Advantages And Disadvantages Of Irr Finance Essay

Advantages And Disadvantages Of Irr Finance Essay Internal Rate of Return of a project is a discount rate at which the net present value of a project is zero. In case of several independent projects, a project where IRR is greater than the cost of capital shall be accepted and in case of mutually exclusive projects, the project with a highest IRR shall be selected. It is also known as realized rate of return. (K.J.S. Satyasai) Net present value indicates the impact of a projects value on firms value. The projects with a positive NPV shall be selected and those with a negative NPV shall be rejected not to be undertaken. In case of mutually exclusive projects, the project with a largest NPV shall be selected. NPV is computed as the difference between the present value of the project cash inflow and the present value of the project cash outflow. Capital budgeting is a process by which firm decides among the various long term projects which project is to be undertaken. The factors to be considered while deciding various projects is the cash flows generated from the project and the cost related to that project. How to Calculate IRR measures the growth of the portfolio in absolute terms. To compute internal rate of return, we should use either trial error method or average capital base. Trial error method This method requires certain information for the time under consideration All inflows of capital for the project. All outflows of capital for the project. The beginning value of the project at beginning of the computation period. The ending value of the project at end of the computation period. PV = Sum of (FVi / (1+r) ni) + FVe / (1+r) N Where, PV represents the present value, FVi represents future cash flow i, ni represents number of period i, r is IRR, FVe is end value and N represents the number of period. Average capital base method IRR = (End Value Begin Value Total Contributions + Total Withdrawals) / (Begin Value + Total Weighted Contributions Total Weighted Withdrawals) Where Total Weighted Contributions Total Weighted Withdrawals = Sum of (Each Change in Capital Xi (Days Left in Period for Xi / Total Days in Period)) Advantages and Disadvantages of IRR Advantages: It takes into consideration the time value of money while evaluating a project as compared to ARR method (Accounting Rate of return) which does not takes it into consideration. This method is simple to interpret as compared to other methods. It does not require to compute hurdle rate or required rate of return. The required rate of return is a rough estimate and IRR is not completely based on required rate of return. Disadvantages: It ignores the actual dollar value of benefits. Assumes that the project will generate future cash flow which is reinvested at IRR. If a project generates low IRR, then it will assume reinvestment at low rate of return and on the other hand if the other project has very high IRR, it will assume reinvestment rate at very high rate of return. But this is not a realistic situation. As at the time the cash flows are generated, will have same investment opportunities is very difficult. In case of certain projects, a manager may require to invest into certain contingent projects also. So, IRR ignore these additional costs. IRR may suggest to purchase a asset but the benefits derived from that project may be wiped off by the cost of the contingent project. In case of mutually exclusive projects, that is the manager if selects then he has to reject other projects. In such a case IRR is not suitable as it gives a percentage of interpretation value which is not sufficient. It does not take into consideration the duration of a project in case two projects are evaluated with different time period. Other competitive methods Pay Back Period (Investment appraisal techniques, The Institute of Chartered Accounts England and Wales) Refers to time required for cash generated from a project to become equal to the initial cash outflows. This method is an initial screening method where by a manager can determine the initial time period by which projects return would equate the cost invested in a project. Hence, it would reject a project whose payback period is more than the targeted payback period. This method is very simple to use. It enhances the liquidity by focussing on early pay back. This method is alone is not suitable to determine the real worth of a project as it has several disadvantages: Ignores the timing of cash flows with the payback period. Ignores the cash flows after the end of an project as well as the total return of a project Also ignores the time value of money. In case two projects has similar payback period then it is difficult to determine which method is suitable. It could also lead to excessive investment in short run. It takes into account the risk of the timing of cash flows but does not take account of the variability of the cash flows. Accounting Rate of Return (Investment appraisal techniques, The Institute of Chartered Accounts England and Wales) ARR is defined as the average accounting period as a percentage of the accounting outlay. Higher the ARR better it will be. In order to select a project, ARR should be above the minimum acceptable level. The main advantage of the project is that it is very simple to calculate and understand. But it has several disadvantages: It does not take into consideration the timing of the project. It is subject to various accounting policies as it is based on accounting profits rather than cash flows. It ignores the time value of money. It does not take into account the size of an investment as it is a relative measure rather than absolute measure. Net Present Value (Investment appraisal techniques, The Institute of Chartered Accounts England and Wales) The difference between present value of future cash flow of an investment and the amount of an investment. Discounted cash flow (DCF) techniques discount all the forecast cash flows of an investment proposal to determine their present value. The main advantage of this methodology is that it takes into consideration the time value of money. If NPV is positive, it indicates cash inflows from a project will generate a return more than the cost of capital hence the project shall be undertaken. If NPV is negative then it indicates that the inflows from a project would generate a return lower than the cost of capital, hence the project shall not be undertaken. If NPV is zero then it indicates that the cash inflows from a project would generate return same as the cost of investment, hence the project should not undertaken as it would have certain inherent risk and will not generate any wealth to the shareholder. Disadvantages: The project size could not be measured or is not reflected. It is difficult to compute. It is difficult to compute appropriate discount rate. It may not give appropriate result when projects have unequal span of life. Time Value of Money Time Value of Money (TVM) is based on the principle that money is available at the present time is worth more than the same amount in the future due to its potential earning capacity. It is an important concept in financial management and can be used to compare investment alternatives. The drivers of time value of money are inflation, consumer preferences and risk. The concept has an impact on the appraisal of long term projects. So, the future cash flows are discounted to reflect the time value of money. The total of these discounted cash flows reflect the true value of a project. Disadvantages This method requires an estimate of the cost of capital to decide a project. In case of mutually exclusive projects, the method does not give value maximizing decision. In case of capital rationing it does not give value maximizing decision. This method cannot be used in situation where the sign of cash flow during a project more than once during the life of a project. Conclusion IRR is an appropriate method to select a project as it considers the time value of money. As in todays world of competition, inflation plays a very significant role which decreases the value of money over a period of time. So, by considering these factors it becomes one of the methods while evaluating a project. Recommendations Each method has its own advantages and disadvantages so a manager should be very careful while selecting an appropriate methodology. If a manager chooses a wrong methodology then he would end up selecting a wrong project and can incur heavy losses. Appendix

