Heritage Assessment in Nursing

Heritage Assessment in Nursing

Heritage assessment tool in nursing is an essential component in the field of medicine and health. It is a tool used to assess, maintain and restore individual’s culture and beliefs. Heritage assessment tools play a key role of helping health care and service providers assess and evaluate the cultural health methods (Viginia & Catana, 2010). All individuals living in a community have their heritage which is different from culture. These types of traditional health assessment majorly deal with peoples spiritual, mental and physical beliefs. Communities have varieties of beliefs on death, illness, health and diseases. In most of the societies, health is termed as a complete balance between an individual’s mind, body, spirit and family in relation to other external forces of the world. All this beliefs play important roles in heritage assessment because they give a holistic approach for addressing this issue. It helps both the health provider and the patient to find an effective and efficient communication that will enhance health (Philos, 2010).

The ultimate goal of heritage assessment in nursing is to collect information about the various beliefs that will establish traditional competence among the health care providers. Traditional and cultural health methods are used in health maintenance, health protection and health restoration. Health maintenance can be termed as designed approach of preventing a disease and promote health. Health protection is a tool used to give an explanation of how individuals maintain their health on a daily routine. Health restoration is the act of restoring an individual’s health to its maximum level. This paper is going to investigate three families. It is going to lay out how the family’s beliefs on health have impact on well being and how health providers can effectively handle such situations (Nunnery, 2012).

The first family to be interviewed for this assignment is my own family.  My family is a US California heritage. I come from a complete family consisting of my four brothers, my mum and dad. My family believes in the Holy Scripture. They do believe that health is a God given gift to the human beings and should not be taken for granted. My parents and siblings have a strong spiritual attraction and belief in God Almighty. I believe that too but God almighty opened the way out of poor health through the many drugs that have been discovered to combat different diseases. Although my family is established in a heritage rich in culture, I don’t practice the beliefs.  My brothers and I are very close and we talk and joke severally. We go to church weekly. We belief that proper health restoration and maintenance can be achieved using the cultural beliefs alongside the modern health care techniques.

The second family which was interviewed beliefs that health related cases should be handled by medicine men. . If the illness persists, they involve witchcraft in the process. All the individuals in that family have grown up believing on the beliefs. This family believes that diseases are demonic brought by evil spirits. They say that the evil spirit and should be extracted by a medicine man who is well acquainted with knowledge on how to appease the dead and bind evil spirits. The family did not want to talk about their religion or spiritual life because they belief in medicine men more than their religion and health care. They use natural herbs as medicine. Varieties of herbs are used to heal different types of illnesses. The best way of health maintenance, restoration, and protection is looking for techniques that can be used to analyze the traditional herbs these families are using. This will effectively eliminate side effects of the herbs and ensure for proper health. Maintaining, protection and restoration of health using traditional beliefs requires knowledge and proper understanding of the cultural beliefs. Nurses should be well equipped with knowledge and skills about the belief.

The third family that was interviewed believed that health can be maintained by the religions they belief in. The belief that illnesses and diseases which causes poor health can only be intervene through prayers. They believe that prayer is the only tool that can combat illnesses. This beliefs makes them put on religious medals on their necks, legs, and hands. They belief that the medals can poses some holistic powers can protect them from contracting diseases. They visit shrines to be given candles which they light when praying as a sign of shunning away diseases which are considered demonic. They do not belief that hospitals and health care providers can help them get over the sickness. The most suitable way of restoring, maintaining, and protecting health in such a family is by using the modern health care techniques alongside the traditional methods. Health care providers should use psychology as a weapon of handling such families. They should look for the most effective way to communicate and reaffirm them that it is through God that human beings have discovered drugs to many ailments.

An individual’s traditional culture and beliefs are essential in health care. It influences an individual’s health and how they response to health care provided by nurses. Traditional cultures heritage and beliefs cannot be evaded. They should be embraced. Cultural heritage is considered an essential factor in economic, social and health promotion on individual’s life (Sagar, 2011). By assessing individual’s traditional heritage, health care providers and nurses gets a transparent chance of providing quality health care techniques to patients.  Heritage assessment has played a very vital role in the field of health care maintenance among individuals in a community. The assessments will give nurses and medical practitioners a clear structure and information on how to effectively and efficiently handle individuals in our societies with such issues. This paper has used interviews on three families to lay out how health can be restored, maintained and protected in such cases (Treas & Judith, 2010). Nurses may use such interview to gain information on how to handle such situation. The goal of the interview is to equip nurses with knowledge and skills on how to properly handle patients with such complications.

 

Reference

Treas, S.L., Judith, M. W. (2010). Fundamentals of Nursing: theory, concepts, and application.     Philadelphia: F. A. Davis.

Virginia, C. S., Catana, B. (2010). Occupation Therapy on Mental Health: A visit for          participation. Philadelphia: F. A. Davis.

Philos, N. (2010). Knowledge for the Good of individuals in the Society: linking philosophy,       disciplinary goals, theory, and practice. Journal of the Nursing Institute of Health, 11 (1),         42-52.

Nunnery, K. R. (2012). Advancing your Carrier: concepts of professional nursing. Philadelphia:    F. A. Davis.

Sagar, P. L. (2011). Transcultural Nursing Theory and Models: application in nursing        education, practice, and administration. New York: Springer Publishing Company.

 

 

 

 

 

A review about Lizzie Siddal show

 

 

A review about Lizzie Siddal show

Lizzie Siddal is a new play about a woman named Ophelia in the famous painting of Millais (Pina, 2013). The movie recounts the life story of this woman as a shop girl to rising up to becoming a successful model and artist that people admires. This paper is a personal view about on the movie show.

The script in the movie resembles the themes in the novel. The script is well adopted and organized. The story flows from one aspect to another as it demonstrates the experiences and the way Lizzie defied all orders to become a successful artist.  Some of the aspects about this woman are exaggerated.  For instance in one of the play, the movie claims that Lizzie’s hair continued to grow even after her death. This is not true but is used to portray how her hair was nice and the fact that she was a model.

The lightings used in the movie are a bit blurred. Various scenes are not presented in bright color. The contrast used was slightly dim making the picture a bit blur.  The reason for this might have been to portray the exact pictures and images in their original form aimed at making the show look real and appealing to the audiences. The movie is also accompanied by various music sounds.  The background sound makes the movie interesting as they add spice. Different sounds are incorporated in the entire movie.

Movies are also produced for a specific audience. The directors are very key to ensure that the themes and the movie in general appeal to certain audience. This movie, appeals to young people and women.  The themes in the story are an inspiration to these audiences who require motivation about life. That they can rise to the level they wish in life.

The play is written by Jeremy Green and directed by Lotte Wakeham. They have really done a wonderful job in this movie. A movie is well cast and is very organized with a clear message. It is also interesting to watch and therefore a recommendable.

 

 

References

Pina, S. (2013). Lizzie Siddal: A new play by Jeremy Green. Retrieved from:             http://preraphaelitesisterhood.com/lizzie-siddal-a-new-play-by-jeremy-green/

Weston, N. (2013). Pre-Raphaelites: Victorian avant garde, Craft Arts International. 87: 100-        103.

 

 

Time Value of Money

             Time Value of Money

A brief definition of time value of money

Time value of money simply means that the value of a unit of money is different when received in time periods that are different. In other words the value of a unit of money at hand today is different from the value of the same unit of money if it is to be received at a future date (Bianco, Nelson & Poole, 2010). Money held in hand now is of more value than the same amount of money if it is received some time in future. For example $100 at hand today has more value than if the $ 100 is received in a year’s time. This is because the $100 held today can be invested and earn a return by the end of the year. The concept of time value of money implies that a dollar in hand today is worthy more than a dollar to be received tomorrow (Benshoof, 2005). Time value of money can be paralleled to the wise saying that “a bird at hand is worth two in the bush”. This concept recognizes that the passage of time affects the value of money. This because a dollar in hand can be put to immediate productive use and also the dollar in hand is free from the uncertainties of future expectations (Bianco, Nelson & Poole, 2010).

  • The importance of understanding the concept of time value of money by finance managers

The concept of time value of money is important to finance managers due to a number of reasons. The concept of time value of money is important in making investment decisions between mutually inclusive projects. Finance managers are charged with the responsibility of advising company shareholders on the attractiveness of investing in various investment opportunities (Benshoof, 2005). Finance managers are required to invest a company’s financial resources in ventures which generate the highest possible returns to maximize shareholder value. Finance managers in doing this rely on the concept of time value of money to make decisions. According to Freeman & Freeman (1993) finance managers rely on time value of money in determining the attractiveness of potential investment opportunities. Finance managers calculate the net present value of the various potential investment opportunities and choose the ones with the highest net present values to invest in. Without the concept of time value of money it would be practically impossible to choose between competing investment opportunities (Benshoof, 2005).  Many companies grow their market share or revenues by investing through the stock exchange. The concept of time value of money assists managers to determine investment opportunities which are viable and the ones that are not (Benshoof, 2005).

Finance managers also rely on the concept of time value of money in determining the breakeven point of a project. Breakeven point is the point at which total cost of a business venture equal total revenues. Any additional revenue earned beyond the breakeven point revenue is considered as a profit to a company (Bianco, Nelson & Poole, 2010). Without considering time value of money, finance managers can invest in business ventures which lose value instead of adding it which jeopardizes the survival and growth prospects of a company. The concept of time value of money also assists finance managers to determine the opportunity cost of business ventures. Calculating opportunity cost of a project helps finance managers to choose which ventures are worthy investing in and which ones should be avoided (Bianco, Nelson & Poole, 2010).Time value of money computations assists finance managers in making financial structure decisions, lease versus purchase of capital assets choices, bond refinancing decisions, valuation of securities, cost of capital among others.

To illustrate the importance of time value of money we will use an example this is because if finance managers ignore the impact of time on their investments they will end up misleading their companies into making wrong investment decisions.  For example assume a company is faced with two mutually exclusive investment opportunities.  Assume the initial capital outlay (cost) is the same for the two opportunities. One of the investment opportunities, (Company A), will bring lump sum cash inflow at the end of 15 years of $ 4 million. If the company’s cost of capital is 10% then the present value of this investment is as follows. The general equation for present value is PVk,n=FVn/(1+k)n

Whereby PVk,n=Present value of a future amount to be received at n period at k opportunity cost

FVn=Amount of money to be received at future point n

K=opportunity cost

n=time period

Hence the present value of the $ 4 million will be =>

Present Value (PV) = $4million / (1+10%)15

  • $4million / (1.10)15 => $4million / 4.177248169 = $ 957,568.20

From the foregoing the value of the $4 million will have fallen to $ 957,568.20 in the 15th year.

Assume the next business opportunity (Company B) will bring in $ 2.5 million in the 10th year with cost of capital at 10% then the Present value of the cash inflow will be as follows.

