Managerial Economics and Business Strategy

Dr. David J. St. Clair Managerial Economics and Business Strategy 3551 #6 Answers – Summer 2012 1. What type of evidence did Dupont introduce in its plastic wrap trial that proved decisive in its acquittal? __ It brought in cross elasticities to show that there were many substitutes for plastic wrap. It then argued that the market had to be defined to include all substitutes. This broadened the definition of the market to the point where DuPont’s market share was small. ___ 2. What had Alcoa done that made the judge find it guilty of being a monopoly? It had a market share above 90%_. Did the judge rule that Alcoa was a â€Å"dirty† firm? _ No ___ 3. Why did the verdict in the U. S. Steel antitrust case confuse everyone? __ U. S. Steel was ruled to be â€Å"reasonable† under the courts â€Å"Rule of Reason† doctrine. This was confusing because the company had a notorious reputation for price fixing and uncompetitive practices __ 4. Bill Gates took a very aggressive approach to dealing with the Justice Department in the Microsoft case even though Microsoft had an â€Å"Alcoa Problem. † What was Microsoft’s â€Å"Alcoa Problem? ___ Microsoft had a large market share approaching the 90% threshold established in the Alcoa case ___ 5. When something is illegal â€Å"per se,† what does this mean? __ The government only has to prove that you did it; motive or intent does not matter ___ 6. What was the remedy in the Standard oil and American Tobacco cases? __ divestiture (i. e. , the companies were broken up) ____ 7. What, according to Andrew Carnegie, was destructive competition? ___ excessive and ruthless competition among big firms that eliminated profits but not competitors __ 8. When we were discussing oligopoly, we referred to the two faces of oligopoly.Which face of oligopoly was Carnegie referring to in his discussion of ‘destructive competition? ’ the non-cooperative, extremely competitive r ivalry _ 9. What does the Hart-Scott-Rodino Act require? ___ pre-merger notification and approval by the Justice Department and the FTC ____ 10. What is a tying contract (or agreement)? __ a firm refuses to seel product that you want unless you also buy one of the firm’s other products ___ 11. The Sherman Act was short and sweet. It outlawed two things. Identify both: a. ___being a monopoly ______________________ b. ___trying to become a monopoly __________________________ 2. Which antitrust act made vertical market foreclosure a violation of antitrust laws? __ the Celler-Kefauver Act __ 13. What was the reason why the European Union blocked the merger of GE and Honeywell? __ It violated the EU’s â€Å"portfolio power† doctrine __ 14. What is a â€Å"soft loan? † ___a government loan that is never going to be paid back; a disguised subsidy __. Why have many American economists likened â€Å"portfolio power† to a soft loan? ___They argue that portfo lio power is a disguised protectionist policy masquerading as an antitrust policy___ 15. What was IBM’s defense in its mainframe computer antitrust case? _ It challenged the government’s narrow â€Å"large main-frame computer† definition of the relevant market ___ 16. What was DuPont convicted of in the GM case (be specific). ______ vertical market foreclosure ____ 17. What precedent did the Pabst Brewing case set? __if the market is a local, then the relevant market must be local ____ 18. What precedent did the Staples/Office Depot case set? ___the Justice Department or the FTC can disallow a merger based on the anticipated price and competitive consequences ________________ 19. What happened to U. S. antitrust policy following the E. C. Knight case? __ as a consequence of the E.C. Knight case, antitrust laws did not apply to manufacturing and there was a wave of mergers in the manufacturing sector __ 20. In the 1890s, German courts were taking a very different approach to cartels and antitrust. What did the German court rule in the pulp cartel case? __ cartel agreements were legally enforceable contracts; cartels were legal and socially beneficial ___ 21. What was Brown Shoe accused of in the Kinney Shoe antitrust case? ____ vertical market foreclosure _____ 22. What was the remedy in the Brown Shoe/Kinney Shoe Case? ____ The merger was disallowed and the two firms were separated _______ 3. What does the firm have to do in a consent decree? _ stop the offending practices without admitting guilty _. What does the Justice Department agree to do in return? ___ drops the case _ 24. Why do most firms prefer a consent decree to a trial, even when they feel that they are innocent? __ the case is quickly resolved and there is no conviction that can be used to expose the firm to civil suits seeking triple damages __ 25. Are interlocking directorates illegal per se? Yes. Is price fixing illegal per se? Yes 26. Are tying contracts illegal per se? Y es Is price discrimination illegal per se? _ No 7. How can the Justice Department and the FCC respond to a notification of merger filed under the Hart-Scott-Rodino Act? (Hint: they have three options. ) __1) approve; 2) deny; or 3) approve with conditions __ 28. English Common law became the basis for American Common Law. What dos the Common Law say about damages for parties injured by restraint of trade? ___ injured parties are can collect triple damages ____ 29. Which type of elasticity is often important in antitrust cases? _ cross elasticity __ 30. Why did the Justice Department allege that Microsoft was using a tying agreement or contract? ___The Justice Department alleged that Microsoft was tying the MS-DOS operating system to the purchase of its browser ___ 31. Bill Gates was rather arrogant and combative in dealing with the Justice Department in the Microsoft case. He seemed unaware of Microsoft’s â€Å"Alcoa problem. † What was Microsoft’s â€Å"Alcoa problem? † _________This is a duplicate question – see above____________ 32. How did IBM’s mainframe computer antitrust suit end? ___ the Justice Department dropped the case because the court was unlikely to accept its narrow definition of the relevant market ____ 33.Why was Microsoft accused of â€Å"vertical market foreclosure? † ___ Microsoft was accused of using its operation system monopoly (MS-DOS) to foreclose browser maker from the market ___ 34. Why was Nabisco giving up on its strategy of seeking to create a cracker of biscuit monopoly? __It was unable to eliminate competition, especially the competition of capitals __ 35. Why was Nabisco so open in its 1901 annual report about discussing its efforts to monopolize the cracker (biscuit) industry? __Because of the E. C. Knight Case, there were no antitrust laws in 1901 that pertained to manufacturing firms _ 6. In its 1901 annual report, Nabisco announced that it was giving up on its efforts at cre ating a cracker or biscuit monopoly. What was the company’s new strategy going to be? ____Nabisco was going to concentrate on making better products and creating a more efficient and competitive firm ___ 37. What did Liggett accuse Brown & Williamson Tobacco of doing in its law suit? (don’t simply say â€Å"of being a monopoly† or â€Å"violating antitrust laws†) ___Liggett accused Brown & Williamson of engaging in predatory pricing