Maritsa Plcs Using the Capital Asset Pricing Model Essay

Maritsa Plcs Using the Capital Asset Pricing Model - Essay Example Using the Capital Asset Pricing Model, the cost of capital is computed as: where: kc is the cost of capital; krf is the risk free rate; ß is the systematic risk of the common stock’s return relative to the market as a whole; and km-krf is the market risk premium, which is equal to the difference in the expected rate of return for the market as a whole2. In order to choose the most profitable investment to be pursued, the Net Present Value (NPV) technique will be used. This method of capital budgeting is widely used because of its recognition of the time value of money3. Thus, annual cash flows will be discounted order to arrive at their present values.Table 1 shows the computation of NPV for the first option which is to renew the rent contract and extend the facility for higher production. It should be noted that the values are expressed in unit  £. It can be seen that the rent payments are adjusted each year to take into account the annual 5% inflation. The NPV for Option 1 is computed as - £2,562,594. Table 2 shows the computation of NPV for the second option which is to purchase a larger facility to accommodate the increasing demand for the products. Like in the first option, all values are expressed in unit  £. Consistent with the case, this paper assumes that the company is able to secure financing through five-year debe nture with an 11.5% annual interest. It is also assumed that the company borrows the whole amount that it used to purchase the building which is equivalent to  £2,500,000. This paper also assumes that interest payments are taxable thus; it opts to deduct the tax shield from interest payments in the cash outflow. This paper also assumes that the building will be sold at  £5,000,000 after the ten-year period. The computed NPV for the ten-year period is - £1,674,701.

When You Shouldn't Take the Job Essay Example | Topics and Well Written Essays - 500 words - 7

When You Shouldn't Take the Job - Essay Example It is a tricky position she is in because she would not have to pay them back for the costs they incurred, and she would have secured herself a job. Still, it looks like coercion. Moving is a not an easy thing too. There are more challenges for the young lady than there are for the company. For example, if the girl agrees to the terms the company has set forth for her, then it will have to incur the travel costs and pay for her accommodation in the hotel. Still, it would be profitable in the long run since she will be rendering her services to the firm. For the young woman, however, there is more to lose than there is to gain. The company has her in a dilemma, and her thoughts that she is being coerced are justified. For example, if she does not agree to relocate, she will have to reimburse the company for the cost they incurred paying for her flight and the hotel accommodation. The young woman is unemployed so far and asking that she repays the money is more likely to be a coercive way of telling her that she has to take the job. Since she may have no money to reimburse the company, which could have gotten her an expensive ticket and hotel, she would have no choice but to take the job. If she takes the job, she will have much moving to do and have to leave her social ties and her friends and neighbors from where she lives. Also, she will have to go through all the hassles involved in moving and then slowly make new friends from her new neighborhood. While it is a good thing to have secured herself a job in the company, the terms the company has placed on the opportunity are selfish. It shows the company is willing to use any coercion to have people work there. That is already a red flag as such a company is likely to have other forms of oppression to those people who already work there in a bid to keep them working.