PV= $2.5million / (1+10%)10 => $2.5million / (1.10)10

  • $2.5million / 2.59374246 = $ 963,858.22

In this case a finance manager who does not take into account the effects of time value of money will choose the option of investing in Company A because it will bring in $ 4 million in the 15th year. However, a prudent finance manager who takes into account the time value of money will choose Company B whose present value of $ 2.5 million is $963,858.22 and higher than the present value of the $ 4 million from company A whose present value  on the 15th year will be $ 957,568.20 and less than the present value from company B. This not considering that the longer the period before the cash inflow is received the riskier a business venture is (Martinez, 2013).

3) Calculate the future value of the following:

  1. a) $120,537.19 if invested for three years at a 3% interest rate

Future value techniques measure cash flow at some future point in time. It is the value at some time in future of a present sum of money or a series of payments or receipts. In other words the future value refers the amount of money an investment will grow to over some period of time at some given interest rate.

The general equation for future value at end of n periods can be formulated as;

FVn=po(1+k)n

Where FVn=future value at end of end of period n

Po=Initial principal or present value

K=annual rate of interest

n=number of period the money is left on deposit

Hence Future Value (FV)=$120,537.19 *(1+3%)3=>$120,537.19 *(1+0.03)3

=>$120,537.19 *(1.092727) = $131,714.24

  1. b) $337,891.22 if invested for seven years at a 6% interest rate

Future Value (FV) = $337,891.22 *(1+6%)7=> $337,891.22*(1+0.06)7

=>$337,891.22*(1.503630259) = $508,063.46

  1. c) $420,891.12 if invested for 11 years at an 12% interest rate

Future Value (FV) =$420,891.12 * (1+12%)11=>$420,891.12 *(1.12)11

=>$420,891.12 *(3.478549993) = $1,464,090.80

  1. d) $525,520.22 if invested for 14 years with a 15% interest rate

Future Value (FV) =$525,520.22 *(1+15%)14=>$525,520.22 *(1.15)14=>

=>$525,520.22*(7.075705764) = $3,718,426.45

4) Calculate the present value of the following:

  1. a) $262,126.17 to be received six years from now with a 4% interest rate

The general equation for present value is PVk,n=FVn/(1+k)n

Whereby PVk,n=Present value of a future amount to be received at n period at k opportunity cost

FVn=Amount of money to be received at future point n

K=opportunity cost

n=time period

Hence=> PresentValue (PV) = $262,126.17/(1+4%)6 => $262,126.17/(1.04)

=> $262,126.17 / 1.265319018  = $207,162.12

  1. b) $325,003.21 to be received eight years from now with a 7% interest rate

Present Value (PV) = $325,003.21/(1+7%)8=>$325,003.21/(1.07)8

=> $325,003.21 / 1.71818618  = $189,154.83

  1. c) $421,567.35 to received 10 years from now with an 10% interest rate

Present Value (PV) = $421,567.35/(1+10%)10=> $421,567.35/(1.10)10

=> $421,567.35 / 2.59374246 = $162,532.46

  1. d) $631,500.05 to be received 12 years from now with a 13% interest rate

Present Value (PV) = $631,500.05/(1+13%)12 => $631,500.05/(1.13)12

=>$631,500.05 / 4.3345231 = $145,690.78

5) Suppose you are to receive a stream of annual payments (also called an “annuity”) of $525,891.12 every year for seven years starting at the end of this year. The interest rate is 15%. What is the present value of these seven payments?

This is calculated using present value interest factor of an annuity (PVIFA) tables. PVIFA cannot be greater than 1 or less than 0.

PVA=PMT*PVIFA

Where PVA=Present value of an annuity

PMT=future cash flows

PVIFA= present value interest factor of an annuity

Hence= PVA=$525,891.12*0.376=197,735.06

6) Suppose you are to receive a payment of $637,891.24 at the end of each year for six years. You are depositing these payments in a bank account that pays 12% interest. Given these six payments and this interest rate, how much will be in your bank account in six years?

To determine the amount of money that will be in my bank I will use the tables to calculate the future value of the annuity of receiving a payment of $637,891.24 at the end of each year for six years and depositing the money in a bank account at a rate of 12% interest

FVn=P0*FVIF

Where FVn=Future value of the annuity

Po=Present value of instalments

FVIF=Future value interest factor

Hence=$637,891.24*1.974=$1,259,197.31

The amount of money that will be in your bank is =$1,259,197.31 at the end of 6 years.

 

References

Benshoof, M. (2005).THE TIME VALUE OF MONEY.Professional Builder, 70(3), 74. Retrieved from http://search.proquest.com/docview/194232521?accountid=45049

Bianco, C. A., Nelson, D. T., & Poole, B. S. (2010).Teaching time value of money. The Business Review, Cambridge, 16(1), 25-31. Retrieved from http://search.proquest.com/docview/818356218?accountid=45049

Freeman, M., & Freeman, K. (1993).Considering the time value of money in breakeven analysis.Management Accounting, 71(1), 50. Retrieved from http://search.proquest.com/docview/195672414?accountid=45049

Martinez, V. (2013). Time value of money made simple: A graphic teaching method. Journal

of  Financial Education, 39(1), 96-117. Retrieved from http://search.proquest.com/docview/1435377604?accountid=45049

 

 

 

 

Future of Transport (electric)

Future of Transport (electric)

Many concepts exist on how the future transport system will look like. Engineers are working hard to improve the present transport system especially the powering of the transport system to make it more efficient. Over the coming decade, the thought of getting to work on time, getting to class on time and also going for vacations will be much easier. Cars will be astonishingly driving themselves using the required routes while the trains will use magnetic rail systems moving at 800 miles per hour.

New technologies on transport will make the transport system safer and more effective. The department of Transportation’s Research and Innovative Technology Administration is working towards ensuring that the technologies will be unified safely to the existing transport system. There will be less congestion, lower transport cost and less pollution.

Radio thermal generators

Radio isotopes have been there and are used as alternative fuels. However, their use on land is deteriorating since the isotope can be stolen and it also causes environmental destruction if the unit is opened. Decay of radioisotopes produces heat and electricity especially where sun is weak and where low temperatures are a problem. Radioisotopes used as fuel are not reliable enough to radio thermal generators since they end up making the radio thermal generators not to sustain the atomic chain reaction. On the contrary, they end up producing electricity from Earth as a fuel.

Bio diesel

This is a mixture of petroleum diesel and oil from vegetables. They reduce air pollution by producing less carbon. This is when compared to standard diesel. Biodiesel are cheaper compared to petrol, and they are also more energy efficient hence drivers prefer using them than petrol. However, biodiesel cost is very high compared to diesel; another problem is that the farmers start growing biodiesel plants instead of growing food crops thus causing food shortage.

Ethanol

Ethanol is also used as an alternative for petrol. It is produced from of gasoline and propellant from grain. Its emissions are environmental friendly since there is less pollution. The farmers also highly benefit from the sale of the propellant grain. However, the ethanol has its own disadvantages because some people argue that the poisonous gas emissions from the grain production are more than that of the ethanol emissions (Severinsky, 1994).

Hybrid cars

These operate from a mixture of gasoline powder and electric power. The advantage with these cars is that they highly save the fuel costs since their engine is efficient and their battery stores energy when moving. The disadvantage with the cars is that they are very expensive to acquire.

Hydrogen

This is an alternative form of fuel which replaces petrol. Hydrogen comes from water which means it is a renewable fuel which is fair in cost and is also non- exhaustible. The emissions from hydrogen fuel cars is 100% environmental friendly. However, the manufacture for the hydrogen fuel cars is rather cumbersome. In addition, hydrogen is very explosive, which highly endangers human life.

Nuclear power and radio thermal generators

This is any technology used to generate energy from atomic nuclei by means of nuclear reactions. Nuclear power has got many uses: it can be used to generate steam pressure, which can be used to generate electricity. Electricity from nuclear reactors can be used for propulsion in space. Power generated from nuclear fission has been used over the past time by spacecraft, however, of late there has not been a nuclear reactor sent to the space. Electricity is being currently used in moving electric trains and cars; electricity is a clean form of fuel which does not pollute the environment. The electric trains and cars do not emit fumes which cause environmental pollution; their movement speed is also very high. However, they are very expensive to acquire.

Super conducting vacuum trains

Over the past years, very fast maglev train systems have been operating though they have not fully become pervasive. The reasons are because the engineers do not find any need to replace the existing railway systems. Another reason may be due to lack of enough money to replace them. However, the evacuated tube transport (ETT) structure envisages superconducting maglev trains, which works in expatriate ducts moving at a speed of six thousand, five hundred kilometers per hour. It takes a very short time to cover a long distance. This is evidence that the ET3 train will be 50 times faster than the current train and vehicles. A 500 km/h (310 mph) vacuum train has been projected in Switzerland which will be much more efficient than the current transport means today (Brownstone, Bunch & Train, 2000).

Trains started operating from steam to diesel. Nowadays, diesel trains have been replaced with ultra-low-sulphur diesel, biofuels and hybrid technology. Liquefied natural gas (LNG), whose another name is propane, has also replaced the steam and diesel driven trains. It has low costs, which make it striking especially to those industries with noteworthy energy cost. In addition, the advantage of Liquefied Natural Gas, unlike diesel fuel is; harmful emission reduction has led to the encouragement of use of Liquefied Natural Gas by the environmental sectors since carbon emission is reduced by 30% while nitrogen emission goes down by 70%.

Methanol

Methanol has many benefits that make it attractive to many. It has a high performance and many safety benefits. It is an environmental friendly gas, and it is not flammable. However, those who opt to use methanol as a form of fuel are flexible to use any other fuel (Chan & Chau, 2001). Though it is made from a natural gas, methanol can also be manufactured from coal and wood. The drawback of methanol is that it is toxic.

String transport system

It is highly being worked on which will act as an alternative to straight structures. The idea is founded on what is likely of heavy-duty that are placed above the ground but are electric wires, which instead if transmitting current they act as a support for carriages. The supporters of the system find the system more advantageous in terms of cost where it can be 10 times cheaper than a railway, maglev system and also the monorail system (Wyman & Bespalko, 1997).

Tubular rails

This is Robert’s C. Pulliam’s project whose idea is taking above ground rail. The train normally carries the paths while the rolls and motors are enclosed in the rings where the train passes through at a speed of up to 240Km/h (150 mph). The advantage of Tubular Rails is on its construction, which is 60 percent less than that of standard urban train networks. Another advantage is that the rail will cause slight disturbance to the present network. The third advantage is that the technology for making the Tubular Rail is readily available and not very expensive. The tubular rails reduce environmental pollution (De Luca et al., 2009).

The straddling bus

The straddling bus, roll on its stilts above the traffic by means of small pathways, which will be positioned between the lanes of traffic. It is one of the most exciting transport means which highly reduces the urban congestion. The travelers get on and off at the bus stops without any troubles. This system will add the capacity of people carried in town roads. It will not cause any disruption to traffic. The bus will be electric causing less pollution in the air.

