APT- Arbitrage Pricing Theory and CAPM-Capital Asset Pricing Model Research Paper

APT- Arbitrage Pricing Theory and CAPM-Capital Asset Pricing Model - Research Paper Example In the action of comparing investments’ returns and risks, if CAPM or APT is well utilized, they will reflect on whether one ought to invest in a given firm or another. The formulas to these two methods are given under; CAPM Re= Rf + ÃŽ ²*(Rm – Rf) Where; Re = Required return rate Rf =Risk-free return rate ÃŽ ² = Beta, which is the market risk factor premium Rm = Expected overall market return rate (valuebasedmanagement.net, 2011) APT Re = Rf + (Individual risk factor premium*Relationship between the factor and price) + (Individual risk factor premium*Relationship between the factor and price) Generally, these two methods are different in that one (CAPM) uses beta- which is the risk factor of a given stock in relation to that of the market. Therefore, if beta equals 1 this stock is equally risky with the market, if it is 2 the same stock is twice risky in comparison to the market. While on the other hand, APT utilizes individual factors in place of beta. Also APT does not apply the market return rate and thus considered to be more particular to a given stock in focus. CAPM’s data is objective while APT applies data from a single stock. Thus, CAPM is recommendable to an investor who is relatively dormant as compared to APT, which if correctly applied is better placed to assess projects. (Grover, 2010) Some authors have applied APT and compared the resultant estimates with those of CAPM. Patterson notes one of the cases where such has been done is the electric utility’s, written by Ross and Roll in their 1983 book. According to Patterson the end results of APT were credible in comparison to those of CAPM. But, this was without enough justification of the results. (Patterson, 1995 p151) Besides the first two, there are methods of assessment like the Dividend Growth Model and Modern Portfolio Theory. The Dividend Growth Model shows the value of ordinary shares in present value of the prospected future flows of cash which has been invested by an investor. The receivable cash inflows are taken as dividends as well as the expected price in future while the stock will be disposed. An ordinary share usually does not possess maturity and thus, it is held for numerous years. Therefore, a general ordinary shares’ valuation introduced by Gordon would be as below; P0 = ?t= 1â₠¬ ¦? Dt/ (1+r)t Where; Dt = dividend in duration t P0 = current stock price in the market r = constant yearly rate of growth of dividends t = number of given durations of periods (Siegel, et al 1997 p140) Just to mention, the other model investment assessment is known as MPT- Modern Portfolio Theory. This is a theory applied by investors who are risk averse and at the same time they want to achieve maximum or optimum level of expected return which is based on the market risk level. It emphasizes that risk is inherent in the process of getting the rewards associated with it. MPT is sometimes called the ‘Portfolio Management Theory’. As per the argument of this model, it is a possibility to come up with an efficient frontier that depicts optimal levels of a portfolio giving the maximum rate of expected return at the given risk levels. (investopedia.com, 2011) The study is set out to explain that the most recommendable model in the assessment of investment projects is CAPM . First things first, though, since lack of consideration of the assumptions would not lead to a comprehensive outcome of the study. The model of CAPM has the assumptions mentioned below forming its basis; Persons seek to achieve maximum utility of their investment portfolio over a given duration of planning horizon, Persons involved are risk averse, Persons have expectations

What are the advantages and disadvantages for society, when people Essay

What are the advantages and disadvantages for society, when people live longer lives - Essay Example This review will explicate the fact that when people live longer, it is both beneficial and detrimental to the societies in which they live. To start with, research has shown that contrary to the perception that when people live longer they are merely burden to society; there are actually some very significant benefits if people live longer. For instance, when people live longer lives, they are a valuable asset to society because of the vast amount of knowledge they have acquired about different issues throughout their lives. While old people may often be perceived as ancient and outdated, it is indisputable that the present-day advancements in most spheres of life were borne out of foundations that were set up when those who are in their old age today were younger (Johnson & De Souza, 2008, p. 24). As such, the opinions and expertise that can be attained from those who have lived long are invaluable to society. While the opinions of the elderly may not be given from a professional standpoint, the mere fact that they have spent more time alive makes their opinions worth seeking. For instance, in the current tough economic times, most people forget that there are people who have lived, and survived tougher economic times during the economic depressions that followed the two world wars. In this situation therefore, the opinion of someone who lived through both wars is clearly invaluable to society. Another advantage of people living longer is that they are able to pass on positive societal values to the younger generation. During recent decades, societies globally have been able to get rid of values that were detrimental to society. Such values include male chauvinism and racism. However, societies have also adopted some values that are of no benefit to them. In fact, the family unit which is the most basic unit of any society has been negatively affected by the current trend of doing away with any value that is considered ‘traditional’ irrespective of