african americans in the civil war :: essays research papers fc

African-Americans in the Civil War The foundation for black participation in the Civil War began more than a hundred years before the outbreak of the war. Blacks in America had been in bondage since early colonial times. In 1776, when Jefferson proclaimed mankind’s inalienable right to life, liberty, and the pursuit of happiness, the institution of slavery had become firmly established in America. Blacks worked in the tobacco fields of Virginia, in the rice fields of South Carolina, and toiled in small farms and shops in the North. Foner and Mahoney report in A House Divided, America in the Age of Lincoln that, â€Å"In 1776, slaves composed forty percent of the population of the colonies from Maryland south to Georgia, but well below ten percent in the colonies to the North.† The invention of the cotton gin by Eli Whitney in 1793 provided a demand for cotton thus increasing the demand for slaves. By the 1800’s slavery was an institution throughout the South, an institution in which slaves had few rights, and could be sold or leased by their owners. They lacked any voice in the government and lived a life of hardship. Considering these circumstances, the slave population never abandoned the desire for freedom or the determination to resist control by the slave owners. The slave's reaction to this desire and determination resulted in outright rebellion and individual acts of defiance. However, historians place the strongest reaction in the enlisting of blacks in the war itself. Batty in The Divided Union: The Story of the Great American War, 1861-65, concur with Foner and Mahoney about the importance of outright rebellion in their analysis of the Nat Turner Rebellion, which took place in 1831. This revolt demonstrated that not all slaves were willing to accept this â€Å"institution of slavery† passively. Foner and Mahoney note that the significance of this uprising is found in its aftermath because of the numerous reports of â€Å"insubordinate† behavior by sla ves. 8 Individual acts of defiance ranged from the use of the Underground Railroad - a secret, organized network of people who helped fugitive slaves reach the Northern states and Canada - to the daily resistance or silent sabotage found on the plantations. Stokesbury acknowledges in, A Short History of the Civil War, the existence of the Underground Railroad but disagrees with other historians as to its importance. He notes that it never became as well organized or as successful as the South believed.