Space elevator

This aims at reasoning means of getting to the space. There is a variety of designs, but the main component of making the space elevator is a thin tether from a light material. That is, the carbon nanotubes which spring from near the earth’s equator to a distance of 60000 miles into space. The cost of cargo transportation will be reduced according to the International Space Elevator Consortium. If worked on today, by 21st century the idea will be transformed to a reality. The Tokyo construction company has got ideas for making a space elevator by 2050 which will carry approximately 30 passengers (Brownstone, Bunch & Train, 2000).

In conclusion by the year 2050, the transport sector will have highly changed to the better. There will be fewer cases of poisonous gas emission from the transport sector. These gasses are a threat to the ozone layer which protects us from the dangerous ultra-violet rays of the sun. The human health will no longer be at a high risk of getting these dangerous diseases from exhaust fumes. People will reach their destination in time due the fast means of transport being worked on today. The engineers are working hard for the betterment of future transport.

 

 References

De Luca, C., Deeva, I., Mariani, S., Maiani, G., Stancato, A., & Korkina, L. (2009) Monitoring antioxidant defenses and free radical production in space-flight, aviation and railway engine operators, for the prevention and treatment of oxidative stress, immunological impairment, and pre-mature cell aging. Toxicology and Industrial Health, 25(4-5), 259-267.

Chan, C. C., & Chau, K. T. (2001). Modern electric vehicle technology (Vol. 47). Oxford University Press.

Severinsky, A. J. (1994). U.S. Patent No. 5,343,970. Washington, DC: U.S. Patent and Trademark Office.

Wyman, M. M., & Bespalko, S. J. (1997). The Hydrogen Fuel Cell Locomotive as National Energy Policy Insurance. Terra, 480, 775-4000.

Brownstone, D., Bunch, D. S., & Train, K. (2000). Joint mixed logit models of stated and revealed preferences for alternative-fuel vehicles. Transportation Research Part B: Methodological, 34(5), 315-338.

 

 

The Cost of Equity

The Cost of Equity

 

General Mills

The Capital Asset Pricing Model (CAPM) is the best method of determining the cost of equity for General Mills Inc (NYSE: GIS). Using CAPM calculations, GIS target for December 2014 is $ 50.60 (Reuters, 2013). If this security becomes untenable in one years time, then the option of increasing dividends to boot investor confidence should be explored. The arbitrage pricing theory (APT) is less accurate compared to the CAPM and the dividend growth models. However, CAPM is easy to use. The isolation of the Beta assumptions into a single variable best fit the current state of the company.

General Mills Inc- Cost of Equity

CAPM would estimate the company’s cost of equity as follows

Current cost of equity at 5.96% will be

RE=RF+Beta (RM-RF)

RE =3.15% +0.18 (5%-3.15%)

=3.48%

CAPM Variables and Assumptions

When the above calculations are expanded from the left to the right, new assumptions are introduced by each variable. RF is the risk free rate. In this situation, the 3.15% would use a “zero coupon government bond matching the time horizon of the cash flow being analyzed” (Damodaran, n.d). In the analysis of General Mills, the time horizon being considered is not static, but dynamic. Instead of a 12-month bond, which yields almost zero (0.12%), the coupon on a 30-year Treasury bond represents a better risk-free investment option (Bloomerg, 2013). However, a more contentious variable other than the risk free rate (RF) is Beta, which is the “statistical analysis of past price movements of an individual stock against the market as a whole” (). In this calculation, 0.18 was used. Although Beta is supposed to be a mathematical truth, the assumptions used in the calculations are extremely fluid. For example, several sources were consulted, all which yielded several results. The source of the Beta, Reuters, was used because it was felt to be more credible than the others were. The differences in the Beta values could be based on how each looked at the market as whole. The other variable is the time horizon, the concern is here is whether the entire life should be used to calculate the regression. This will assume that the market is limited to domestic securities of similar risk-adjusted. In this scenario, Beta is a powerful variable as used in the CAPM and the results are highly dependent on how it is selected. In selecting from the available pool, RE could flow from 3.59% and 3.48%.

Lastly, the Capital Asset Pricing Model’s most uncertain assumption is the Rm (expected aggregate market return). This is the expected market performance as a whole in the time being considered. If there were a foolproof method was available, and that could provide an accurate figure for the next one year, there would be no market premium. Indeed, there would be no need for advisors. However, most projections are at the rate of 2% for the economy (Easterling, 2010). This would interfere with expectations of year-over-yea growth well below the historic figures. In addition, Crestmost Research Group have predicted a long-term returns closer to 5%, than the historic projections of 9.75 (Easterling, 2010). While some expectation would enter into these forecasts, uncertainty in the market is still prevalent. For instance, even a small variance of 5.0-9.75% would change Re between 4.34% and 3.48%, when Beta is assumed as 0.18% for both options.

Arbitrage Pricing Theory

This is more precise than the CAPM, although it has more assumptions. This model attempts to redress most of the assumptions under the CAPM. Unlike the CAPM, the APT takes the opinion that investors are unique and motivated by several factors. The CAPM assumes investors are homogeneous. In addition, the investors not only have different risk tolerance, different risk factors are more or less important to each individual investor. In addition, APT acknowledges that the market is comprised of various portfolios, instead of stocks (Easterling, 2010).

Although the risk factors explored above are not clearly defined, several factors can be sued to underscore investor’s interest in risk. These include variations in inflation rate, surprises in gross national product, as well as surprises in investor confidence (Easterling, 2010). These macro economic variables are common in the market as a whole. Indeed, these specific risk components should be captured in many Beta values as there are factors. Two critical choices for the company include crop yields’ effect on raw material, as well as the global demand for staple food products. Although APT might closely model the market and the risk factors affecting General Mills price of equity, the reasoning behind the model remains essentially the same: Beta. Therefore, although APT is more precise than the CAPM, the various combinations of Beta and the forecast of likely changes means that the model is no much better than CAPM. This is because there is the model guarantees no more accuracy. In essence, the model increases the complexity and workload in extrapolating the various Beta factors.

Dividend Growth Model (DGMs)

There are numerous dividend growth models. For instance, there is the Gordon growth model. In addition, there are various dividend discount models as well. All these are similar to the APT, because they need significant projections of future events for them to be accurate. However, unlike the APT, dividend growth models do not have the luxury of past trends on which to base the Beat factor. Dividend growth models operate on the variable of growth itself, which is something that is difficult to generate future valued on.

Dividend growth models work on the assumption that a security only holds value through cash flow generated by dividend payouts (NYU). General Mills has seen an increase in its dividend payouts over the past 6 years by about 10% (Fidelity, 2012).  However, it is not easy to provide a forecast for the next 6 years. As can be seen from the recent global financial crisis, volatilities in the economy can have differing effect on securities. For instance, in 2012, General Mill reduced its profit estimates citing weak sales projections (Reuters 2012b). The Gordon growth model is best suited for mature companies, those companies that have a stable growth (NYU 2010). However, although General Mill can be classified in this category, the current volatility in the market share would invalidate any conclusion that the model would offer.

PART II: Specific Company Cost of Equity

CAPM would estimate the cost of equity for the following companies in the following ways;

CAPM would calculate Nike’s current cost of equity at 4.176%:

RE=RF+Beta (RM-RF)

RE = 0.20% + 0.79(4.49% – 0.20%)

RE = 3.59%

This calculation is based on a variable market rate of return of 4.49% and a risk free rate of 0.20%. Using a variable market rate of return may be appropriate in comparing companies, assuming the market rate is risk-adjusted and appropriate to the industry the security operates in.

CAPM would calculate Sony’s current cost of equity at 9.628%:

RE=RF+Beta (RM-RF)

RE = 0.20% + 1.98(6.83% – 0.20%)

RE = 13.33%

CAPM would calculate McDonald Corporation current cost of equity at 1.698%:

RE=RF+Beta (RM-RF)

RE = 0.20% + 0.29(2.94% – 0.20%)

RE = 0.99%

From these calculations, it can be deduced that Sony has the highest cost of equity at 13.33%. This is based on the higher Beta of Sony. In addition, the higher expectation sin the market rate of return also plays an important role in Sony’s performance. Further, the Japanese economic shocks in the last 3 years and the foreign exchange risks might also be a contributing factor.

Conclusion

In conclusion, the various models explored have underlying assumptions in their calculations. It has been shown that the CAPM is the simplest method to use, and that its assumptions are simple. However, although CAPM model relies more on the rear-view to arrive at Beta, it limits its assumptions to empirical data. Further, the CAPM places little emphasis on future growth projections.  On the other hand, APT is not suitable because it is adds more burden in determining the Beta value to be sued. Indeed, it is a less effective version of the CAPM. APT has more assumptions compared to CAPM, but these cannot be effectively used in real-world situation. DDM was probably a better model for General Mill. However recent forecast have put doubts on the infinite growth rate that are projected by the model. In the near future, DDM might prove useful for General Mills investors. However, without a good knowledge of the longer-term strategy, it is impractical to estimate the dividend peaks and lows until the market share settles out. In this case, the best course of action for the company in 2014 would be to keep a close eye on its revenues and market share. Every attempt should be made to beat the newly revised forecast. Depending on the cash-on-hand of the company, dividends should be kept steadily.

References

Bloomberg, (2012). Government Bonds. Retrieved from http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

Damodaran, A. (nd). Picking the Right Projects: Investment Analysis. Retrieved from http://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/inv.pdf

Easterling, E. (2010). Waiting for Average. Crestmont Research. Retrieved from http://www.crestmontresearch.com/docs/Stock-Waiting-For-Avg.pdf

Fidelity, (2012). General Mills: Earnings and Dividends. Retrieved from http://eresearch.fidelity.com/eresearch/evaluate/fundamentals/earnings.jhtml?stockspage=dividends&symbols=GIS

Money Terms, (2007). Arbitrage Pricing Theory. Retrieved from http://moneyterms.co.uk/apt/

NYU, (2010). Dividend Discount Models. Retrieved from http://pages.stern.nyu.edu/~adamodar/pdfiles/valn2ed/ch13.pdf C

Reuters, (2013). General Mills, Inc. Financials. Retrieved from http://www.reuters.com/finance/stocks/financialHighlights?symbol=GIS.N

Feasibility of Two Traffic Congestion Solve Techniques in Sao Paulo

Feasibility of Two Traffic Congestion Solve Techniques in Sao Paulo

  • Introduction

Traffic congestion in Sao Paulo has been considered a serious challenge to the regional and local area (Leme, 2010). The problem has raised the costs of fuel, massive delays and losses in financial resources among other problems (Vickerman, 2005). In the last few decades, traffic congestion in Sao Paulo has turned to be a nightmare that has to be addressed by the authorities. The problem has been highlighted in the international news agencies and also by the local news agencies in local news houses. Surveys done by the Time Magazine indicated that Sao Paulo is one of the cities in the world with the worst traffic congestion. Statistics compiled by the International Business Machines Corporation (IBM) placed Brazil at position six among the nations with the worst traffic congestion in the world (IBM, 2010). The economy of  Sao Paulo has been negatively influenced despite frantic efforts done by the authorities (Jain at al., 2012).

