wars, and it ends Stevens' old way of work, if not the job itself. Although Remains of the Day concentrates on a particular culture, and an obsolescent one at that, Ishiguro makes many insightful observations on human behavior in general. I will explore a few of these observations here, and attempt to show that Ishiguro's work possesses meaning far beyond an examination of one emotional ly-repressed servant. Ishiguro illustrates Stevens, and all of the old English butlers, as characters who basically amount to machines, unable to think for themselves. They see loyalty to the master as the only thing that matters in the world. Every time Stevens ends his lines with â€Å"sir,'; he is repressing his true identity. Ishiguro makes the reader wonder how on earth a person could get to be like this, for the sole reward of having the best silver in the house or the best-starched suits. The old service culture of butlers in England was destined to change dramatically after the two world wars; by the time Stevens decides to change his lifestyle the old ways are already gone forever. Stevens even relates the subdued nature of English scenery to the proper way of dignified behavior, in his observation that the English countryside is more dignified than the showy American landscape, in its â€Å"lack of obvious drama or spectacle'; (28). Obviously, most regular people in England did not act like the butlers. The behavior of the old butlers represents stereotypes which persist today in our conception of the people of England. After all, â€Å"butlers only†¦exist in England'; (43). Indeed, Farraday judges the worth of Stevens, and Darlington Hall, according to stereotypical ideals of genuine Englishness. In a moment of panic, Farraday dem... ...ing purely like a machine, and at least Stevens had good intentions behind his repetitive â€Å"Yes, sirs.'; On his motoring trip, Stevens meets a man named Harry Smith, who argues his own definition of â€Å"dignity';: â€Å"there’s no dignity in being a slave†¦no matter if you’re rich or poor, you’re born free and you’re born so that you can express your opinion freely†¦that’s what dignity’s really about'; (186). Stevens, naturally, merely said, â€Å"Of course, you’re quite correct.'; Even in this frank atmosphere he could not spill his thoughts candidly. Stevens is a very affecting character whose battles with his emotions are far from unique, either to himself or to his culture. Most people, even Americans, sometimes find it difficult to say honestly what they feel, even when it is in their own best interests to do so. Occasionally they cannot even recognize what they feel, let alone put it into words. They are, then, like Stevens: perhaps full of feelings, but not recognizing quite what they are, or how to reveal them if they ever do seize their identity. Remains of the Day is a novel that anyone concerned about the difficulty of communicating openly and honestly should find rewarding.

A Note on the Cuban Cigar Industry – 1

â€Å"A Note on the Cuban Cigar Industry† 1. Threats of new entrants: Product differentiation is major player in the market of Cuban Cigars, with certain brands being linked to prestige and honor. Also, restrictions from the world make it difficult for new entrants, because of trade embargos put in place by a majority of the most powerful countries in the world, including the United States. Power of suppliers: Cigar industry is dominated by two major suppliers, Altadis and Swedish Match, which control the distribution of Havana cigars and Cuban branded names, with Altadis being the largest cigar company in the world.Power of buyers: Buyers are willing to pay premium price for quality cigars, therefore, the power of the buyer is very minimal, as cigar enthusiast have increased worldwide. Threats of substitutes: The threat of substitutes is higher, where the actual tobacco seed has been farmed in locations outside of Cuba, including the United States, Dominican Republic, and Hon duras. As noted in the Case, 250 million cigars were exported to the United States from the Dominican Republic. Competitive Rivalry: Rivalry in the Cuban cigar industry is extremely high, where the industry growth has tapered off because of intense competition.Projections were high in the nineties for Cuban Cigar imports; however, with the fear of loss in quality and exclusivity of the cigars, the projections were lessened. Even though there has been a steady increase in exports, it has not been heavy, exhibiting the fact that there are few â€Å"real† producers of Cuban cigars. 