by selling it cigatettes at below Brown & Williams’ AVC______ 8. Under the Areeda-Turner test, predatory pricing is defined as a firm selling its product at a price ____below its average variable cost_____ 39. Was the Areeda-Turner test upheld (validated or confirmed) by the court in the Liggett vs. Brown & Williamson’s case? ___No, the Areeda-Turner test was replaced by the â€Å"recoupment test† ___ 40. What must a plaintiff (the one who files the law suit) do (show) in order to keep a predatory pricing law suit from being dismissed (thrown out even before it goes to trial) under the â€Å"recoupment test? ____The plaintiff must show that the defendant did have a reasonable chance of raising prices in the future to make up for, (that is, to recoup) its short term losses due to the low prices ___ 41. Does the recoupment test introduced in the Liggett vs. Brown & Williamson case make predatory pricing law suits more likely, less likely, or equally likely compared to the old Areeda-Turner test? ____less likely _____ 42. The courts have held that predatory pricing cases require a showing that a firm has reduced price below its costs. What is the relevant cost for this criterion? ________average Variable cost (AVC) _________ 3. Many economists have used the concept of â€Å"barriers to entry† in their criticism of predatory pricing antitrust laws. Explain their criticism. __Predatory pricing only makes sense if the firm can raise prices after using it to attain a monopoly and if it has barriers to entry that can keep new competitors out. However, if it had such barriers in the first place, it would probably not need predatory pricing. Predatory pricing does not give the firm the required barriers to entry, unless one envisions constant predatory pricing. But constant predatory pricing is nothing more than price competition. ___ 44.During the 1930s, large American cigarette companies faced competition from small cigarette companies offering new brands at 10 cents per pack. How did they meet and deal with this competition? __They resorted to predatory pricing, i. e. , they dramatically reduced their prices (in some case to below costs) in order to drive the new competitors out of the market ___ 45. Did the response of the â€Å"Big Four† tobacco companies to the challenge from the new 10-cent brands competitors in the early 1930s work? Why or why not? _the Four Majors were unable to drive out two competitors created by the 10-cent brand episode.They h ad a 91 percent market share before the episode and only a 69 percent market share after. Two formidable competitors emerged and the Big Four became the Big Six__ 46. What was the verdict in the 10-cent brands cigarette case? _____the major cigarette companies were found guilty of violating the antitrust laws______ 47. Was predatory pricing the government’s primary allegation against the majors in the 10-cent brands cigarette price wars? If not, what was the primary complaint? _the court focused primarily on the collusion among the majors to fix prices__ 48.What was the court’s remedy in the 10-cent brands cigarette case? ___the court fined the guilty parties and restricted their ability to communicate and work together ____ 49. Why do most economists argue that antitrust laws prohibiting predatory pricing are actually anti-competitive? ____ Most economists argue that antitrust laws prohibiting predatory pricing are actually anti-competitive because any firm that lower s it's prices to compete against it's market competitors are susceptible to being charged with predatory pricing, even when no such intent probably exists.Furthermore, filing an antitrust lawsuit related to predatory pricing is often abused and a convenient way for businesses to compete with their competitors without matching their competitors price cutting especially since antitrust laws concerning predatory pricing are sometimes difficult to distinguish from predatory pricing, market competition, and competitive business practices. __ 50. Suppose there are five (5) firms in an industry with the following market shares: 15%, 20%, 2%. 45%, and 18%. What is the Herfindahl Index for this industry? _______2,978_______. According to the 1992 Horizontal Merger Guidelines, how would this industry be classified? ___It would be classified as a ‘highly concentrated’ market. _____ 51. Ceteris paribus, would a merger that raised the Herfindahl index from 1900 to 1941 be likely to trigger interest by antitrust regulators? Why or why not? ____No, because while this market would be classified as ‘highly concentrated,’ the merger does not raise the HHI by more than 50 points and will therefore not trigger the interest of regulators. ___ 52. Ceteris paribus, would a merger that raised the Herfindahl index from 750 to 985 be likely to trigger interest by antitrust regulators? Why or why not? ___No, because a market with a Herfindahl Index below 1,000 is considered to be ‘unconcentrated’ and mergers in unconcentrated markets are unlikely to be challenged by regulators. _____ 53. Tying contracts are illegal per se under American antitrust laws. However, enforcing their illegal per se status has proven to be very difficult.What is the problem here? ___While tying contracts are illegal per se under antitrust law, there seems to be no way of getting around some tying during the course of routine business, e. g. , left shoes tied to right shoes , etc. This therefore introduces the element of intent and competitive consequences; two features that are not supposed to figure into illegal per se allegations. Currently, this problem is most pronounced in the practice of ‘bundling’ in high tech markets. ____ 54.In the YouTube video on Monopoly, what did Milton Friedman think was the primary cause of longer-lasting monopolies? ____government market restrictions ___________ 55. In the YouTube video on Monopoly, what did Milton Friedman think was the very best policy for dealing with monopolies and market power? ____free trade or measures to make trade more free and open _______ 56. In the YouTube video on Monopoly, Milton Friedman never mentioned or discussed Smith’s Formula. However, based on his comments, what do think his position would have been on our 200-year old question? __Friedman would definitely argue that markets had, if government leaves them alone, sufficient competition to make Smith’s For mula society’s primary line of defense against monopoly abuse. __ 57. What happened when Coca-Cola tried to introduce its new soft drink Peppo in the late 1960s? ____Dr Pepper sued for trademark infringement and Coka Cola had to change the name of the product to ‘Mr Pibb’. _____ 58. How did the FTC end up defining the relevant market in Coca Cola’s proposed acquisition of Dr Pepper? _The FTC took a very narrow view and defined the relevant market as the ‘pepper-flavored soft drink market’ __. How did the FTC rule on the proposed acquisition? __The FTC denied the request for merger approval. __ 59. Both the FTC and Coca Cola introduced Herfindahl Indexes in support of their positions in the proposed acquisition of Dr Pepper. What was the critical point on which the proposed merger was decided? ____The definition or scope of the relevant market ____