 

Authorities in Sao Paulo have discouraged use of private vehicles through the introduction of Road space rationing, in similarity to what is done in major cities of the world, particularly in the United Kingdom and in the United States. The practice must be supported by all the stakeholders in realizing the desired results of reducing traffic congestion in Sao Paulo. Concerned stakeholders identify with districts and municipalities in the urban and city regions, public acceptance, political commitment and institutional capabilities in Sao Paulo (Rivasplata, 2013). Congestion pricing is another option that Sao Paulo can engage in reducing the current traffic congestion in the city. This report analyses the feasibility of congestion charge and road space rationing in relevance to public acceptance, cost and effectiveness of the techniques.

 

  • Background

Reflecting on surveys done by Urban Age, it was noted that Sao Paulo in Brazil is one of the extensive metropolitan areas (Biderman, 2008), with a population of forty million individuals; hence accounting for more than twenty percent of the Brazilian population. In the recent past, traffic congestion in Sao Paulo is a serious problem that must be addressed by the relevant authorities. Traffic congestion has been facilitated by the increased ownership of vehicles by the urban population basing on the high population growth and on the increased purchasing power of individuals basing on higher wages, salaries and business returns.

 

It has been noted that the number of cars in 1985 was approximately two million in Sao Paulo, the figures has shot to over four million according to statistics compiled in 2007 and the figures are increasing (CAF, 2010; Mahendra, 2008). The ratio of car ownership to a thousand individuals in Sao Paulo is 230:1000, which is one of the highest ratio in Latin America and the nearing regions (CAF, 2010). The problem of inappropriate land use planning and poor coordination in the transport industry is a challenge to Sao Paulo just like majority of cities in the world, particularly with the developing nations and in the least developed nations (Texas transportation Institute, 2011). Increased incomes among the dwellers of Sao Paulo has opted for private transport in regards to public transport, a practice contributing to high levels of air pollution and also traffic congestion (Anas & Timilsina, 2009).

Travel demand management implementation relies on the current and on the future financial investment. The city Sao Paulo has rich resources accounting for a third of the Gross Domestic Product (GDP) of Brazil. Analysis done of the GDP of Sao Paulo indicated that the city contributes more than one thousand billion United States dollars, a model that has contributed to Brazil being the largest economy in the South American region. Sao Paulo has the largest per-capital income, a factor contributed to complex lifestyles in the city, there are pockets of poor people at the peripheries of  the largest cities in Brazil.

 

  • Presentation of Recruitment
    • Cost

Brazil is a developing nation, an indication that the country considers cost as an important factor contributing to the choice of the traffic congestion management technique. Analysts argue that the cost of control techniques depend on the technique and should focus on the effectiveness of the technique and the associated benefits.

  • Social Acceptance

Brazilians acknowledge the need of managing traffic congestion in Sao Paulo, but the current system has faced a number of public discontent and criticism (Leme, 2010). It is argued that the current system is ineffective and places an economic burden to the communities neighboring Sao Paulo. The cost and effectiveness of implementing both techniques should  resonate with the social acceptance of the residents in the city since tax levy will be used in facilitating the traffic jam control techniques.

  • Effectiveness

Implementing congestion charge technique and road space rationing should be pegged on the effectiveness of the techniques depending on the context (Gentile et al. 2005). Effectiveness considers the short term results and also on the sustainability of the technique in the long run.

 

  • Presentation of Options
    • Congestion Charging

Congestion pricing is characterized with techniques and strategies of engaging charges that discourage motorists from entering the Central Business District (CBD) and other congested areas in high traffic periods (Gentile et al. 2005). The users of vehicles in the high traffic periods are surcharged in the course of using public goods. Peak hours are characterized with excess demand of electricity, bus services, railways, metros, road pricing and telephones. Congestion charging has worked in a number of developed cities in the world, and the same concept is replicated in Sao Paulo to ease traffic congestion (Ecola & Light, 2009).

  • Road Space Rationing

Road Space Rationing is a technique applied in reducing traffic congestion in the cities, this is made possible by restricting access of the city by the private cars; particularly during the peak hours, cars with particular number plates, specific days that are pre-established or particular road networks (Cervero, 2013). This method restricts vehicle travel artificially in regulating traffic congestion in major cities. The technique admits that the road space is scarce mainly during peak hours, it has been noted that negative externalities are discouraged, which are common in peak hours. Road space rationing encourages high road capacity at peak hours in effectively managing traffic congestion (Cervero, 2013).

 

  • Comparison of Options
    • Cost

Adopting congestion and road space rationing techniques is faced with a number of barriers (Rivasplata, 2013). Congestion-charge technique is very expensive to implement since Brazil is a developing nation, the system has effectively worked in developed nations. In Brazil, incomes are low and the resources are inadequate compared to Europe. The pricing system is expensive to operate, setup and design.

 

 

 

Table 1

Plant Output m3 / day Cost ( Per m3) € Cost ( Per m3) € (Average)
<1000 1.78 – 9.00 5.39
1000 – 5000 0.56 – 3.15 1.86
12,000 – 60,000 0.35 – 1.30 0.83
>60,000 0.40 – 0.80 0.60

Source: (Karagiannis et al., 2008)

Graph 1

Table 2

Congestion Charging and

Road Space Rationing

Merits

Congestion Charging and

Road Space Rationing

Demerits

  • Reduce congestion
  • Lost business for businesses located in the city center
  • Reduce Pollution
  • Contributes to inequality among the city dwellers
  • City centers become attractive to cyclists and pedestrians
  • Evasion of paying tax through corruption
  • Reduce time lost in journeys
  • Administration very expensive especially with road space rationing since it does not generate revenues
  • Drivers pay for driving social costs in congestion charging
  • Public criticism in developing nations
  • Raise Revenue through congestion charging
  • Road space rationing ineffective as compared to congestion charge

 

  • Public Acceptance

Congestion pricing brings out a complex issue reflecting on public acceptability, although it can be approached in diverse models (Schade et al, 2003). The toll schemes have been criticized by transport sectors and a number of social groups and arguing that pricing measures contribute to unfairness. Pricing measures are expected to work in Sao Paulo since road space rationing has not been as effective as it was thought before the program was initiated and will also act as a source of revenue in Sao Paulo (Ecola & Light, 2009). The congestion charge is an added cost to the high income travelers and also to the middle income travelers in the city; low income earners will barely be affected by congestion charging. Sao Paulo has developed mechanisms that ensure that low income households face free passes and discounts as part of the congestion pricing programs.

  • Effectiveness

It is expected that road users in Sao Paulo will respond in diverse ways concerning full implementation of congestion pricing. It is expected that people will change departure time, travel mode, route choice, travel frequencies and destinations. It is expected that congestion pricing in the long run will affect work locations and residential locations (Banister, 2002) location choices will be influential in understanding travel mode choices and trip patterns that will react to congestion pricing model in reducing traffic congestion in the cities (Cervero, 2013).

  • Comparison between Public Acceptance and Effectiveness

Changes and new ways of doing things historically have been characterized with societal controversies. In the same concept, introduction of Congestion Charge and Road Space Rationing in Sao Paulo has faced both public acceptance and controversies that affect the effectiveness of the programs due to public acceptance and public rejection. It has been noted that if public acceptance is positive, the effectiveness of the program is promising. Authorities in Sao Paulo must understand the psychological determinants that generate to controversies and public acceptance. Public acceptance and effectiveness is influenced by trust, risk, knowledge, perceived benefits, attitude and individual differences.

 

  • Conclusion

The problem of traffic congestion in Sao Paulo has persisted even after the implementation of road space rationing. There is a need of facilitating implementation of congestion pricing in curbing traffic congestion that has contributed to diverse losses in the city and in the economy of Brazil in general. The best model of implementing the techniques for curbing traffic congestion is best done by actively involving all the stakeholders involved, which will make implementation stage fast and effective due to minimized resistance.

 

  • Recommendation

Sao Paulo is one of the congested cities in the world and has one of the complex traffic congestions. In 1997, Sao Paulo implemented road space rationing, and the results lasted for some years in the initial stages, the problem of traffic congestion is back to Sao Paulo. It is the high time that Sao Paulo fully implements congestion charge along with refining road space rationing. All stakeholders must be involved in realizing the desired results and in reducing friction with different social groups, transport sectors and other influential bodies that could derail the process. Congestion charging will reduce urban congestion, handle environmental concerns and manage increasing vehicle ownership in Sao Paulo.

 

 

References

Anas, A., & Timilsina, G. R. (2009). Impacts of policy instruments to reduce congestion and emissions from urban transportation: the case of Sao Paulo, Brazil (No. 5099). Sao Paulo: The World Bank.

Banister, D. (2002). The integration of road pricing with land use planning. Imprint-Europe, pp. 1–18.

Biderman, C. (2008). São Paulo’s urban transport infrastructure. Newspaper Essay, Urban Age, 7-27.

Cervero, R. (2013). Bus Rapid Transit (BRT): An Efficient and Competitive Mode of Public Transport. IURD Working Paper 2013-01, 12-23.

Corporacion Andina de Fomento (CAF). (2010). Urban Mobility. Observatory for Latin America & Information Policies and Best Cities, 10-56.

Ecola, L., & Light, T. (2009). Equity and congestion pricing: A review of the evidence.Technical report. Santa Monica, USA: RAND Corporation.

Gentile, G. et al. 2005. Advanced pricing and rationing policies for large scale multimodal networks. Transportation Research Part A, 39, 612– 631.

International Business Machines (IBM). (2010). IBM global commuter pain study reveals traffic crisis in key international cities. Retrieved September 3rd, 2013, -03ibm.com: http://www-03.ibm.com/press/us/en/pressrelease/32017.

Jain, V. et al. (2012). Road traffic congestion in the developing world. In Proceedings of the 2nd ACM Symposium on Computing for Development, p. 11.

Karagiannis et al. (2008). London Congestion Charging. Brookings-Wharton Papers on Urban Affairs , 450.

Leme, M. C. (2010). Transforming the modern Latin American city: Robert Moses and the International Basic Economic Corporation: Research from the field. Planning Perspectives25(4), 515-528.

Mahendra, A. (2008). Vehicle restrictions in four Latin American cities: Is congestion pricing possible?. Transport Reviews, 28(1), 105-133.

Rivasplata, C. R. (2013). Congestion pricing for Latin America: Prospects and constraints. Research in Transportation Economics40(1), 56-65.

Schade, J. et al. (2003). Acceptability of urban transport pricing strategies. Transportation Research Part F: Traffic Psychology and Behavior, 6(1), 45–61.