Cooking as an Art Form

Cooking As an Art Form Food, cooking, and whatever related to these themes are usually considered as an art because food is an everyday item that has a wide meaning for all people. Food can be considered as an art; for example: the decoration of a food, the way a food is constructed in the plates, or even the way many different foods are being mixed in order to create a new food. Sometimes even people consider the arrangement of plates in a table as an art. This is called Table Art. Brillat-Savarin in his book, â€Å"The physiology of taste† states that cooking is the oldest of all arts. He says that Adam was born hungry and even a new born child first looks for become feed by his nurse right after he comes to new world (Physiology of taste, 300). He also believes that cooking and food is the finest art that has had the most influence on humans’ civilization (300). Food is one of the fewest things in whole world that almost everyone becomes satisfied with. When people eat, a kind of satisfaction and pleasure make them happy. And whatever can make a person happy could be considered as an art. Gastronomy is the knowledge and science of whatever related to human’s nourishment (physiology of taste, 51). Savarin believes that Gastronomy is a part of cookery. The way the dishes are adapted and arranged in a table and the way a food is tasted make the food as an art work (physiology of taste, 51). Savarin by his philosophical look explain the joy and sadness that a food can cause by its taste. He says that taste gives us the greatest joy because eating is the only thing which is not followed by regret (physiology of taste, 42). Brillat-Savarin says that the knowledge of Gastronomy is important for everyone. â€Å"There is this special advantage in their gastronomical knowledge, that they attain through it a completely personal note in the way their table is maintained; they are able to supervise up to a certain point the arrangements which they must then entrust to others, and they may even direct them occasionally†. Preparation of food is as much important as the food itself. Only a good cook can prepare a food in its best way and the final product is what everyone would like to try. Brillat-Savarin in his book explains how a skilled cook can make a fish that become an immense source of pleasure. He explains different ways it can be prepared, served in whole, cut in fillets or sliced, whether boiled or fried, cold or hot. And what he believes is that it would be always acceptable (physiology of taste, 91). Sometimes only professional cooks can make an astonishing dish because every one does not have the skill and techniques of preparation of a dish. For example when John Barlow wanted to try the ear part of the pig he found it a little disgusting before he saw the dish but after they prepare his dish he said: â€Å"The culinary art, I guess, often involve artifice. Things are cooked so as to disguise their ugly origins. An oxtail, for example, doesn’t really look like an ox’s tail; it looks brown and glazed and beautiful, like a slow-roasted half-brogue† (Everything but the squeal, 208). Savarin interestingly explains the different usage of sugar in his book and he describes how skillful a man should be in order to mix sugar with different other things to prepare a good product. For instance, sugar mixed with water that is refreshing and healthy, mixed with wine which produces cordials, or mixed with flour and eggs, the result is sponge cakes, muffins, and uncountable delicious pastries which are all the product of skillful cook (physiology of taste, 102 & 103). In the Gourmet’s diary of a foodie, it was so amazing when Chef Dani Garci was making fantastic dishes by some simple ingredients, like: Green and red Gazpacho and Ajo Blanco which are traditional dishes of south Spain. The most significant part is that how they take their times to make these dishes. They are like an art work that an artist put all his time and skill on it to create the best work. It was so amazing when he was making those tomato skins which were frozen in nitrogen. He was using all his skill to make them and coat them with red color. Food and cooking just same as music can inspire people. Usually when people listen to music they like to dance. It is the inspiration of music and brings people together to dance. Food and cooking do the same thing as music does. Gourmands are people who are fond of good eating and Gourmandism has an important effect in our social life. It spreads the spirit of entertainment and friendship which brings together different kinds of people, make a friendly atmosphere that people mingle and melt in to conversation, and vanish the inequalities of position and breeding (physiology of taste, 153). Also it will motivate the host to do his best in order to make the best table for his guests and take care of them. The host uses his knowledge and techniques to please his guests. Brillat-Savarin states,† any preparation which springs from a high intelligence demands explicit praise, and a actful expression of appreciation must always be made whenever it is plain that there is any attempt to please† (153). Savarin explains the origin of the table in his book and he brings the note that one of the most important and strong laws of human being is to respect for any one with whom one has shared bread and salt. He says that it happens during the meals that languages should have born and perfected (physiology of taste, 18 2). From the other point of his view, he explains the effect of Truffles and how it inspires humans. whosever pronounces the word truffle gives voice to one which awakens erotic and gastronomical dreams equally in the sex that wears skirts and the one that sprouts a beard† (Savarin, 93). Savarin by his explanations believes that truffle is the diamond of the art of cookery (physiology of taste, 95). The art of food and cooking is really one of the greatest works by a human being in history. The power of table, unbelievable different tastes, techniques of preparation, and all other aspects that concern about food and cooking should really considered as an art. John Barlow in his book â€Å"Everything but the squeal†, demonstrates the power of table and how a table can bring people around the table. Indeed, it is like a movie scene when he was sitting next to a family and he noticed that how they stare down at their table before they start eating, he says their elbows were raised and explains how the table was prepared and arranged, the way the forks and knives were next to dishes (Barlow, 145). In fact, these kinds of excitements are the result of foods and cooking’s art. In Gourmet’s diary of foodie, there is a connection between the traditional foods of gypsies and the art and skill of cooking. Manuel Valencia who is a chef and author wrote a book about the traditional gypsy foods. He explains what constitute gypsy foods in his books. In the video it is really interesting to see how they cook while they are dancing and how they manage the table and guests. It is the art of gypsies that can entertain their guests and serve them delicious foods by simple ingredients. They prepare nice dishes with the lowest costs and of course this would not be done only if you are a professional cook. Also I noticed that how they prepare Iberico Hams in Spain. It is said in the video that from the dehesa to the table will take 4 years. So what do they do during these years is all about preparing the most delicious ham in the world which obviously is so expensive. To conclude this, it is important to know that cooking and whatever is related to foods and cooking is one of the finest arts conceived by human and it should be considered as art in all aspects and themes of cooking, from preparing to eating.