Belgacom Case Study

Belgacom Case Question 1 a) Why did the share price of Belgacom increase following the announcement of the acquisition? b) Why did the ratings of Belgacom drop (S&P) or put on negative watch (Moody’s)? a) As Belgacom secured the purchase of the remaining 25% share of Proximus it did not own yet, the share price of the Belgian company increased by 0. 92 % the same day and 9. 8% over the following month. An announcement can lead to pre-event abnormal returns as markets react to this information to get a premium.Investors will try to assess the increase in expected earnings and dividends. The impact of this assessment will depend on how the merger is done, how the transaction is paid, the sector it concerns, etc. However, according to market efficiency theories, overreaction on stock prices tend to disappear in the long-run and the price reflects the present value of expected returns. (FAMA, 1998) That being said, several reasons may explain this jump.First, we can underline the fact that this operation enables Belgacom to collect all the benefits of Proximus. Before the purchase, 25% of the earnings of Proximus were placed in minority interests, these were payable to Vodafone. After the operation, Belgacom owns 100% of the shares and can enter all the cash of its subsidiary in its accounts. It represents an increase of the future cash flow not only for the firm but also for its current shareholders, which will be comforted to receive more in the future or that their shares represent more cash.This is due to the decision of Belgacom to finance its acquisition by debt which doesn’t give ownership rights to the bond owners. Fig. 1: Evolution of Belgacom Share Price (2005-2008) Second, Belgacom was familiar with Proximus business as Belgacom (75%) founded the company with Airtouch (25%) in 1994, creating by this way the first mobile phone operator in Belgium. b) Unlike the market, rating agencies did not welcome positively this transaction: Moodyâ€℠¢s changed its outlook to negative and Standard&Poors downgraded Belgacom rating to A from A+. Moody’s xplained that it keeps Belgacom’s rating unchanged because according its methodology designed for GRI (Government-Related Issues), there is no change in Belgacom solvability. Moody’s GRI methodology use three inputs: the rating and the outlook of Belgium, the low level of default dependence and the medium level of support from the Belgian government. While there is no change in those inputs, there should be no change in Belgacom rating. That being said, several indicators lead the agency to wonder about the ability of the Belgian company to deal with its creditors.First, Belgacom announced a bunch of outflows for the months to come: just at the same time, Belgacom decided to sell its 5,8% stake in Neuf Cegestel to SFR: the outcome of the operation was EUR 187 million plus a share buyback (maximum 200 million) and a dividend in 2006 for EUR 100 million. Futhermo re, Belgacom decision to use its current financial stability and therefore weaken its debt ratios. As for Standard&Poors, the agency decided to downgrade the rating of the Belgian firm from A+ to A.S&P said this decision lies on the fact that the Belgacom debt will rise of about EUR 2 billion, making notably increase the debt/Ebitda ratio from 0,8 to 1,9. Moreover, its business in a competitive and liberalized market, as well as the decline of fixed lines market make fear for future results of the company. However, the outlook remains stable, that can be explained by the strong position of the company on the Belgian telecom market and its huge ability to generate cash. Question 2 a) Why was the acquisition financed by a bridge loan? ) What were the alternative financing sources? a) Bridge loans are short-term financial instruments usually used to lock-in a settled price( (frequent in Real Estate Market). This practice buys time for the deal maker to sort things out and to better str ucture its financing scheme. This seems to be the main rationale for Belgacom in this case. The management wanted to lock-in the price agreed on with Vodafone and as the deal was subordinated to the Belgian Authorities approval, it was more cautious to make it happen right away.Yet there is another way to see a bridge loan as a temporary expensive loan serving the purpose of being an intermediate financing mean for the company that benefits from it (Fabozzi, 1991). Later on, this bridge loan is reimbursed with more advantageous types of loans. was in fact a syndicated loan underwritten in order to finance an acquisition. As a matter of facts, the loan was made by several lending institutions called the mandated lead arrangers i. In the case of Belgacom, the company took a bridge loan for several reasons that are detailed below.The bridge loan e. BNP Paribas, Citi, Fortis, ING and JP Morgan. For the investment banks that underwrite the syndicated loan, the main interest resides in th e fact that they gain a fee. In this specific case, the bridge loan was arranged as a revolving credit instrument type. This meant Belgacom had to pay a fee plus interest expenses and can draw-repay-redraw as many times as needed. As said before, a first valid reason would be that the cash was needed quickly (maybe) and bridge loans are arranged more quickly.In any case it is in the best interest of the company (Belgacom here) to reimburse the bridge loan as quickly as possible because it is very expensive and the interest rate generally increases with the maturity. Moreover issuing corporate bonds takes time. In fact, there are four main steps to issue a bond in the bond market. First, there is the pre-mandate phase which aims to determine the funding needs or whether it is the right time to tap the bond market. Additionally, the currency has to be determined, the market as well plus the targeted investors.After that, comes the book building process which is one of the most importa nt tasks that consists of taking the orders from the investors. Then, a range for the coupon rate has to be determined and the amounts have to be allocated to the investors. Those steps could typically take weeks. Helping companies with short term funding is thus a major need for the client. Another reason may be that it gives Belgacom time to wait for more favourable economic conditions for issuing the bonds. Depending on investor’s appetite, timing is in fact crucial in such deals.Now, from the investment bank’s perspective, there is possibly a conflict of interest as the investment bank is at the same time creditor (through the bridge loan) and the entity that prices the securities that will be used to reimburse this loan. One could argue the investment bank could lack objectivity (Glazer, 1989). However, this constitutes an additional incentive for the book runners to successfully carry the deal to its end. Additionally, four of the five banks that granted the brid ge loan became the joint book runners. To that extent, there are clearly business interests which are involved.This can be interesting for the investment bank in order to get closer to the client. Moreover, this form of short term financing is more expensive for the company because it bears higher risks. Alternatively, it means that it is more lucrative for the investment bank as well. To sum up, bridge loans seem to be a lucrative source of profits for investment banks. First, they place themselves in a comfortable position to issue bonds for the company later on. Second, they can diversify their revenues and be a good candidate for the bond issuance.As a matter of facts, four of the five banks providing the bridge loan took care of bond issuance. b) Alternatives to bridge loans were traditionally letters of comfort written by the investment bank stating that the bank was ‘highly confident’ that the additional financing needed by the company could be obtained. This imp lies no bridge funding at all. Hence the alternative would be to wait for the bonds to be issued. The risk here however would consist of being too late for acquiring the target. Another alternative would be to use your own capital to fund the acquisition in the short run.This depends, of course, on the ability of Belgacom to generate such a large amount of cash. Yet another option would have been to raise more capital by issuing shares with the agreement of its existing shareholders. However, this option could have been detrimental to existing shareholders: the Belgian state which had a major stake in Belgacom with 50. 