Texas transportation Institute. (2011).Urban Mobility Report by Texas Transportation Institute. Retrieved November 22nd 2013, mobility.tamu.edu: http://mobility.tamu.edu/ums/.

Vickerman, R.W. (2005). Evaluating the wider economic impacts of congestion charging schemes: the limitations of conventional modeling approaches. 45th European Regional Science Association Congress, 23–27.

 

Net present Value, Mergers and acquisitions

             Net present Value, Mergers and acquisitions

 

PART I

  • Net present value (NPV) is a sophisticated capital budgeting technique; found by subtracting a project’s initial investment from the total present value of its future cash inflows discounted at a rate equal to the firms cost of capital.Net present value therefore considers time value of money by taking in to consideration the effects of inflation on the value of money due to passage of time before its received. Net present value can thus be said to the present value of all cash inflows and outflows from a project discounted with a rate which is determined after putting into consideration the risk profile of a project or business venture (Arshad, 2012).

According to Arshad (2012) Net present value actually calculates the amount of money in excess of the initial investment outlay from discounting future inflows with a firm’s average cost of capital. The decision criterion is that if the net present value is greater than 1 (one) the firm should accept the investment but if it is less than 1 (one) the firm should reject the investment opportunity. For mutually exclusive projects therefore a firm should only accept those projects with a net present value of more than 1 (one) and reject those with a net present value of less than 1(one). The general rule is that the bigger the net present value figures the better for investment purposes. The project with the largest net present value should be selected over the one with a smaller net present value figure.

In the case below Google is considering investing in a new project or business opportunity that will have initial cash outflow (cost) of $1,750,000. In this case Google’s cost of capital is 14%. The project is expected to bring in future cash flows as shown in the table below.

Year Cash in flow Present value of Cash inflows
0 -$1,750,000 -$1,750,000
1 350,000 307,017.54
2 630,000 484,764.54
3 700,000 472,480.06
4 550,000 325,644.15
5 850,000 441,463.36
Net  Present Value of the investment $281,369.66

 

In order to calculate the project’s net present value we start by calculating the present value of the cash inflows.

Present Value (PV)  of Cash Flows (CF)  = CF1 / (1+r)1 + CF2 / (1+r)2 + CF3 / (1+r)+ CF4 / (1+r)4 + CF5 / (1+r)5……            CFn / (1+r)n

Whereby;

PV=Present value

CFn= Cash flow to be received in period n

r=Discount rate

n- Time period with which the cash inflows will be received

Calculations

In year 0 the present value is equal to initial capital outlay.

Present Value (PV) in year 1 =>PV =350,000 / (1+0.14)^1

=>350,000 / 1.14 = 307,017.54

Present Value (PV) in year 2=> PV = 630,000 / (1+0.14)^2

  • 630,000 / (1.14)^2 => 630,000 / 1.2996 = 484,764.54

Present Value (PV) in year 3=>PV=700,000 / (1+0.14)^3

  • 700,000 / 1.481544 = 472,480.06

Present Value (PV)  in year 4=>550,000 / (1+0.14)^4

  • 550,000 / 1.68896016 = 325,644.15

Present Value (PV)  in year 5=>850,000 / (1+0.14)^5

  • 850,000 / 1.925414582 = 441,463.36

Net present value therefore is total present value of cash inflows less initial capital outlay (cost)

Hence Net Present Value (NPV) of Google’s new proposed project is as follows

  • $2,031,369.66 – $1,750,000 = $281,369.66

Based on the foregoing analysis the project has a net present value of = $281,369.66 which is more than 1 (one). The decision criterion in net present value concept is that if a project has a net present value of more than 1 (one) it can be accepted but if it has a net present value of less than 1 (one) it should be rejected.  It would therefore make a wise investment decision for Google’s shareholders and executives to invest in the new proposed project.

PART II

1.) Analysis on whether Google’s potential acquisition of Groupon would add value to the shareholders of both corporations

The acquisition of Groupon, which runs a daily deals website, by Google would benefit the shareholders of both firms in several ways. During negotiations of the deal, Groupon benefited from association with Google for its revenues increased tremendously and its reputation in the market greatly improved (Winkler, 2010). In 2010, Groupon’s sales revenue surged to $760 million compared to $33 million realized in the previous year of 2009. The market price of Groupon also rose tremendously which increased the shareholder wealth. In this scenario the shareholders of both companies are likely to receive high dividends and also would make capital gains if they sold their shares in the securities exchange (Efrati, 2011). It also appears from the revenues earned that the market was supporting the deal. Groupon’s shareholders would have received higher capital gains than they would have realized had the deal not been there. After the deal collapsed Groupon chose to go public and its value fell by 79% to $2.8 billion from the $6 billion Google was offering (Wall Street Journal, 2011). In this case the shareholders of Groupon lost value instead of making capital gains had the deal been sealed with Google.

If the acquisition went through Groupon’s shareholders would also have benefited from the increased market reach of its products since Google has a better marketing infrastructure (Winkler, 2010). The sales revenue of Groupon would have rose to new levels which would have seen Groupon’s shareholders make phenomenal capital gains. Groupon’s shareholders seems to have lost more than Google’s shareholders since after the deal collapsed Groupon’s sales fell drastically, In fact in the fourth quarter of 2011 the revenues were restated to $14.3 million which was a six fold drop from the deal year of 2010 (Efrati, 2011). The sudden drop in revenues was because the allure of daily-deal websites which is Groupon’s core business activity was wearing off among consumers. Groupon is also facing intense competition from the ever increasing number of competitors. Had the deal gone through Groupon would have leveraged the competitive advantage that Google has achieved in the market to grow its revenues. Google’s shareholders would have benefited by increasing the value of their shareholding by $6billion dollars (Winkler, 2010). Google shareholders would also increase the number of product lines that Google is currently managing and this would have brought in more returns which would have translated to higher dividend payout at the end of the financial year. In general Google’s shareholders will benefit from Groupon acquisition by getting new technology, talented engineers and an increase in revenue base from the new product line. Groupon’s shareholders will benefit from access of extra capital to support its rapid growth which will enable it achieve its sales growth targets (Efrati, 2011).

2) Recommendations to the shareholders of Google and Groupon based on my analysis and findings (Part I and Part II)

According to the foregoing analysis, the shares of Google would have risen in the market had the deal gone through. This would have increased the value of Google’s shares and enabled the shareholders of the two companies to make huge capital gains. The two companies should conclude the deal since it has positive net present value (NPV) of $281,369.66, which is more than 1 (one).  The business venture would bring in positive returns which would grow the asset base of both companies (Efrati, 2011). Google will also benefit by combining a potential competitor and Groupon would benefit by utilising the huge and more popular Google’s search engine to increase its sales revenue (Winkler, 2010). There will be synergies that will be generated by the deal which will grow the value of the two companies.  Benefits to Google’s shareholders would include adding a new product line which would definitely grow Google’s sales revenues by a substantial percentage. The other benefit to Google would be that it will add into its existing staff establishment a pool of talented and competent staff mainly drawn from the technical field. Google would also take over all staff member of Groupon which would definitely increase Google’s skill base and enhance its competitive position in the market (Winkler, 2010). Google would then leverage this new knowledge for the benefit of existing business and the new business to be brought on board by the acquisition (PR Newswire, 2011).

The risk factors in this deal include a possible drop in Groupon’s  revenues  due to the customers are fast losing interest in web based deals which is Groupon’s core business. This could lead to drastic fall in sales revenues which would lead to loss in value. Google would also be entering into unfamiliar business facing intense competition which would likely lead to a fall in revenues instead of rising. Google may therefore be unable to recover the money spent in acquiring Groupon (Efrati, 2011).

The other risk is foreign currency risk. Since Groupon generates a large part of its revenues from overseas markets that would increase foreign currency risk. Unexpected and drastic fluctuation in foreign currency exchange rate would seriously affect the revenues from Groupon’s product line. The other risk is associated with operational challenges in terms of being more efficient than the competition (Efrati, 2011). The other risk is liquidity related. Due to intense competition in Groupon’s line of business, Google’s could lose its money instead of gaining in terms of revenues. The business also faces management risk in that Google did not have management and operational expertise in Groupon’s business. If top managers of Groupon left then the business operations of the new line of business would most likely be grounded to a halt (http://www.bloomberg.com/news/2012-12-11/buying-groupon-hard-for-anyone-as-growth-slows-real-m-a.html?link=mktw)

. 

References

Advisers vie to take on groupon IPO. (2011, Jan 14). Wall Street Journal (Online). Retrieved from http://search.proquest.com/docview/839609105?accountid=45049

Arshad, A. (2012). Net present value is better than internal rate of return. Interdisciplinary Journal of Contemporary Research in Business, 4(8), 211-219. Retrieved from http://search.proquest.com/docview/1282292585?accountid=45049

Efrati, A. (2011, Mar 05). Google cranks M&A machine — undaunted by valuations, deals chief says will continue to pursue start-ups.Wall Street Journal. Retrieved from http://search.proquest.com/docview/855035294?accountid=45049

Google acquisitions and strategy. (2011, Dec 22). PR Newswire. Retrieved from http://search.proquest.com/docview/912248654?accountid=45049

http://www.bloomberg.com/news/2012-12-11/buying-groupon-hard-for-anyone-as-growth-slows-real-m-a.html?link=mktw

Winkler, R. (2010, Dec 01). No groupon discount for google.Wall Street Journal. Retrieved from http://search.proquest.com/docview/814956094?accountid=45049

 

 

 

The capital structure decision and the cost of capital

The capital structure decision and the cost of capital

 Introduction

The capital structure of a firm refers to the different combination of how a company finances its assets by combining equity or debts or a hybrid of the two or by a combination of securities. The proportion of a company’s long-term and short-term debts determines its capital structure. Also its dividend policy. The capital structure of a company affects its financial risks and the value of the company. The theories in capital structures assist in understanding the relationship that exists directly between the value of the firm and the composition of its capital structure. Weighted average cost of capital is actually the marginal cost of raising extra or additional capital and is generally affected by costs of capital involved and the relative proportion of each source of capital. The three companies to be analyzed are:

Alaska Air Company operates the Alaskan Airlines together with the Horizon Air. They have partnered with regional airlines and together they serve over 95 cities across Hawaii, Mexico and Canada. In the year 2012, they served over 26 million passengers and earned $339 million in customer sales.

The Clorox Company deals in mainly in bleaching and cleaning products that are marketed in over 100 countries worldwide.

Ebay Inc. is a technology Company that facilitates commerce through its three major segments; Payments, GSI and Market places. They achieve these tasks by providing a variety of online platforms, services and tools that assist merchants across the world to trade their wares online. Ebay participates in development of soft ware’s and other digital devices solutions. These also offer marketing, advertising and other classified services.

The long term and short term assets for Alaska air amounted to (all figures are in millions of dollars) to 3768 and short term assets were 1737 which totaled to 5505. Ebay and Clorox long term and short term assets amounted to 1576 and 2979 respectively for long term assets and 21398 and 1376 respectively for short term assets in the year 2012.