Childhood Obesity Young And Oversized - 1320 Words

Young and Oversized in America Does one ever wonder what factors contribute to the increase of childhood obesity? Childhood obesity is a major issue and common disease that is becoming prevalent and widespread. The amount of children that are obese has doubled and the amount of adolescents who are obese has quadrupled within the past thirty years. Children at a young age are already being diagnosed with medical issues such as diabetes and cardiovascular diseases. Obesity itself is the second leading cause of preventable death. Currently, every one out of three kids is diagnosed as obese. Over the past years, obesity has highly increased in children and there are three things that lead to this issue; which are the consumption of fast foods, lack of physical activity, and certain family situations, like upbringing. Many critics and doctors believe that the best way to battle childhood obesity is by having the child engage in physical activities, cook more healthy meals at home, and red uce their portion size. The first fast food business in America is White Castle, which was created in Kansas during 1921 by Bill Ingram. From that point the business became popular and other businesses emerged such as McDonald’s, Dunkin’ Donuts, and KFC. Fast food businesses were created so people can have the option of getting food faster. Also, for businesses to make money by having people go out instead of cooking. Many find it beneficial, but they don t understand the harm it’s doingShow MoreRelatedChildhood Obesity in America3479 Words   |  14 PagesControlling Childhood Obesity in America By Jessica Spencer English 102 Dr. Grimes 1 May 2006 Outline Thesis statement: Childhood obesity in American can be controlled if a healthy lifestyle of exercise and healthy eating can be incorporated into each child’s day. 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