The History of Zara

The History of Zara Zara is the most successful brand of Spanish company Grupo Inditex. Its owner, Amancio Ortega, opened first retail store in 1975 in La Coruna, a small port in Spain. Zara became the worlds largest fashion retailer by 2008 end. By this time it had stores in over 70 countries, out performing its rivals like Gap of USA and Sweden based HM (Hennes Maurits) (http://www.guardian.co.uk/business/2008/aug/12/retail.spain). Zaras Innovative Operations: Daniel Piette, director of fashion, LVMH has described Zara as possibly the most devastating and innovating retailer in the world http://tbmdb.blogspot.com/2009/12/business-model-example-zara-devastating.html, owing to the companys innovative and unique approach in fashion retail. Zara follows the concept of a vertically integrated supply chain, in which the company has a tight control over most of the design phase, production phase and distribution system to its chain of retail outlets. The rest of these processes is handled by its sister concerns with nearby locations. Unlike its competitors Zara does not outsource its production to Asian developing countries; the proximity of production units helps Zara by giving flexibility in production so that the company can meet the ever-changing demands of the consumers more efficiently than its competitors. Zara has integrated the system of POS (Point Of Sales) and has formed a unique method that helps in the production of new designs. POS helps in monitoring what designs are bringing in maximum sales at the retail shops. The store managers are allowed freedom to decide which designs to display and which ones to keep back in the store, depending on the sales of those designs. Zaras employees at the retail outlets gather feedbacks from the customers and convey the information to the headquarters with the help of hand-held PDAs that each employee is required to carry. At the headquarters, the design teams immediately respond to feedbacks sent via PDAs and begin designing new clothes accordingly. The clothes are manufactured and distributed to the retail stores within a short period of 2 to 4 weeks owing to the vertical integration of its supply chain. While its rivals are busy finding and identifying what the latest trends might be and finally take 4 to 9 months to distribute new designs to their respective stores, Zara manages to design, manufacture and distribute new designs in a matter of just of 30 days. Taking advantage of the fast turn around time, Zara eschews the concept of producing just one collection per season, like its rivals do. Instead the designs keep on changing frequently so that Zara manages to deliver new designs twice a week to its retail shops. Zara only produces small quantities of each style so that there is continuous demand of popular designs. It cuts down on manufacturing costs as well. Thus Zara manages to deliver around 12000 different styles in a year whereas its competitors can produce only 4000-5000 per year. Hence, the company-coined phrase, fast fashion http://www.3isite.com/articles/ImagesFashion_Zara_Part_I.pdf. Current Technology in Information Communication Zaras use of technology in information technology is unique from its competitors. Firstly Zara uses much less technology, in terms of expenditure and work-force, than its competitors just 0.5% of its work force compared to 2.5% of employees that its rivals utilise. Similarly Zara spends only 0.5% of its revenue on information technology compared to expenditure of 2% by its competitors. Secondly Zara employs a unique combination of human and IT intelligence. Managers at the stores and the market survey done by the employees, form the human intelligence while IT intelligence consists of the PDA devices used to send information collected by the managers and other employees carrying the PDAs. An order form is transmitted to each managers PDA asking for information such as availability of garments and patterns of garment sales. The managers of each retail outlets then divide this order form into sections and these sections are transmitted to the PDAs of each employee to fill up, based o n customers feedback and the kind of designs sold. Employees then transmit back their respective sections to the managers PDA, after entering the customers requirements. The managers of each store are given total authority to determine and identify which sections are to be retained in the order form. The edited order form is then sent back to headquarters where the designing teams start working on the basis of the order forms. This unique hybrid of humans technology helps in managing the inventories efficiently and quick and efficient link between demand and supply, thus successfully helping in their own doctrine of fast fashion. Summing up Zaras use of technology http://leoborjblog.wordpress.com/2009/08/10/zara-it-for-fast-fashion/: Gather customer requirements PDAs Logistics and transmission of order form POS terminals and modems. Quickly designing new style CAD (Computer Aided Design) Advantages of such an Innovative System Vertical integration of supply chain and short turn around time lead to High turnover of product. Quick and efficient distribution helps to eliminate warehouse requirement, saving on additional storage costs. Searching the market for latest fashion trends and responding quickly to the consumer requirements with the help of hand-held PDAs. Complete autonomy and flexibility to the employees and managers who are in direct contact with the customers. POS terminals run on DOS operating system, which is cheap and easy to maintain and operate. Perceived limitations of this System http://www.slideshare.net/koffman/zara-case-study-2780928 Zara and its sister concerns have been using DOS as their main operating system in all the processes. It is an outdated operating system. As the POS vendor supplies DOS OS to zara only, it can always stop its supply, while continue to supply other operating systems to its other customers. Store managers are the decision makers. Zara headquarter relies solely on the experience and intuition of the managers. Instead of looking after customers, managers and employees have the time-consuming task of manually entering the garment details