Alaska air group long term liabilities amounted to $2583 millions while Ebay and Chlorox each had $5285 and $2429 million respectively. Alaska short term liabilities were $1501 million while Chlorox and Ebay each had $2061 and $10924 million respectively.

The revenues for the three companies, Chlorox, Ebay and Alaska air were $5650 million, $15510 million and $4890 millions respectively. The revenues per share were $11.97 dollars, 43.11 and 69.62 dollars for Chlorox, Ebay and Alaska respectively.

The Debt/Equity ratios for Chlorox, Ebay and Alaska air were 19.9, 3032.10, 50.61 times respectively. Ebay Inc has the highest Debt/Equity ratio though its total debts are just about half of what Chlorox has. EBay’s debt is over 3000 times its equity.

The profit margin for Chlorox, Ebay and Alaska air are 17.77%, 10.18% and 9.7% respectively while the return on assets are 5.6%, 13.58% and 6.75% respectively. The ROE for Chlorox, Ebay and Alaska air are 12.92%, 1895% and 29.25%. The Beta’s for the three of them are 0.8, 0.48 and 1.13.

Ebay Inc’s market capitalization of 66.48 billion has total ROE of 12.92% while Chlorox with a market capitalization of 11.94 billion has 1895.08% ROE compared to Alaska air with a market capitalization of 5.35 billion has 29.25% as its ROE.  Ebay Inc has a market capitalization which is almost six times that of Chlorox while its ROE is 140 times more than that of Ebay. Capitalization. The ROE helps in determining the volatility of a company’s total risk as it’s derived from the Net income/Equity. (Brealey and Myers, 1991)

The risks in a business can be narrowed into to two main groups, these are business risks (originates from its operations) and financial risks (originates from the financing decisions)

Business risks refer to the company’s uncertainty on its return’s as compared to its assets. These risks are normally represented by ROA. Assets are normally equivalent to the investments made hence ROA can also be rewritten as ROI. (ROI = Net Income/Investment = Net income/ Debt + Equity) If a firm is not utilizing any debt capital (an unlevered company) its ROA will turn to be its ROE.

The volatility of the Alaska air is almost similar to the average risks of the market. The beta for Alaska air is 1.13. This means that the stocks of the Alaskan air group are slightly more volatile than the overall NASDAQ stock market i.e. the beta of the NASDAQ itself or the representative index is normally by its own definition equal to 1. The market is being compared to itself. (Tofallis, 2008) The shares of Chlorox whose beta is 0.8 are less volatile compared to the shares of Alaska air lines while the beta of Ebay is the least volatile. These means that the shares of Ebay are the least risky when it comes to the conditions of the stock market, and it’s followed by Chlorox Company and Alaska air group

Debt financing refers to borrowing money that will eventually be paid back. The debt period can either be long term, that’s more than a year or short term that’s less than a year. Equity financing refers to the receipt of funding for actual exchange of the ownership shares for the firm. There is no obligation of debt repayment as in the case of debt financing.

There are many advantages and also disadvantages of funding companies through debt and also maintaining a balanced debt to equity ratio is also critical securing a stable financial growth. One of the major advantages of debt financing is that the company ownership is not diluted by other share holders. The lenders of the loan do not have any claim on the company’s ownership or its later profits in future. Most businessmen find it easier and convenient to raise money from debt than from equity. Debt financing provides tax benefits that’s the interest chargeable are tax deductible. (Brigham, 1989)

The disadvantages are that the debt has to be repaid and the principal amount borrowed together with the interest is considered as fixed cost when the breakeven is being determined. For effective cash flow, the debt financing has to be carefully considered and planned. Debt ratios indicate the how much the company is depending on debt capital to finance its expansion strategies and operations. Debt financing affects the Debt to equity ratio is also negatively affects the company’s reputation in the eyes of the investors who view such companies as having a higher rate of risks. Most debts must be guaranteed by individual owners who must offer collateral and personal guarantees which mean that in the event of inability to repay back the loan then the guarantor must utilize his personal funds to settle the debts.

Chlorox depends minimal debts to service its operations and also slightly to finance its expansion. With a debt/equity ratio of 19.9, it means that most of its other financing is obtained through equity capital. Its debts are less than 20% of its entire equity. The Ebay Inc is more than 3000 times dependent on debts. Its entire financing is wholly reliant on debts. It does not balance at all its capital structure. The most balanced capital structure belongs to Alaska air group. Its debt and equity financing is almost on a 50-50 sharing.

The cost of debt capital was pegged at 6.5% for the debt financing.  Bonds can be utilize to raise funds in form of debts like in the case of Ford Motor group in 1998. The Company’s cost of Equity capital and Debt can be determined in several ways. A company’s cost of debt is usually the rate of interest on the loan such the new issues for bonds. The market price of a company’s debt mostly implies its yield to maturity which is the amount the owner or purchaser would have received if he had purchased and retained the bonds to maturity. The yield to maturity is the cost of debt investors normally demand on a company’s debt. For example, in the year 1998 Ford offered to the public bonds with coupon rates of 6.5% that were due in 2018. The cost of debt capital was pegged at 6.5% for the debt financing.  Bonds can be utilized to raise funds in form of debts.

The advantages and disadvantages of Equity and Debt capital are varied. The major advantage of debt capital is that the lenders of the loan do not have any claim on the company’s ownership or its later profits in future. This case happens only if the debtors can repay back the loan but if they cannot repay the loan then creditors can take over the company or be allowed to be part of the ownership.  Most businessmen find it easier and convenient to raise money from debt than from equity. These can be difficult if the owner has no collateral. Debt financing provides tax benefits that’s the interest chargeable are tax deductible. If the rate of taxes increase so much then it’s no longer a good option. (Barges, 1982)

The major disadvantage of using debt capital is that it has to be repaid and the principal amount borrowed together with the interest is considered as fixed cost when the breakeven is being determined.  In case of hard ship in repayment then loan can be easily converted into shares for the creditor to be part of the owner of the business. For effective cash flow, the debt financing has to be carefully considered and planned. Debt ratios indicate the how much the company is depending on debt capital to finance its expansion strategies and operations. Debt financing affects the Debt to equity ratio is also negatively affects the company’s reputation in the eyes of the investors who view such companies as having a higher rate of risks. Most debts must be guaranteed by individual owners who must offer collateral and personal guarantees which mean that in the event of inability to repay back the loan then the guarantor must utilize his personal funds to settle the debts.

John Linters model (Myers, 1984) indicates that the market stock prices generally responds to unanticipated moves on dividend changes an observation that Miller and Modigliani also noted in 1961. Changes in capital structure relay different messages to investors. Most of the theories relate to optimal capital structure. The static trade of is a framework where a company targets a debt to value ratio that it gradually moves towards it and also adjusts its dividends in the same way towards the payout ratio. The pecking order policy framework prefers the internal financing to external financing and also prefers debt to equity if it deals in securities like the Ebay. The company’s optimal debt ratio as the stated Static Tradeoff Theory is determined by a tradeoff between costs and the benefits of holding a company’s assets, borrowing and investment decisions. (Myers, 1984)

Most companies have different sources and classes of finance i.e. common stock, preferred stock, debt and retained earnings. WACC (Weighted Average Cost of Capital) is calculated by averaging the cost of all the sources after tax deductions have been made. It’s arrived at by multiplying the total cost of finance from each source by its relevant weight and adding the products. Weighted Average Cost of Capital (WACC) is also affected by increase in cost of capital as it also increases and reduces the PVs and NPVs. When interest increases, the interest expenses also goes up and the overall corporate income is affected negatively.

The WACC for Chlorox, Ebay and Alaska air group were 2.8%, 6% and 0.5% respectively. Chlorox has the lowest weighted average cost of capital and it’s followed by Alaska air group and finally Ebay Inc. these is probably because of Ebay high leverage status as compared to the other two companies and Chlorox being the least in terms of debt capital.

The cost of Equity for Chlorox, Ebay and Alaska air group were 5.44%, 6.4% and 7.3% respectively. Chlorox has the lowest cost of Equity and it’s followed by Ebay and finally Alaska air group.

Finally to conclude, a company is supposed to balance and substitute its debt for equity or its equity for debt for some time until the company’s value is maximized. The corrected and new version of MM theory on debt and taxes indicate that any tax paying company gains by borrowing; the more the marginal rate of tax the more the pain. However if a company is paying a lower at a lower rate, it would incur a net loss and instead it should lend at a higher rate in order to gain.

 

 

References

Brealey, R. A and Myers, S.C. (1991) Principles of Corporate Finance. 4th Ed. New

York: McGraw-Hill, 1991.

Brigham, E. F. (1989) Fundamentals of Financial Management. 5th ed. Chicago: Dryden

Press,

Barges, A., (1982) The Effect of Capital Structure on the Cost of Capital, Prentice-Hall, Inc., Englewood

Myers, S.C. (1984) The Capital Structure Puzzle, The Journal of Finance, July 1984, Vol. XXXIX, No 3.

Tofallis, C. (2008). “Investment Volatility: A Critique of Standard Beta Estimation and a Simple Way Forward”. European Journal of Operational Research 187

 

 

Juvenile Justice System

Juvenile Justice System

Juvenile delinquency is also known as the youth crime or juvenile offending. It has been noted that juvenile delinquency is the participation of minors commonly referred to as the juveniles in illegal activities in the society. Juveniles are individuals aged less than the legal age of the majority (Feld, 2013). Different states in the United States have legal systems designed to address the issues of juvenile delinquency, among them are juvenile courts and juvenile detention centers. Any person under eighteen years committing crimes is subject to juvenile delinquency. The status of a crime varies with jurisdictions depending on severity and type, and there are some crimes that subjects juveniles to be tried and charged the same as adults (Feld, 2013).

Times are changing fast in the recent years, it has been noted that more and more children are being tried as adults in the American law courts. First arrests are on the increase as young girls and boys are getting involved in crimes. It is estimated that about sixty percent to eighty percent of the American adolescents are engaging themselves in juvenile offenses (Feld, 2013). Some of the crimes are status offenses; an example being underage smoking, violent crimes and property crimes among others. Teens are heavily involved in juvenile crimes and the statistics are worrying.

Researchers argue that juvenile crimes are directly proportional to normative teen behaviors, and that the pattern is evenly distributed in the world. Teens tend to ignore laws as they try new ways of doing things at adolescent stage, and in the process break the laws in non-violent crimes in most cases (Feld, 2013). Few teens engage in violent crimes, surveys around the world have indicated that the majority of adolescents are inclined to antisocial behaviors.