1% of the shares. Here is a summary of all the plausible alternatives: * Pay with retained cash: Belgacom could put 2Bnâ‚ ¬ on the table for Vodafone’s stake (assuming that the amount was available at the time).Although, this is known as the worst case scenario for current shareholders. Putting the cash in an acquisition would also have constrained Belgacom to lower (even cancel) its expansion investments. * Go straight to the Market: Belgacom could issue the bonds without taking the bridge loan but since the company had no prior bonds outstanding in the secondary market, the pricing would have been necessary anyway and it takes time and money to process it. The risk in that case is the agreement with Vodafone; other players could profit from the info and buy the stake in order to sell it back to Belgacom at a premium.Question 3 Assuming the 5-year swap rate was 3. 922% and the 10-year swap rate was 3. 977% at the time of pricing the deal (primary market), could you calculate: a) The yield for investors The yield is composed of the risk-free interest rate and the risk premium. The risk-free rate is usually defined as the rate of a government bond or the interbank rates (ex: Euribor) for the same maturity. However, the swap rate is used for maturities beyond 12 months. Here, the explanatory statement assumes that the 5-year and the 10-y ear swap rate were respectively 3,922% and 3,977%.The credit spread or risk premium depends on the maturity and the quality of the issuer. After comparing the coupon offered by companies with the same risk profile from the telecom peer group in the secondary market, the explanatory note explains banks’ position which suggested to issue the 5Y bond and the 10 Y bond with a spread guidance of respectively 30-35 bp and 60-65 bp. Bonds 5 and 10 years| Years to| 2006| | | Maturity| 5 years| 10 years| | | Swap Rate (rf)| 3,92%| 3,98%| | | | Min| Max| Min| Max| | | Risk Premium| 0,30%| 0,35%| 0,60%| 0,65%| | |Face Value| â‚ ¬ -100,00| â‚ ¬ -100,00| â‚ ¬ -100,00| â‚ ¬ -100,00| | | Yield to Maturity| 4,222%| 4,272%| 4,577%| 4,627%| | | Coupon Rate| 4,125%| 4,250%| 4,500%| 4,625%| | | Price â‚ ¬| â‚ ¬ 99,57| â‚ ¬ 99,90| â‚ ¬ 99,39| â‚ ¬ 99,98| | | Price %| 99,57%| 99,90%| 99,39%| 99,98%| | | Fees| 0,15%| 0,15%| 0,25%| 0,25%| | | Proceeds| 99,42%| 99,75%| 99,1 4%| 99,73%| | | Cost %| 4,256%| 4,306%| 4,609%| 4,659%| | | Table 1: Results for the Bond Issuance Thus, the yield for investors should be the sum of the risk-free and the risk premium rate: * Min. 4,222% and max. 4,272% for the 5-year bond * Min. 4,577% and max. 4,627% for the 10-year bond ) The coupon rate The coupon rate is the amount of interest payable on the bond. It is important to keep in mind that the market practices want the yield to vary by steps of 0,125%. Therefore, according to table 1, the yield for the investor varies between 4,125 and 4,250 for a 5-year maturity bond and 4,5% and 4,625% for a 10-year maturity bond. c) The issue price The issue price is the price at which investors buy the bonds in the primary market. The bond issue price is the present value of the bond’s cash flow. To obtain this price, we have to use the coupon rate, the face value and the yield for investor as described in this formula:Issue Price = Coupon 1(1+y)+ Coupon 2(1+y)? +†¦ +Coupon n1+yn+ Face value1+yn At issuance, the subscriber will pay: * Min. 99,57%, Max 99,90% for a maturity of 5-year * Min. 99,39%, Max 99,98% for a maturity of 10-year d) The cost for Belgacom The cost to maturity for the issuer y is defined as: Issue Price – Fees of the bookrunners = Coupon 1(1+y)+ Coupon 2(1+y)? +†¦ +Coupon n1+yn+ Face value1+yn The rate y solving (cost to maturity) this equation is: * Min. 4,256%, Max 4,306% for a maturity of 5-year * Min. 4,609%, Max 4,659% for a maturity of 10-year e) Cash Flows Here are the cash flows for the issuer. For a maturity of 5 years: At inception (time 0), the issuer receives (99,57%-0,15%)=99,42% multiplied by the total face value. Every year for 5 years, the issuer pays the coupons of 4,125% * face value of the bonds At maturity, the issuer has to repay the whole face value plus the last coupon. | | | | | | | | | | | | Cash Flows as % of Face Value| 5y-Bond| 0| 1| 2| 3| 4| 5| | | | | | Bottom| 99,42| -4,125| -4,125| -4,125| -4,125| -104,125| | | | | | Up| 99,75| -4,25| -4,25| -4,25| -4,25| -104,25| | | | | | | | | | | | | | | | | | 10y-Bond| 0| 1| 2| 3| 4| 5| 6| 7| 8| 9| 10|Bottom| 99,14| -4,50| -4,50| -4,50| -4,50| -4,50| -4,50| -4,50| -4,50| -4,50| -104,50| Up| 99,73| -4,63| -4,63| -4,63| -4,63| -4,63| -4,63| -4,63| -4,63| -4,63| -104,63| | | | | | | | | | | | | Question 4 Consider an outstanding corporate bond in the secondary market (issued a few months ago). All else being equal, the market suddenly perceives a more important credit risk associated with the considered issuer. What impact should it have on: a) The credit spread The credit risk is the risk that the issuer may default and not pay back the full amount he owes to bondholders (the total face value of the bonds).The credit spread translates the uncertainty about potential future stock price movements†. (Berk, 2011) If the market suddenly perceives more important credit risk associated with the issuer, the credit spread will widen as the market is perceived has being relatively safer. The payoff associated to extra credit risk is a higher yield. Therefore, the credit spread represents a bonus for investors when supporting extra risks. Fig 2: Yield curves Source: CFA b) The yield There are two components in the yield: the risk free rate and the credit spread. All else being equal, if the credit spread widens, the yield increases. ) The price Investors want to pay less for a risky bond having the same pay-offs as a risk-free bond. By taking more risk, the final amount the investor expects to receive may be less than what he will get as there is a credit default risk. (Berk et al. , 2011) The variable on which the market has a direct influence on in order to adjust for a higher yield is the market price. Due to the negative relation between the yield and the price and if the coupon payments and the principal repayment remain unchanged, the price must decrease in order to translate the surge in the yield.T his is particularly relevant when the issuer is the target of a leveraged buyout, which, in most cases, is leveraged by the issuance of new bonds. The increased debt used in order to make such financial actions often decrease the totality of the bonds of the issuer to a status of  «Ã‚  junk bonds  Ã‚ ». Question 5 How would you assess Belgacom’s position with regard to the qualitative factors enumerated to assess the pricing ? * Issue premia for recent transaction First of all, this is the first bond offering issued by Belgacom.Therefore, it cannot be referred to a previous premium offered in its own recent transactions. Therefore, the reference will be the telecom peer group having the same risk profile. * After market performance of recently launched deals The issue premia have widened for two main reasons. First, a trend towards more acquisition in the Telecom sector since 2005. Second, the Telecom sector suffers from the fact its services are more and more commoditize d which in turn may hurt the profitability of a Telecom company. At the time it was expected the bond could be split in three types.A floating rate note and two fixed rate notes. It was expected the 3-year FRN had a spread of 15bp to 20bp whereas the fixed 5-year note would have a 30bp to 35bp spread. Finally the 10-year note would have had a spread of 60bp to 65bp. With regards to recent transactions, Deutsche Telekom was offered a spread of 20bp for a 3-year floating note. 15-20bp is thus potentially better for Belgacom. As far as the fixed notes are concerned, Belgacom seems to benefit for a slightly better spread for 10-year notes but not for the 5-year ones as the one of Deutsche Telekom was only of 17bp in April 2006. Date| Swap 5-y| Swap 10-y| Coupon| Spread(bp)| Currency| Amount| Deutsche T| April 2006| 3. 