in small PDAs. This could result in the employees failing to assist some customers in choosing and might miss out on few garment sales. Inventory is maintained manually as well. Information transmitted is one way only. Managers have no knowledge of the inventories at headquarters and the stores distribution centre. Consequently managers cannot promise a customer if a particular garment that has been sold out, can be replenished and in how many days. Promises made to customers not kept can damage Zaras reputation, so the managers need to know about the garments inventories at headquarters and the distribution centres. There is a great demand for Zaras garments even though new designs are available twice a week. Zara may consider increase in production to meet these ever growing demands. Gathering of information therefore may need to be upgraded in terms of frequency. Its competitors can change to a better OS or software package and increase their turn around time, neutralizing Zaras edge of fast fashion over them. New IT Technology for Sustainability http://www.123helpme.com/view.asp?id=97642 Benefits: New technology may not help Zara in increasing the competitive edge over its competitors but will help in sustaining that edge. A new operating system will help in installing software packages that will help in efficient access of inventory at the stores as well as headquarters and distribution centers. Upgrading to new OS will remove the companys dependency on its current supplier of DOS. Using more than one IT supplier will increase Zaras bargaining power. A Network can be set up between HQ, production centers and retail stores. POS system can be automated so that each sale will automatically update the POS devices. If the POS system of all stores can be interlinked all the store managers can easily know the inventory online and can make and keep their promises to customers demanding a particular garment. POS automation will help reduce overall workload of the employees and managers, as they will not have to manually enter every detail required in the order form. There will not be any need of hand held PDAs. Dedicated POS software will ensure that orders will now be made on the basis of theoretical inventories and will be more accurate. Orders can now placed continually increasing the frequency from twice a week to daily. Ideal software to be used for integration would be ERP (Enterprise Resource Planning). Linking all the process in the supply chain, from HQ, design centers to retail stores, will not only help the managers in accessing inventories but will also help HQ to regulate the supplies more accurately according to the orders placed. Production will become even leaner than before. ECQ (Economic Order Quantity) can help in determining quantities of different garments that buyer can order so that there is sufficient stock for the customers. This will reduce inventory cost as well. Knowing reorder levels will streamline managing of the inventory and help in maintaining the autonomy of the managers. Managers can determine from the reorder levels whether a particular garment needs to be ordered before it will go out of stock and can transmit the same to the production centers that are now linked to the retail outlets. Of course manual checks will still be needed occasionally to check a stores real time inventory is same as the theoretical inventory in case of exceptions like garments getting stolen or gone missing. Designers at HQ will now not depend entirely on the managers discretion and can observe themselves sales of new designs due to two-way system integration by ERP. Just in case a store does run out of stock on a particular garment, the manager can easily check the inventories of local nearby stores for availability and suggest the customer to go there. Inter-store connectivity will have added advantage of shipping garments to another store that has more demand of a particular garment. This will further increase the speed-to-market. Besides HQ even managers of different stores will benefit if they know through network what is selling at other stores and what is not. Cost Analysis: Zara will have to upgrade to better OS that will support ERP like Linux, Unix or Windows NT. Implementation cost of Linux is lowest of the three OS. But recurring costs like service-contract is much higher (McAfee et al). Annual cost of using Unix is the lowest and if functionality remains more or less same, Unix will be best suited. If other costs like plans for systems failure are not taken into consideration then implementation cost will relatively much lower than prospective ROI (Return On Investment). Risk Analysis: Changing software and operating system in all retail shops world over is not an easy task. Due to location of Zaras retail outlets all over the world, there will be many extra tangible costs. Cost of replacing current POS system with the new one. Cost of installation of new cables in each store and maybe new infrastructure to support the cables. Cost of external IT support, hiring professional consultants. Cost of internal IT management and technical training of personnel. Time taken to train the personnel till outside assistance is not required cannot be determined as level of training and learning will be different at different locations around the world. Risk Reduction: Both current and new systems should operate together till the personnel of each store can run the new system smoothly; this will not interrupt any service provided to customers. Zara has a huge pilot outlet that is around 1,500 square meters. Zara can use this as training facility from its personnel from all over the world. Zara can use it to test the new system as well. Zara can hire experienced software professionals and open an in-house department for software management and development. Zara can outsource the management and development to experienced software companies. However Zara will have to trade-off between highly efficient and expensive companies. Zara should develop a contingency plan and an exit plan as well in case the company cannot continue with the up gradation for some reason. Robust data backup is required in case the new system crashes due to mishandling by inexperienced staff.