2. Given the previous analysis, based on Porter’s Five Forces model, I would without a question invest in the Cuban cigar industry. For a few decades now, the industry has been on the rise, with cigar connoisseurs always remaining loyal and faithful to their preferred brands of cigars.At first, the tobacco firms were increasing their production rapidly, all the while trying to maintain and impr ove quality, however, that was too difficult of a task, so in turn, Ana Lopez, the head marketer for Habanos S. A. changed their focus and decided to keep working at improving quality at any expense. The quality remains, and with that remains a set group of cigar buyers, who would rarely stray from a brand that they have become affixed to. Specifically, I would target my investments towards the distributors of the cigars, as they not only supply Havana or Cuban cigars to the world, but also many other popular brands and types.The main barriers that exist in investing in the Cuban Cigar industry are the U. S. trade embargo as well as the type of government ruling over Cuba, Communist. The trade embargo puts a huge blemish on Cuban cigar export numbers, where the numbers could be increasingly high. Furthermore, because of the Communist government in place, it isn’t always easy for competitors to start new ventures, or to keep profits on the rise. 3. My decision would remain the same; I would still invest in the Cuban cigar industry, even if the trade embargo is lifted.However, the difference in the analysis comes in the situations of rivalry, new entrants and power of the buyers. All of these would change completely with trade being allowed to the United States, who stakes claim to more than 500million premium cigar imports a year, of which, zero are â€Å"officially† Cuban cigars. If the U. S. were to lay stake in the Cuban cigar industry, the entire market would be revamped, with competitors springing up everywhere, buyers gaining more control, and competitive rivalry going on the rise.

Investment and Market Risk Premium

Cost of Capital at Ameritrade Day 1 1. What factors should Ameritrade management consider when evaluating the proposed advertising program and technology upgrades? Why? -They should see how revenues have changed after adopting the new ad program and technology upgrades -They need to see ROI for their investments over time 2. How can the Capital Asset Pricing Model be used to estimate the cost of capital (required return) for calculating the net present value of a project's cash flows? it will help us determine the Cost of capital or discount rate which we can use to calculate NPV, in other terms the numerator will never change (FCF), only the denominator will based on the cost of capital3. What is the estimate of the risk-free rate that should be employed in calculating the cost of capiual for Ameritrade's proposed investment? – the risk free rate should be the T-bills rate or the average annualized total annual returns on US government securities = 3. %. In my opinion, we sho uld use the risk-free rate equal to yield of 20-year US government securities, because it is long-term capital investment. We may use 30-year rate, but we are investing in technology, and concerning the speed of technological enhancements, 20-year rate is optimal. So it is 6,69% 4. What is the estimate of the market risk premium that should be employed in calculating the cost of capital for Ameritrade's proposed investment? Market Risk PremiumThree distinct concepts are part of market risk premium: 1) Required market risk premium: the return of a portfolio over the risk-free rate (such as that of treasury bonds ) required by an investor; 2) Historical market risk premium: the historical differential return of the market over treasury bonds; and 3) Expected market risk premium: the expected differential return of the market over treasury bonds. Also called equity premium, market premium and risk premium.Market Risk Premium = Expected Return of the Market – Risk-Free Rate The e xpected return of the market can be based on the S;P 500, for example, while the risk-free rate is often based on the current returns of treasury bonds. First to find the Expected Return of the market, from Exhibit 6, We take the aggregate stock market and multiply by 12: = 15. 71% The Risk-free rate is 3. 8% =;gt; The market risk premium= 15. 7 – 3. 8 = 11. 