83%| | 4%| 17| EUR| 750m| Deutsche T| May 2006| | 4. 13%| 4. 75%| 62| EUR| 500m| Telefonica| Feb 2006| 3. 42%| | 3. 75%| 33| EUR| 2250m| Telefonica| Feb 2006| | 3. 68%| 4. 37%| 69| EUR| 1750m| Vodafone| Jun 2006| | 4. 07%| 4. 75%| 68| EUR| 300m| * Are investors liquid? (hedge funds) However, according to the case, investor’s appetite remained high at that time. In fact, bond issuances remained low because corporates generated increasingly more cash flows and made use of cheaper ways of funding. Market sentiment? (world, Belgium, politics) There has been a lot of deleveraging followed by acquisitions in the past years. Moody’s says the economy of Belgium is only weakly correlated with Belgacom’s credit quality. However, for companies that are partly owned by the state, the credit quality of the Sovereign may play a greater role. At that time however, there was no political complications in Belgium yet. In 2006, the subprime crisis had not begun yet either. Hence one could argue the political setting was relatively clear.Moreover, there were strong liberalization policies pushed by the EC and investors were afraid that the Belgian state would disinvest in Belgacom after the following elections. The Belgian state had already to divest, keeping 50,1% of the share. Therefore, investors wanted an insurance against a change of control in case the Belgian State sold his participations but also to cover the risk against an LBO. As Belgacom could not introduce a step-up language, it could have had an impact on the credit spread by increasing it. * Credit Spread volatility Credit spread rose significantly more for telecom companies in 2005-2006.This was due to the fact the telecom companies ventured more in acquisition activities during that period. 5-year and 10-year credit spread for A-rated telecom companies respectively rose 10bp and 20bp during that period. * Saturation effect in investors portfolio? Are investors sick of telecom bond issuances? In principle, investors were not sick of telecom bond issuances as the one of Belgacom would add diversification to their portfolio. What is more, Belgacom was seen as a safe and relatively liquid company as they were previously weakly leveraged. * Amount raised in the pastAs far as Belgacom is concerned, the company has never issued any bond. Hence this was a premiere for the company. If we look at the issue amount of comparable transactions in the peer group of the same year, telecom issuers have issued in 2006 from three to 5 times with an issue amount from 500 million. For example, Telefonica issued in 2006 a total of 11. 750 million â‚ ¬ * Credit quality of issuer and peers In terms of credit quality, Belgacom is better than most competitors. This is mostly due to the fact that Belgacom was weakly leveraged before the issuance.For instance, EBITDA/Interest expenses of France Telecom, Telecom Italia and KPN was between 2. 4x and 7. 2% while Belgacom’s was 93x. However, Belgacom wasn’t the best according to credit rating agencies. The considered peer group is made of France Telecom, Telecom Italia, KPN and Belgacom. Moreover, Moo dy’s seems to give to Belgacom a better rating that Fitch. Therefore, we may suppose that Belgacom’s cost of issuance may be slightly lower than those of his peer group. Question 6 What is a change of control put provision? How would it have protected investors?Why did some investors think the step-up language would not be useful? Looking at the step-up language, what would be the coupon rate if the rating of Belgacom was downgraded a) to BBB- (S&P)/Ba1 (Moody's)? b) to BB+ (S;P)/Ba1 (Moody's)? A change of control put provision is an option given to the bondholder to get its bond repaid before maturity at par or above, in the event of change of control followed by a rating downgrade (e. g. after an LBO). Companies may be reluctant to issue bonds including this clause, because it can place more constraints on their finances as investors have the power to control repayments.Besides, it protects investors so they can have the opportunity to change their investment decisio n strategy if the issuer would happen to change its ownership. In case of a LBO, for example, the ownership of the company is transferred by using debt relying on the future cash flows of the company. According to (Rosenbaum et al. , 2007), â€Å"a target only represents an attractive LBO opportunity if it can be purchased at a price and utilizing a financing structure that provides sufficient returns with a viable exit strategy. In such a case, a former bondholder would see the credit risk he faces considerably increase, given the amount of additional debt supported by the company. This clause should then enable a bond investor to exit his position without bearing that increased risk because firstly, the change of control was likely, since the Belgian government was seeking to sell its stake in Belgacom and secondly because some argued that the inclusion of a step-up language taking the form of a +50bp in interest payment per downgrade below investment grade would be far from comp ensating the additional risk they would be bearing.In the case of Belgacom, there were some concerns about this possible withdrawal of Belgian state from its majority stake, intensified by the fact that the company could also be the target of a potential LBO operation as explained above. In order to reassure prospective investors and consequently lower interest rates for long term bonds (10 years), it has been considered to include such a clause in the deal. Therefore, Belgacom finally decided to add a step-up language despite the concerns emitted by some investors.The main benefit of the step-up language is that investors will usually get the initial coupon above the market and will also know what is to expect from their bond(s) over a longer-term period. However, bonds including a step-up language present the disadvantage of being callable by the issuer in order to issue it at lower rate to reduce their cost of borrowing which is the reason why some investors were reluctant concer ning the step-up. In the case of Belgacom, a downgrade in the rating would have had the following impact on the coupon rate: ) If the rating of Belgacom would have been downgraded to BBB- (S&P) / Ba1 (Moody's) and if the lowest rating is taken into account which is Ba1 (one grade below investment grade), the interest paid (coupon rate) would have increased by +50bp. b) In this scenario, both rating agencies consider a one notch downgrade below investment grade leading therefore to a +50bp increase in the interest rate paid. Bibliography BERK J. , DeMARZO P. (2011) â€Å"Corporate Finance – Global edition† Second edition, Pearson edition, pp. 001 FABOZZI F. (1991) â€Å"The handbook of Fixed Income Securities†, Mc Graw-Hill edition, Third edition, p. 224 FAMA E. (1998) â€Å"Market efficiency, long-term returns, and behavioral finance† Journal of Financial Economics, 49, pp. 283-306 GLAZER A. (1989) â€Å"Acquisition bridge financing by investment banks à ¢â‚¬â€œ bridge financing, as source of revenue for investment bankers, poses risk and conflict of interest† Business Horizons magazine, Sep-Oc 1989, Website: http://findarticles. om/p/articles/mi_m1038/is_n5_v32/ai_8120675/ (Seen in April 2012) ROSENBAUM J. , PEARL J. (2009)  «Ã‚  Investment Banking  : Valuation, Leveraged Buyouts and Mergers ; Acquisitions  Ã‚ » Wiley finance Vodafone Non Official Website  : www. vodafonews. com/belgique. html (Seen in April 2012) ——————————————– [ 1 ]. www. vodafonews. com/belgique. html [ 2 ]. Exhibit 13