Status offenses are also referred to as the status crimes and they are characterized with two definitions. Status offense is part of the actions that are prohibited to a particular class of people, in most cases attached to crimes committed by the juveniles or minors. The second meaning in the United States is attached to crimes such as traffic violation where motive does not play a role in deciding whether the person is guilty or not (Feld, 2013). Status offense in Europe means regulatory offenses. Examples attached to status offenses are alcohol consumption, running away from home, smoking of tobacco and truancy among others. Status offenses are only subjected to persons engaged eighteen years and below, while the acts are legal for adults. Status offenses are also attached to laws prohibiting actions of particular persons basing on race, sex, religion and nationality among others. An example is laws that prohibit women from using men’s toilets in the public places (Feld, 2013).

Juvenile courts are also known as the young offender’s courts in the United States. Juvenile courts are characterized with a tribunal with special authority to pass judgments and try children involved in crimes. Offenders in the juvenile courts are under the age of majority according to the jurisdictions (Feld, 2013). Legal systems in the modern times separate crimes committed by juveniles and crimes committed by adults. Serious crimes such as gang related acts, murder, homicide, rape and robbery are treated as crimes committed by adults where juvenile crimes are transferred to adult criminal courts. There are a number of cases where juveniles have been treated as adults in criminal offenses (Feld, 2013).

Adult courts are tribunals powered to try and prosecute adults in criminal activities, adults in most cases are persons aged eighteen years and above. Juvenile courts comparing to adult courts have wider jurisdictions in trying offenses carried out by the minors, which are subject to a number of considerations ignored in adult courts.

Juvenile courts differ from the adult courts in a number of ways, it has been noted that juveniles are prosecuted for committing delinquent acts and not for committing crimes as in adult courts (Feld, 2013). Serious delinquent acts such as murder are considered as crimes and tried in the adult courts. Juveniles in most cases have no rights to public trial carried out by the jury. Minors subjected to crimes are directed to the judges for the trial portion, where the judges offer a ruling after hearing the evidence; this is known as adjudication hearing (Feld, 2013).

Juveniles are considered to be delinquent or not according to the court’s decision and the appropriate actions are taken. Differences from the adult courts come in on the part of actions taken by the juvenile courts, which is different to the actions propelled by the adult courts. Adult courts have a goal of punishing the perpetrators of crime while juvenile courts are directed at serving the interests of the minors and also rehabilitate or reform the minors, with the expectations that the youths will resume functionality as soon as possible in the society (Feld, 2013). Minors are kept out of the jails as much as possible through parole, probation and diversionary programs. It has been noted that juvenile courts are informal compared to the adult courts that are formal, rules on admissibility of evidence in the juvenile courts are more lenient as compared to adult courts.

Similarities between juvenile courts and adult courts are alike in diverse ways where the offenders are offered with some rights depending on the extent and type of crime committed (Feld, 2013). Minors and adults have a right to access the services of an attorney, minors and adults have rights to cross examination of witnesses and right to confront witnesses. Minors and adults are accorded rights against cases of self incrimination, minors and adults also have rights to notice of charges and that the minors and adults must be proved beyond any reasonable doubt that they committed the crimes, before any conviction to take place (Feld, 2013).

Surveys have indicated that variables correlating with juvenile crime rates identify with alcoholism, single parenthood, child maltreatment, no parental care, truancy, poor parental supervision, bullying, drug use, depression, poverty, school dropouts, gang membership and trauma among others (Feld, 2013).

Teens are considered young adults, and to some extent know what they are doing. This is the basis used by adult courts trying teens as adults depending on the nature and the extent of the crime committed (Feld, 2013). Across the United States, it has been noted that more and more juveniles are facing adult courts and tried in the same way as adults face the processes in the criminal courts, such minors are then confined in adult correctional facilities, which is a challenge among the policy makers in inhibiting or promoting community protection, rehabilitation and accountability in relation to juvenile offenders.

Minors accused of being involved in delinquent acts are advised to access the services of criminal defense lawyers with immediate effect. Criminal law in the United States is very complicated and subject to diverse interpretations. An Attorney is influential in letting the minors know their rights and propel the right defenses.

References

Feld, B. C. (2013). Cases and Materials on Juvenile Justice Administration. Eagan, Minnesota: West Publishers.

 

 

Acculturation preferences to be encouraged among minority and majority members

Acculturation preferences to be encouraged among minority and majority members

Introduction

There are many factors that determine the social pattern of people across the world. Apparently the world is experiencing crisis resulting from acculturative practices which are being fueled by rapidly growing populations and population movements. Human migration and movement patterns have been cited as being the cause of unparalleled challenges to economic, political and social systems in many countries especially those faced with high immigration rates such as Australia, Canada and the United States (Safdar, Dupuis, Lewis, El-Geledi, & Bourhis, 2008). Among the causes of rampant bi-lateral migrations have been family reunions, refugees and employment. Acculturation in the 21st century has been attributed to globalization which has resulted into the formation of multi-cultural communities and emergence of citizens with Diasporas affiliations to their mother countries which implies that acculturation is increasingly becoming complicated (Brown & Hewstone, 2005). In order to understand acculturation preferences, it becomes prudent to define the term and as stipulated by psychologists. Acculturation is a cultural change that arises from interactions between two or more distinct ethnic groups.

Acculturation is premised on the fact that it attempts to identify ideas defining how the minority members of the society who are in most cases immigrants correlate with the majority members. By so doing, the scope of this paper is made extensive to the extent that it employs empirical analysis of statistical findings relating to preferences stipulated by different cultures across many countries which gives credibility towards pinpointing preferences that should be encouraged among both the majority and minority members. Acculturation preferences define the desire by immigrants as well as the natives to preserve and manage their cultural distinctiveness. On the other hand, the majority groups need to establish their expectations towards the immigrants and their cultural distinctiveness. On a wider scope, contextual data relating to migration trends, the interplay between minority and majority members, as well as their acculturation preferences will be analyzed.

Based on the introduction, it is noticeable that majority groups in countries with high immigration rates such as the United States, Australia and Canada have assimilated multi-cultural ideologies which have made them more likely to accept minority members in spite of their religious, cultural or linguistic inclination. Lara, Gamboa, Kahramanian, Morales & Bautista, (2005) identified that majority members who show acceptance of hybridity and heterogeneity of multiple cultures are most preferable to minority groups who are often faced with acculturation fears. The establishment of a common acculturation preference means that different cultures residing in a given country have a higher chance of sharing in making of a common history which promotes future affiliations between the minority and majority members. Consequently this will lead to modification of the host’s cultures to include multivariate aspects which are bonding to the whole society. By so doing, self-identities of all the members are restructured and subsequently reconstructed to form multicultural or hybrid cultures which help in the attainment of a global culture.

Despite the constant need to form a global culture that will reduce acculturation fears and biases, there are many variations that have jeopardized the process. This statement is supported by evidences derived from several researches identifying diverse acculturation preferences thus deviating us from our previous acculturation preference illustrating the need for formation of a hybrid multivariate culture that can be adopted by the whole world (Skuza, 2007).  One instance of a probable global culture is that implicit in Mauritius which has been historically known as the land of immigrants or the emigration country. The country was previously dominated by the Dutch but constant transnational marriages have helped change its uni-dimensional cultural paradigm into a multi-dimensional culture that is accommodative of both the minority and majority members.  Seemingly acculturation is a subject matter that is currently receiving much attention and as a result it is being analyzed by governments, academicians, immigrants, host communities and policy makers.

Most Germans as well as the immigrants possessed both the perceived and preferred acculturation preferences. This is because integration between minority and majority members has resulted into much success in the past making it the most encouraged acculturation preference. The minority members in German were more afraid of losing their cultural heritage because of an effect called swamping thus the minorities had a higher urge to maintain their native cultures. On the other hand, the majority preferred that the minorities could abandon their native culture for the host’s culture. To match up the acculturative preference of integration which is the most encouraged, Berry’s model can be used to compare between the immigrants and the hosts view on contact. In Germany, both minority and majority members had a desire to make contact. Further analysis of the preference using the Berry’s Model reveals that, minority groups are more afraid of losing their cultural heritage so they prefer to maintain their cultural identify (Rudmin, 2003). The minorities perceived the majority group as having a lower desire to embrace a foreign culture while the majority alleged that the minorities were less willing to lose their cultural identity.

An analysis of attitudes between the two groups identified that the preference for integration was more dominant among the minority group. Probably this research findings can be attributed to the fact that minority groups are often made to feel marginalized, alienated or rebellious thus they will always participate in activities that bring them closer to the majority groups which are also the hosts (Ensari & Miller, 2002). To some extent it means that the minorities would prefer integration so as to derive that sense of security that is associated with immigrants who portray a liking for the hosts’ communities’ cultural practices. Even though the Germans who represent the host population prefer integration but their reasons of integration are motivated by the need to assimilate the minorities because the Germans did not have a liking for immigrants who maintained their cultural heritage. The attitude shown by Germans during the research reflects the national policies set by the Government of Germany regarding treatment of foreign cultures. The national polices made 40 years ago stipulated that foreigners living in German for a long period of time or immigrants who intend to apply for nationalization as German citizens should consider assimilating the cultural practices of the majority group. This infers that the government is against breeding of a multi-cultured society which makes German a country with a very slow rate of cultural hybridity. From these findings, it is highly likely that integration preference is the most encouraged.

By comparing the historical attitudes portrayed by the Germans in the past, it is rife that the majority groups are slowly becoming inclined towards making German a multicultural society. This is evident with the reality that majority of the hosts (Germans) nowadays prefer cultural integration which is an indicator that their drifting towards multi-culturalism (Rohmann, Piontkowski, & van Randenborgh, 2008). On the other side the preference for integration among the minority is dominant among the youths because they are not maturely socialized into their cultural practices by their parents. This is one reason why youths from the minority members viewed their parents as having a higher desire to maintain their cultural heritage as compared to their children. The parents further had a lower preference for contact. The researcher explained this phenomenon as being tied to the social circles. Whereas the children are free to mingle and associate with children from other minority groups and majority groups while they are at school, the parents’ social circles are limited to their places of work after which they have to attend to their parental duties. Their busy lifestyles limit their conduct with the members of the majority groups therefore they tend to have a negative attitude towards contact and assimilation.

According to a parallel research conducted on youths from minority groups living in Canada, school going children were observed to be in constant contact with the hosts’ children at schools (Gudykunst & Kim, 2003). This forces them to adapt to the hosts society because it is critical in determining their academic performance and success. Because of the need among children to become competent members of their new societies, they easily get adapted to the majority culture and become assimilated into losing their cultural believes and practices. On the other hand, parents to the children from the minority groups in the Canadian schools were observed as being reserved towards assimilating or making contact with the hosts cultural practices because they are loyal to their traditional cultural believes. The same scenario is portrayed in the United States where despite being a multi-cultured society consisting of African-Americans, Asian-Americans in addition to Europeans and Caucasians. These findings can further be discussed from several angles one being the use of contact hypothesis (Pettigrew & Tropp, 2006).