John Rawls And Utilitarianism :: Rawls Utilitarinism Philosophy Essays

  Ã‚  Ã‚  Ã‚  Ã‚  The social contract theory of John Rawls challenges utilitarianism by pointing out the impracticality of the theory. Mainly, in a society of utilitarians, a citizens rights could be completely ignored if injustice to this one citizen would benefit the rest of society. Rawls believes that a social contract theory, similar those proposed by Hobbes, Locke, and Rousseau, would be a more logical solution to the question of fairness in any government. Social contract theory in general and including the views of Rawls, is such that in a situation where a society is established of people who are self interested, rational, and equal, the rules of justice are established by what is mutually acceptable and agreed upon by all the people therein. This scenario of negotiating the laws of that society that will be commonly agreed upon and beneficial to all is what Rawls terms "The Original Position and Justification". Rawls states that for this system to work, all citizens must see themselves as being behind a "veil of ignorance". By this he means that all deciding parties in establishing the guidelines of justice (all citizens) must see themselves as equal to everyone paying no mind to there economic situation or anything else that they could keep in mind to negotiate a better situation to those qualities. For example, if everyone in this society has an equal amount of influence toward the establishing of specific laws, a rich man may propose that taxes should be equal for all rather than proportionate to ones assets. It is for this and similar situations that Rawls feels that everyone must become oblivious to themselves. Rawls believes that the foundational guideline agreed upon by the those in the original position will be composed of two parts. The first of these rules of justice being one that enforces equal rights and duties for all citizens and the later of the two one which regulates the powers and wealth of all citizens.   Ã‚  Ã‚  Ã‚  Ã‚  In the conception of utilitarianism possessed by Rawls, an impartial spectator and ideal legislator are necessary components. The impartial spectator is one who rational and sensitive to all of the desires of society. The impartial spectator must feel these desires as if they were his own desires and by doing such, give each of them priority over other desires and organize them into one system from which the ideal legislator tries to maximize satisfaction for all citizens by manipulating and adjusting the policy for that society. By this theory of utilitarianism, Rawls argues that the decision making process is being integrated into one conscience and that this system