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DB 4-2 Essay Example | Topics and Well Written Essays - 500 words

DB 4-2 - Essay Example There are large national firms as well as small firms working in this sector. Among these small and big firms H&R Block is the largest firm filing over 21 million tax returns in the year of 2008. Next to them is Jackson-Hewitt filing approximately 3 million returns. The factor which is unavoidably making this industry lucrative is that practically each and every working household of U.S. has to file annual tax return. This helps to create a stable stream of revenue for these tax preparing firms. This industry is almost free from the effect of economic environment and it is a low capital investment business. Another factor which catalyzed the performance of the company named H&R Block was the Refund Anticipation Loans (RALs). These short-term loans enabled the tax-payers to get immediate cash which they used to repay during the time of tax refund. The interest calculated on the RAL is very steep, the annual interest rate ranges from 50-300% (Has The Tax Preparation Industry Lost its L uster?, 2010). A fair part of the interest paid by the tax-payers used to be earnings of the company. It indirectly enabled the tax preparing firms to earn huge revenues. These two are the prime factors which helped these two companies to thrive. In U.S.

Disaster Management System Essay Example | Topics and Well Written Essays - 1000 words

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Homework Essay Example | Topics and Well Written Essays - 250 words - 38

Homework - Essay Example This discusses how inventory as a whole may just be given representation by average inventory and thus solve the related issues which crop up from time to time. 11- Suppose an operation has excess capacity (i.e., it is not a bottleneck); however the set up time between batches is not insignificant. Should process batches be large or small? What determines the size of a process batch? Process batches should neither be large nor small. However their size should be equal to the size of the operation so that neither excess capacity is an issue nor minimal levels stand as a concern. The need is to know how excess capacity can be kept at a safe distance and so is the case with minimal levels where set up times focus more on how time between batches can be increased or decreased as per the need. Therefore, the set up time between batches should be considered in essence to have a better know-how of how things shall shape up within the batch routines. It will take care of all the concerns that either excess capacity or under capacity may have at a given time and thus protect the batches as

Diffrenece between living in usa and uae Essay Example | Topics and Well Written Essays - 500 words

Diffrenece between living in usa and uae - Essay Example Need I say more? The UAE like the United States is a country made up of states that are largely independent. The seven states of the United Arab Emirates are: Ras al Khaimah, Abu Dhabi, Ajman, Umm al Qaiwain, Dubai, Fujairah and Sharjah. However, unlike the US, the UAE is governed by a Supreme Council of Rulers made up of the seven emirs, who appoint the prime minister and the cabinet. I know this is not the democracy that the US purports to be practicing but I can assure you that of all the countries in the Gulf, the UAE is the most liberal. The UAE government promotes moderate Islam and permits all other religions. However, I believe that freedom and democracy like everything else needs to be moderated and I am of the opinion that this concept is deeply lacking within the American society. In America I could find people outside a shopping mall cursing the president at the top of their voices. You won’t see that in the UAE. Whichever way you view it, I dont think this is a good thing. In UAE a culture of respect is cultivated for the blue-bloods and other figures of authority. That is the proper thing to do. The UAE has a free modern health care system and education, a booming economy and political stability in the midst of an unstable region. It does not cost its citizens an arm and a leg to obtain medical care as is the case within the US healthcare system. This could probably explain why life expectancy has rapidly caught up with and will soon surpass that for Americans. 99 percent of UAE nationals work in the state sector because of its attractive benefits while in the US the civil service is considered the least attractive employer. Furthermore, if getting a job in Dubai is accompanied by a tax free salary. Yes, you are not going to drown in taxes like in the US plus all shop goods can be bought at tax free prices. Job opportunities are diverse and plentiful. In comparison to America, the

Physical Fitness Test Essay Example for Free

Physical Fitness Test Essay Research Strategy and Design The researchers will be using the descriptive strategy to study the facts derived from the research. The researchers will be using the descriptive strategy in order to ascertain prevailing conditions and to give qualitative and quantitative description. This strategy is intended to answer questions about the current state of the problem the researchers are studying and the individuals involve. The researchers will also be describing each factor that contributes to physical deficiency of cadets. The researcher’s concern is not the relationship between these factors and the cadets but of the description and elaboration of these factors. On the other hand, the researchers will be using the survey research design to give a qualitative and quantitative description of the problem. The survey research design will be a fact finding study with accurate and adequate interpretation, (Calderon and Gonzales, 2007). This would help the researchers to gather data needed in the study in order to have a precise data for the researcher’s analysis. This will also provide a clear and accurate picture of the individual being studied. Population and Locale of the Study The total population of the study will be cadets of the Cadet Corps Armed Forces of the Philippines (CCAFP) composed of firstclass, secondclass, thirdclass and fourthclass cadets. The place of the study will be at the Cadet Corps Armed Forces of the Philippines, Philippine Military Academy, Fort del Pilar, Baguio City. The researchers will use the stratified random sampling in order to determine the number of respondents since the population totaled to 875 cadets. This method will yield the manageable sample that will be studied and be taken respondents. The researchers will use this sampling technique because the participants are randomly selected from the different classes in the CCAFP. The researchers will be using the Slovin’s Formula as statistical tool in getting the total sample of the respondents. Slovin’s Formula: n= ( N / (1 + Ne? ) ) in which: n= the size of the sample N= the size of the population e= the margin of error Computation: n= ( N / (1 + Ne? ) ) ( 875 / 1 + (875 ? 0. 10? ) ) = 89. 74 or 90 cadets There would be a total of 90 cadets that are needed to accomplish the study. The researchers will get 23 respondents for the firstclass and seconclass cadets and 22 respondents for the thirdclass and fourthclass cadets. Statistical Treatment of Data Statistical treatment gives meaning and interpretation to data (Calderon and Gonzales, 2007). Without it, the data gathered cannot be associated to give answers to the pr oblems posed in the research study. In order to arrive at precise analysis and interpretation of the results, the proponents will be utilizing different tools in treating the data. In the study, the researchers will be making use of the weighted mean to determine the extent of the factors that contribute to the deficiency of the cadets in Physical Fitness Test. In the second part of the questionnaire and 1st and 2nd specific statement of the problem, the weighted mean will be calculated using the following formula: ?fx X = ______ ?f Where: X = weighted arithmetic mean ?fx = sum of all products of f and x; where f is the frequency and x is the weight of each option ? f = sum of all subjects The obtained answer will be rounded off to the nearest whole number and whatever value obtained corresponds to the characteristic given by the scale. The profile of the respondents will be treated using percentage distribution. The researchers will then be able to assess the respondents or the population in general. In order to find a ignificant difference in the responses from the different age, class, Body Mass Index (BMI) and sex, the Analysis of Variance (ANOVA) is employed. This statistical tool will test the hypothesis that there is a significant difference in the: 1. Responses of the cadets belonging to an age bracket. 2. Responses of the cadets belonging to different class. 3. Responses of the cadets having different Body Mass Index (BMI). 4. Responses of the cadets having different sex. The formula for the Analysis of Variance will be given by: F = MS MSe Where : MS = Mean square MSe = Mean square error