9% (That is why we may use the difference between US Government Securities rate (6,69%)and historical Large Company Stocks annual returns.But we have 2 numbers: during1950-96 and 1929-96. The difference between them is 1,3%. I think that we should useâ€Å" younger† value of 14%, because the years 1930-1949, of course, were under market economy, but at the same time there were not so stable laws, a Second World War passed, many companies at that time worked for government orders, so this number may be a bit out of overall tendencies. ) 5. In principle, how would one go about determining beta for purposes of calcula ting the cost of capital for Ameritrade's proposed investment?TO calculate Beta for cost of capital, or asset beta: We need to find first the Equity Beta = by regressing stock returns over market returns and it will then be the slope. We also need to calculate the market value of the equity of the firm which is the price per share multiplied by the total number of shares outstanding (see attached notes) A cost of capital is a weighted average of the cost of debt and equity. Likewise, the asset beta is the weighted average betas of debt and equity. We use market value proportions of debt and equity (see CAPM, p. 476). Ba = (D/D+E)BetaD+ (E/D+E)BetaEIt is common to assume that debt has no relationship to market risk; that BetaD=0 Empirical studies of corporate debt returns suggest it would be better to assign some market-related risk to corporate debt; and use estimates ranging from 0. 20 to 0. 30. To get BetaE, the equity beta for Ameritrade, we would normally run a regression of equ ity returns on stock market returns. That is, we would estimate the slope of the line that best fits: Unfortunately, Ameritrade had their IPO (Initial Purchase Offer) in March of 1997, so there is not enough data at the time of the case to calculate a reliable beta estimate.So instead, we will look at comparable firms. Firms in the same industry pursuing the same types of projects will have the same sorts of risks, thus their asset betas will be approximately the same. The returns we calculate for these firms, based on stock price movement, dividends, and stock splits, are their equity betas. These are influenced by the degree of leverage each company is using (recall that higher leverage leads to higher ROE, EPS and DPS, but also leads to greater variability in earnings).Knowing the amount of debt in their capital structures (at market values), we can calculate the asset beta for each comparable firm. Then we will average these to use as a proxy for Ameritrade’s asset beta N ote: An agent that mediates sales and exchanges between securities buyers and sellers at even lower commission rates than those offered by a regular discount broker . As one might expect, deep discount brokers also provide fewer services to clients than standard brokers; such brokers typically provide little more than the fulfillment of stock and option trades, charging a flat fee for each.The problem that must be overcome in determining the implementation decision is the uncertainty of the cost of capital. Other Methods of Estimating Cost of Equity Capital: †¢The EP Method r = EPS / Stock Price †¢The Constant Growth (Gordon) Model r = DIV1 / P 0 + g compute g from earnings, dividend, or cash flow growth or use the sustainable growth estimate ? Equity Betas, the relationship of a given equity’s risk to that of the larger market, reflects two kinds of risk –The risk of the business itself –The risk that the debt a business has will prevent cash flow to equity ?We can de-lever these equity betas to strip out financial risk associated with leverage and find the implied beta for the business itself (asset beta) –Asset beta measures the business risk only and does not change with capital structure ? Often, the best way to estimate a forward looking asset beta for a company is to take a median of its industry peers asset betas (historically calculated) since one-time company events in the past will be averaged out ? We can then find the equity beta for the company by re-levering the industry asset beta to the target debt / cap ratio of the company ?Exhibit 4 provides various choices of comparable firms. Which firms do you recommend as the appropriate benchmarks for evaluating the risk of Ameritrade’s planned advertising and technology investments? Determine the betas for these firms. Let us agree that Charles Schwab is a comparable firm. Their price changes, dividends,and stock split information for 1992-1996 is in Exhibi t 5. If there were no stock split, thereturn, compared to the previous period, is given by: For example, if the price the previous period was $100, then wentup to $104, and in addition had a dividend of $8, the return would be +0. 12, or 12%.In ashort time period, the returns will be much closer to 0. If there is an X for y stock split, use the formula: Copy the Return values into Exhibit 6 alongside the appropriate dates, then regress theSchwab returns against the value-weighted NYSE returns for the same period. The slopeof the line is the equity beta. Do this for the other comparable firms. Calculate the asset betas using the formula inquestion 5 (twice, once with Beta D = 0 and once with 25. 0). Average the results. This should be a good estimate of Ameritrade’s asset beta. Finally, put these results back into the equation in #2 to estimate Ameritrade’s cost of capital