The Solutions of Energy Shortage in Pakistan

Energy Shortage now is a global crisis for many countries in the world including Pakistan. Pakistan, one of the high rapid development developing countries now is in the worst energy crisis in its history (Kazmi, 2013). The high speed increasing of its economy and population absolutely demand a large energy supply, but the problem is that the storage of the energy of the country now can hardly supply the whole country’s energy usage. As AOL News said â€Å"Car owns wait for hours to get petrol and gas, cities and villages are lack of electricity for many hours per day, homes can hardly cook without gas.†The situation is becoming more and more serious in the whole country. Actually, Pakistan’s energy shortage crisis can be tracked back to the 1990s ( Kugelman, 2013); and in the 1970s, the energy crisis was averted once because of the Mangla and Tarbela dams. However, the strong economic growth needs a large mount of energy; no matter how indigenous energy resource s do Pakistan have, it is hard to satisfy the soared consumption of energy. For figuring out the good solutions of energy crisis in Pakistan, we’d better to know the effects and causes of the crisis.It is very obviously to see that the impact of the energy crisis in Pakistan is terrible for almost everywhere during the country: economic, educational, political and etc. As Chung (2013) mentioned, because the lack of electricity, numerous business and factories have to reduce 20 to 25% of their productivity, and the consequence of this can be really bad such as citizens are losing jobs, children are losing their education opportunities and factories are losing their foreign markets and clients, even worse, it may lead economic slowdown or economic contraction on Pakistan.On the other hand, Pakistan relies on the compressed natural gas (CNG) most and this is an important cause that leads the energy shortage crisis directly on Pakistan. Because the population is increasing so fas t, no matter how much gas the government has purchased in, it’s still hard to supply CNG for the whole country, also the negative impact of this is that there’s a inflation on the price of CNG. Besides, according to Leung (2013), the government plays an important role in this crisis.The poor managements of the government makes a lot of problems in Pakistan such as the government realized the problem but it didn’t take any action to solve the problem, the worse is, the government even made the problems worse. Government always spent money on wrong ways but not to spend the most of money on solving the energy crisis; at last, it seems that government can only make a ration of energy and owe much more money, but this obviously cannot solve the problem and it will keep increasing burden on the citizens.Hence, for solving the serious energy shortage problem, what could be the possible solutions and what solutions can truly solve the problem permanently or temporarily ? One thing now can be sure is that for solving the energy crisis, Pakistan will require political will, additional funding, and new power-generation sources etc. (Kugelman, 2013). One short-term solution as Kugelman (2013) pointed out that Pakistan could request a new loan from International Monetary Fund (IMF). However, except how much will this solution work, it seems that Pakistan now is not willing to get help from IMF at least after the spring’s elections.In other words, because of the possible political influence from IMF, it’s hard for Pakistan to get new fund from IMF as for now. It means even get loan from IMF is good solution in the additional fund way, it’s not a happy solution for the government’s political will. However, actually for the Pakistan’s situation, even the government doesn’t ask IMF for fund help, it’s still necessary and better to get economic help as soon as possible because even the government itself canno t pay all power bills.New fund can also help Pakistan to import more energy for supplying the demand for a while. Except the new fund, shifting the energy resource to another one is also a good solution for Pakistan. For this, coal energy seems like the best choice to instead of CNG for Pakistan. Considering Pakistan’s economy situation, like Ebrahim (2012) mentioned, many experts think coal is the alternative for Pakistan because Pakistan cannot afford to be romantic.Hydropower depends on water so it’s seasonally, oil is too expensive, only importing abundant coal is viable because coal is much more cheaper than oil and it’s non-seasonally. However, although coal energy is a long-term solution for Pakistan to solve the energy problem, it is also a long-term damage for the global environment (Chung, 2013). In this way, Pakistan needs to consider how to balance the solution of the current problem and the cause of the potential crisis in the future. Hopefully coal energy won’t be a dilemma for Pakistan in the future.Meanwhile, besides coal energy, another long-term solution for Pakistan now is to develop more sugar plants to supply electricity. According to Kazmi (2013), Pakistan has the potential to get electricity from sugar plants across the country especially in rural areas. Sugar mills only use low bagasse to heat boilers; moreover, sugar can also produce ethanol for motor gasoline. This means, if Pakistan starts to use large sugar to be an energy row-material, then it will be helpful for Pakistan to contain oil imports and CNG (Kazmi, 2013).The advantages of sugar are obviously; it can provide Pakistan another new chance to change the situation in a good way, and maybe the only problem for this solution for Pakistan is how to get more places for planting sugar. In general, like Kugelman (2013) mentioned, Pakistan’s energy problems are deep and complex, and sometimes the crisis is not only about Pakistan itself, other coun tries could be involved in the problems; thus, for getting better understand of the problem and better solutions for the problem, we still need to find more information. However, as for now about Pakistan, the energy shortage crisis is becoming worse and worse.The impacts of the crisis are negative: people in Pakistan now have a very hard and challenging life, economy may suspend or even reverse, government can hardly control the situation etc. So far, due to Pakistan’s complex situation, sugar seems like the best solution for Pakistan to solve the problem, it’s cheap and easy to get, it can provide both gas and electricity energy for the whole country, and it can help government to balance the imports and the fund during the crisis. Hopefully, Pakistan could solve the energy shortage crisis and change its hard situation peacefully and quickly.

Creative story Essay

What is creative story? In general, creative story is writing which expresses the writer’s thoughts and feelings in an imaginative way. The key elements of a creative story include characters, theme, setting, plot, structure, complication, crisis, and resolution. Characters are tour guides who lead the readers into the fantastic world created by the writer and theme is what the writer wants to show to the readers. Setting is important in making the story â€Å"real† and creating the atmosphere. Plot is something that happens to the characters and structure shows how the writer develops the story. Complication and crisis make the story tenser and more interesting. Resolution ends up the story. To write a creative story, I will follow the four stages of writing. First, I will write an attention-catching opening to introduce the characters, location and setting. Followed by, I will build up tension and conflicts to make the story more exciting. Then, the story reaches its climax. Finally, the characters sort out the problem and the story comes to an end. In the writing, I will use figurative language like similes, metaphors, personification and hyperbole. These can make my story alive and help the reader visualize a clearer image by comparing it to something that they are familiar with. I think it’s important to â€Å"think out of the border† when writing a creative story. Everything can happen in a creative story like an alien attacks people or a school suddenly disappears. Moreover, I will enjoy the process of writing and express my thoughts and feelings to the readers through my story.