Trash in My Life Essay Example for Free

Trash in My Life Essay Every person is guilty of contributing to the local landfill and I am no exception to this. As all people are responsible for deadline with wastes and creating such, I often find myself a part of it as most of my trash has to do with paper in some form. Every time I go to the supermarket I return home with plastic and paper bags and boxes and I noticed that practically everything I purchase has with it some paper waste. As an example, while enjoying my milk, I tend to buy them in boxes and when these are empty, they somehow find their way to the trash bin and would become another waste added to the tons there is that can be found on the big trash container that will be collected. The community garbage collectors would soon come and take this to the local landfill to join the other trash disposed on different days. While thinking about it, I see myself with no choice but to throw the waste into the trash containers because there is no other way to dispose it especially if it is not recyclable. I have thought about trash and recycling several times. When I purchase toothpaste, for example, it comes in a little box and the paste is contained in a plastic tube. The same applies to many other things which are placed in plastic packages and would also be placed in plastic bags to contain everything else I shopped for. To remedy this, the best thing I can do is to take my own plastic or paper bag so I will not be given another. However, we cannot do this for everything. A good definition of waste is that which is an â€Å"unwanted or undesired material. † I think about the â€Å"unwanted† part when most of the trash that we produce can be used for other purposes. Some components of waste can be recycled such as plastic bottles, metals, glass or paper. If the materials cannot be used for other purposes, then it is this time where they can be considered as waste, which increases the amount of things that have to be taken to the local landfill until it is full and another has to be created. Trash is a major form of environmental pollutant with many types taking hundreds of years to properly decompose when thrown away. The quantity of which is constantly increasing and last year, it is estimated that America generated 390 million tons of trash. With this amount of trash sent in everyday to the landfill, it will be of no surprise that it would soon be filled and this has to be melted down with chemicals and monitoring of the same is a must. To date, there are about 2,216 land fills that are in operation in the US and around 100 landfills across the country closed last year because they were full. Within 50 years, landfills that exist today will be filled (Chang). The idea of recycling came into being when laws were passed that prevented people from burning trash to protect the environment. Attention was given to the fact that many things could be reused and will result to a reduction of the amount of trash produced. At the same time, the materials from the item can be reused to save resources at the same time. A major problem that can be encountered in such is whether the material reused would be cheaper or whether unused materials are cheaper. Goldofttas, in â€Å"Recycling,† stated that most people recycle only about 20 percent of their total waste. Due to the low rate of recycling, laws were passed that all towns with 4,000 or more people had to offer curbside collection of recyclables (Goldofttas). The author also found that in New Jersey, only an estimate of 15 percent was recycled even though the people were encouraged to find ways to recycle 50 percent of the trash (Goldoftas). Some things that can be recycled are being thrown away by people. These things prove to be more costly such as the plastic, glass and aluminum containers which can be recycled if the cost is not higher as compared to the plastic bottle. I believe people put a lot of things in the trash that could be recycled (Monk). I am just as guilty as a lot people, rarely thinking about how trash could be recycled. I enjoy the activity of reading through the news everyday as soon as I see my newspaper delivered to my door. Despite the fact that I could easily have access to the same news through the television, I still prefer to have the news paper inside my house. After reading it, I have to send it to the trash bin and I sometimes forget the act of recycling and I regret not doing so because I could have saved a lot of trees. Being more conscientious of this, I no longer throw paper in the trash along with the garbage, but will take the time to have a special trash can for paper so that it can be recycled. No recyclable materials are allowed in the trash for if it is placed in the trash it will not be picked out to be recycled. It seems that those who pick up the trash each week assume that people are aware of the importance of recycling. Added to this is the fact that most of the trash cans are picked up by trucks, without the collectors knowing what was in them. Toronto was given by Michigan the chance to dump their trash into the land fill located at Carleton Farms, which is a 40-minute drive in the south of Detroit. This is near Flat Rock and the two villages, Waltz and Willow. Supposedly, this is a short-time deal but after six years, the trash is continuously dumped to United States. It is nowhere near end as at the very least 85 18-wheelers filled with 30 tons of refuse, and another 15 trucks filled with dehydrated sewage continue to dump their trash. On days where it is hot, the trucks coming down the road can be smelled and people are affected by the smell (Preville). This is an example of the country’s needs for disposing trash with the space becoming smaller and smaller. There is a need to find ways for people to increasingly engage in recycling. Each city should provide increased literature regarding waste from time to time as much needs to be known about it. The information can be given to the public through the newspapers, television ads at certain times. This is most important around those times when people give gifts that are wrapped in paper, put in boxes, anything creating waste, but which is a waste that can be used again and again. More should be done by the local governments to ensure that those living in the city can help deal with trash as local landfills get filled within a very short time. It is believed that much of the trash being put in the local landfill today could have been put in a recycled bin to be used again. WORKS CITED Chang, Mona. â€Å"What a Dump. † Science World, 57. 13, April 9, 2001, p. 14. Goldoftas, Barbara. â€Å"Recycling. † Technology Review, Nov-Dec, 1987, p. 28. HotFact. â€Å"Facts about Trash and Garbage. † 8 March 2006. Hotfact. 8 March 2008 [www. hotfact. com/facts-about-trash-and-garbage. html]. Monk, Dan. â€Å"Recycling. †  ¬Cincinnati Business Courier. 11. n3, May 30, 1994, p 28. Noyes, Katherine. â€Å"Clean-up Your Trash. † Charity Guide. 8 March 2008 [http://www. charityguide. org/volunteer/fifteen/trash. htm] Parrish Linda. â€Å"Trash and Garbage Collection Regulations. † 8 March 2008 [http://www. fennimore. com//trash. htm]. Preville, Philip. â€Å"Dumps. † Toronto Life 40. 8, August 2006, p. 27. â€Å"Trash Can Depot, Your Source of Trash Cans. † TrashCanDepot. com, Janisan. 8 March 2008 [http://www. trashcandepot. com].