Navas, García, Sánchez, Rojas, Pumares & Fernandez, (2005) clarified that the contact hypothesis asserts that persistent contact between the minority and majority groups has the general effect of reducing cultural prejudice. This is because of the generational gaps that diminish with time. Psychologists support the fact that children have a faster learning curve as compared to adults thus the second or third generation of the immigrants children are likely to be fully assimilated into cultural practices of the hosts or majority groups because they are constantly in touch especially at schools. On the other side, their parents tend to interact with first generation immigrants who still hold onto their authentic cultural practices making it hard to acculturate them. The only problem why the contact hypothesis might not be applicable is the fact that schools are not a perfect place for cultural exchange because they rarely meet the optimal conditions to facilitate diffusion of cultures from either the minority group to the majority or the vice versa.  There also emanates discrepancies relating to there being homogeneous and multiethnic schools in most countries across the globe.  Such discrepancies are likely to influence the attitude and furthermore the acculturation preferences exhibited by both the children and their parents making them rebellious to contact as a way of self-protection.

Another research conducted by Hanna Zagefka, Linda Tip, Roberto Gonzalez, Rupert Brown and Marco Cinnirella in their journal Predictors of majority members’ acculturation preferences: experimental evidence’  supported that members from the minority groups had the acculturative preference for integration or cultural adoption whereby the majority groups had to increase their support aimed at acculturating the minority members. The research supports the findings presented in the previous chapter supporting that the minority members had the desire of maintaining their traditional culture thus their willingness to assimilate the culture of the majority group and adopt it is dependent on the level of prejudice exhibited by the hosts. This is because analysis conducted to establish how cultural prejudice affected perception towards acculturation preferences established that respondents to the questionnaires showed preference for majority groups that had low prejudice than the hosts who were high on prejudice. Likewise the immigrants or the minority groups had the belief that hosts who had low prejudice were bound to accommodate minority members without bias. This journal therefore suggests that the integration and assimilation acculturative preferences are the most preferred among minority and majority members respectively.

Another journal ‘Antecedents and consequences of acculturation preferences of non-indigenous Chileans in relation to an indigenous minority: Longitudinal survey evidence’ written by joint efforts from Hanna, Rupert and Roberto, (2009) illustrate that process of determining between perceived and preferred acculturation preferences should be guided by an exploratory analysis of the relationship the preference selected and the intergroup relationship. Measuring the valence of such relations could help the researcher in identifying the negative impacts or issues associated with contact and assimilation of the host’s cultural practices. An example is given of the Mapuche Community found in Chile. The Mapuche community represents the largest and the most significant cultural group in Chile courtesy of their being deeply rooted to indigenous cultural practices. Their efforts to protect their territory as well as their traditional cultural beliefs and practice make them a perfect sample for the study relating to acculturation preferences. After encroachment of their culture in the 1880’s Mapuche community has since lost crucial aspects of their traditions (Matera, Stefanile & Brown, 2011). They were the last group of people to be subjugated into forced colonialism in South America and this has made them to suffer social effects arising from acculturation. Apparently their negative attitude towards minority groups is influenced by their mistreatment which has made them to lose jobs, rights to ownership of their ancestral lands, appalling educational services as well as health facilities and worse still they have lost their authentic cultures because of multi-ethnic groups of immigrants that inhabited the area as colonialists (Verkuyten, 2010).

Because of their detachment from globalization and prejudiced attitude towards acculturation, the community has suffered discrimination which has contributed to high levels of unemployment and persistent use of drugs especially alcohol. Furthermore it the immigrants who now represent the majority members are violating the indigenous inhabitants of their land which makes them violent towards immigrants (Sam & Berry, 2010). The Mapuche community is among the few indigenous communities suffering in silence as their cultures are swamped by immigrants who have exposed them to suffer historical injustices.  As a result the Mapuche community has a higher perceived acculturation preference. According to Hanna Zagefka, Rupert Brown and Roberto Gonzalez, this attitude is encouraged among the host community because their rights, freedoms and cultural heritage have been encroached against their will. There is apparent support that cultural integration should be a spontaneous process that does not jeopardize of infringe pain into the hosting community. This is to mean that the Mapuche are suffering from cultural shock which might be hard to recover from because of their being forced into colonialism and their mistreatment by non-indigenous groups. Further support for perceived acculturation preferences is implied by the Chilean government through its formation of a special committee aimed at improving the livelihood of the Mapuche by helping them redefine their cultural beliefs and traditions (Tropp & Pettigrew, 2004).

Analyzing the place that has been taken by the Mapuche community in the Chilean society using Berry’s acculturation model illustrates the acculturation preferences exhibited by immigrants towards the host community. According to the model, it was identified that the immigrants who encroached the land previously inhabited by the Mapuche community had the desire to maintain their authentic culture despite their appreciation for contact and assimilation of the hosts’ culture (Maisonneuve & Testé, 2007). Combining contact and cultural maintenance results into a wide array of acculturation preferences among them being integration, separation, assimilation and marginalization. The acculturation preference of integration among the Mapuche of Chile could be encouraged especially for the minority communities as a way of helping the Mapuche preserve their authentic ethnicity and cultural identity in spite of being undermined by majority groups. The second preference of assimilation could be encouraged because the minority members do not prefer abandoning their cultural practices even though they are at liberty to make contact with other communities and exchange ideologies that might be helpful in reforming their interaction systems. Additionally there is the risk of minority groups refusing to make contact with the majority groups. This is implicit among the Mapuche because their attitude has turned to aggression against other communities that encroached their land. To this end it becomes hard to assimilate them because the minority community is more concern about identifying their lost cultural identity thus the preference that comes in is that of separation which is the third preference (Simon & Ruhs, 2008).

Hanna Zagefka, Rupert Brown and Roberto Gonzalez state that the fourth acculturation preference is marginalization (Zhou, 2007). This preference occurs in rare cases which is not applicable to the Mapuche community but in extreme cases, the minority community might decide to reject both their original cultures as well as those cultures of the majority thus they come up with a marginalized culture that is nether inclined to their previous culture or the majority cultural practices. The research implied that of the four acculturation preferences, integration of cultures is the best because it combines the good cultural practices from both the minority and majority communities making the resultant culture easier to adopt by both communities. Psychologists further support that the acculturation preference for integration is healthy for psycho-social growth on the newly developed culture which also adds up to forming a global culture thus it should be encouraged. The preference of integration is further supported by Phinney, Sam, Vedder & Berry, (2006) who ascertained that the integration makes a perfect psychological adaptation which has the least acculturative stress among the minority culture. The most intriguing paradigm presented in the journal is that cultural practices of the Mapuche people are threatened by extinction because of the acculturation stress that they have been forced into (Alexander, 2003). Their change of attitude towards cultural integration has triggered researchers into focusing on the host communities which are at risk of being extinct. In such a case the focus has been shifted from analyzing the acculturation preferences of the immigrant but has been focused on studying the hosts.

Conclusion

Owing to the psychological impacts created by acculturation on both the minority and majority members in society, conducting a study on acculturation preferences becomes vital in explaining the various preferences ranging from integration, separation, assimilation and marginalization. Integration preference is the most preferred thus encouraged by many psychologists. Consequently many factors determine the social pattern taken by people in a given community among them being economic, political and social systems which are further challenged by human migration and movement patterns. In the recent past Australia, Canada and the United States have experienced an influx of immigrants due to bi-lateral migrations. Supported by other journals and articles, it becomes rife that the integration preference is the most preferred by the majority members while the minority prefers marginalization preferences as a way of preserving their cultures. Consequently children and youths have a high preference for assimilation than their parents making the whole idea of acculturation preferences dependent on the age and the hospitality of the majority members of a given society.

 

 

 

References

Alexander, V.D. (2003). The Cultural Diamond – The Production of Culture. “Sociology of the arts: exploring fine and popular forms. New York: Wiley-Blackwell, p. 162.

Brown, R., & Hewstone, M. (2005). An integrative theory of intergroup contact. Advances in Experimental Social Psychology, 37, 255–343.

Ensari, N., & Miller, N. (2002). The out-group must not be so bad after all: The effects of disclosure, typicality, and salience on intergroup bias. Journal of Personality and Social Psychology, 83, 313–329.

Gudykunst, W. & Kim, Y. (2003). Communicating with strangers: An approach to intercultural communication. (4th Ed). New York: McGraw Hill.

Hanna, H., Brown, R., & Gonzalez, R. (2009). Antecedents and consequences of acculturation preferences of non-indigenous Chileans in relation to an indigenous minority: Longitudinal survey evidence. European Journal of Social Psychology, 39, 558–575.

Lara, M., Gamboa, C., Kahramanian, M.I., Morales, L.S., & Bautista, D.E.H. (2005) Acculturation and Latino Health in the United States: A Review of the Literature and its Sociopolitical Context Annual Review of Public Health. 26. 367

Maisonneuve, C., & Testé, B. (2007). Acculturation preferences of a host community: The effects of immigrant acculturation strategies on evaluations and impression formation. International Journal of Intercultural Relations, 31, 669–688.

Matera, C., Stefanile, C., & Brown, R. (2011). The role of immigrant acculturation preferences and generational status in determining majority intergroup attitudes. Journal of Experimental Social Psychology, 47, 776–785.

Navas, M., García, M.C., Sánchez, J., Rojas, A.J., Pumares, P., & Fernandez, J.S. (2005). Relative acculturation extended model: New contributions with regard to the study of acculturation. “International Journal of Intercultural Relations” 29, 28-29

Pettigrew, T. F., & Tropp, L. (2006). A meta-analytic test of intergroup contact theory. Journal of Personality and Social Psychology, 90, 751–783.

Phinney, S., Sam, D. L., Vedder, P. & Berry, J.W. (2006). Immigrant Youth: Acculturation, Identity, and Adaptation “Applied Psychology” 55(3), 303-332

Rohmann, A., Piontkowski, U., & van Randenborgh, A. (2008). When attitudes do not fit: Discordance of acculturation attitudes as an antecedent of intergroup threat. Personality and Social Psychology Bulletin, 34, 337–352

Rudmin, F.W. (2003). Critical History of the Acculturation Psychology of Assimilation, Separation, Integration, and Marginalization, Review of General Psychology 7(1) 3

Safdar, S., Dupuis, D. R., Lewis, R. J., El-Geledi, S., & Bourhis, R. Y. (2008). Social axioms and acculturation orientations of English Canadians toward British and Arab Muslim immigrants. International Journal of Intercultural Relations, 32, 415–426.

Sam, D.L. & Berry, J.W. (2010). Acculturation : When Individuals and Groups of Different Cultural Backgrounds Meet, Perspectives on Psychological Science 5(4). 472

Simon, B., & Ruhs, D. (2008). Identity and politicization among Turkish migrants in Germany: The role of dual identification. Journal of Personality and Social Psychology, 95, 1354–1366.

Skuza, J.A. (2007). Humanizing the Understanding of Acculturation Experience with Phenomenology. “Human Studies”, 30(4) 451-463.

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