The Effects Of Music Videos On Children Young People Essay

The Effects Of Music Videos On Children Young People Essay Music wakes up in our minds in the morning to the point of making us want to dance and probably soothing us when we have sand feelings. From our childhood through teenage to adulthood, music becomes our integral part in our whole life. At teenage, music helps define the characteristics of an individual. Pediatricians have tried to specialize in adolescent medicine and also consider the power of music and how it affects their identity. The impact on the individuals cultural and social boundaries is highly attributed to the long average hours of listening to music. Despite the fact that there is extensive variety of genres of music, adults and children differ on how they select the content to listen to. With the ability to discern what is right and what is wrong, adults may not be highly affected by the current behavior or social ills. Children on the other hand are much prone to the attractive violent category of music; the music contains plots that draw adolescents and other minority. During the development stages in adolescent, children try to discover their own Hero and role models. This means that the environment in which these children spend and grow will give them the character they want as own hero. At this time, the most inspiring issue to the child is to get what she or he wants. Assuming that the child has personal problems o challenges that he or she wants to defeat, it would be easier to prefer violent characters on TV and then adopt their way of doing things. Most of the hip hop music for instance contains violent engagements, use of drugs, sexual situations as well as sexual violence. The child would then develop with the notion that he or she must be violent or arrogant to survive in life. Heavy metal music has extreme alienating effects on developing children which includes psychiatric disorders, substance abuse, sex-role stereotyping and suicide risk. If a child displays violent acts against other children, the parent or the teacher has to pay close attention the music being listened to by children (Kathy John). Most music videos may show half naked women which affect the mental health of a child. Due to the societal behavioral classification, this mode of dressing is not acceptable in public. Therefore children experience severe mental strain in deciding what to accept as a norm or evil. Depending on the exposure the child experiences, the child can develop in favor of the environment. A child can grow in a calm environment which may promote the wellbeing of the child. Calm videos can help the child admire to have the future he or she sees on the TV or such media. These groups of children prefer to stay in peaceful environment and mostly tend to be obedient and accepted in the society. On the other hand violent videos tend to portray that the world is much violent than the way it is. This makes children believe that their home is the only exemption that is safe. Children get deceived that their families must align with the society. Children do not have great exposure to the outer society due to their parental care. This leaves the children to understand the community to be home and TV or digital media. This means that if the parents do not stay at home for long hours, the child may end up adopting the media culture other than the home culture. The child advances in being violent and aggressive through the adolescent to early adulthood. The cognitive scripts developed by children are developed through imitating media heroes. Most of these are adopted from violent music videos and shows. As teenagers and children watch these violent acts, they are able to internalize these scripts and become effective in influencing the life of the individual (Mhhe.com). Fashion is one of the areas that teenagers and children want to feel like they rule. They always want to outdo others, either among themselves or when alone. Celebrities adopt specific fashion for different tracks and videos; this leaves the child in a much vulnerable and delicate situation of selecting the style they want. These fashion problems may become an issue to the family since they may not be acceptable to the parents and the general public. The tense can lead to family problems where parents engage in physical confrontation with the child. Children on the other hand are not in a position to argue with the situation in which case they may be drawn away from their family. Areas in which fashion affects girl child includes scanty dressing, improper make up usage and use of drugs to change their body contour to look attractive. Boys may not experience extensive effects since the society does not set what is morally incorrect for the boy child. The problem however may be pronoun ced in a Christian family setting. This means that children can negatively be affected by such fashion (Media Awareness Network). The other problem area that music videos affect children during development is the misuse and use of alcohol in children. Video show explicit situations where young people are using alcohol and drugs. The child thinks that such use of drugs and alcohol would make the known and respected in the society. Since the video may not be only one that show such behaviors, the child tend to think that use of drugs or alcohol does not have any consequences after all. Although they may see warning signs on billboards highlighting the negative effects of using drugs and alcohol in young age, they do not get convinced as they get while watching a video. Such a child faces the wrath of using such drugs and alcohol to a point of addiction. The problem with such addiction is that they would require the individual to get medical attention and rehabilitation to recover and have a normal life again. Before the child or a parent discovers this problem, the child would have wasted a lot of precious time t hat could be used to develop talents and discover his or her mission in life. As earlier said, children may not be in a position to determine their role model with a conscious mind; the prominent environment chooses for them (Media Awareness Network). Language is the other aspect of a child that is affected by these videos. A child would always want to develop his or her commanding ability especially among peers or to use when asking something from the parent. The process of developing such that he or she can command respect naturally can get interfered with through audio and visual media. When the child sees someone on video eliciting vulgar words to others and gets what he needs done, and then the child will find it easier and efficient. The fact that such language is common in hard music which happens to be wide spread, the child assumes that such language is allowed in the society. The child ends up adopting the vulgar language for use in the community. Such children get discriminated in a society that values respectful individuals (Media Awareness Network). Fear is the other effect the music videos can have on the children. Children always want to feel safe and secure; it may not be the case when they discover that the world is not as they take it. Guns and deaths seem exaggerated on videos such that the child feels that anyone can be killed anytime and the criminal goes scot-free. The child may develop fear that this may happen to him or her or even to one of the family members. This can result to negative development of such children. With advancement in video production technology, video animation has become much easier. Some videos contain pictures showing situations where human being are being traumatized by unknown creatures, such video can be a fear factor to a child who has not developed enough to understand that such images are human creations and fiction. Such videos that scare children can trigger suicidal or homicidal feelings in a child. Music videos show explicit motion pictures that promote sex in the society. It is clear that such pictures would be of much interest to children who have not yet tried to indulge in sex itself. They act as the base upon which they learn how sex takes place. The sexual consciousness of a child may be aroused through such videos. Children can then try among themselves what they observed happen. In the process of trying, careless adults may become attracted to such minors. This opens to the child many challenges in life including sexually transmitted infections or even AIDS. Such sexual experiences are hard for children to contain and control, making them much vulnerable to rapists and child sex (Aubrey Jennifer). In conclusion, music videos have highly affected the structure of our society due to the effectiveness audio visual media. The power of such media has numerous advantages that have benefited the society, but this does not happen without a variety of back draws. Through the same visual technology, our society has degraded to a point of snatching childrens mind; children cannot live any more without videos. Media has become much accessible to children and teens through internet. It is however the responsibility of the guardian to create conducive environment for the child to grow. This can be achieved through use of internet filter tools to lockout inappropriate media from streaming. The parent can also subscribe for family programs that have their content checked for general audience. It might be hard or the parent to control what the child watches when alone therefore, it is also the responsibility of the parent to advise his or her children on what is appropriate and what is not. Work cited Aubrey Jennifer. The impact of sexually objectifying media exposure on negative body motions and sexual self perceptions investigating the mediating role of body self consciousness 2007. May 3, 2010 Kathy Dix John Harris. Violence in Music May 3, 2010 Media Awareness Network. Inappropriate content in music negative effects May 3, 2010 Mhhe.com Does media violence promote violent behavior in young people? July 2001. May 3, 2010 http://www.mhhe.com/socscience/english/allwrite3/seyler/ssite/seyler/ se04/promote.pdf> Murray Jeannette. The Negative Effect of Music Videos, July 29, 2006. May 3, 2010

Soccer :: Art

Soccer My favorite recreational activity is soccer. I play soccer a lot and have been playing for five or six seasons. in a game not long ago I made a hat trick , or three goals in one game. We placed second in our league this year. Their are lots of rules in soccer and they are all very important. If you don’t follow them you will pay the consequences. I’ll tell you about them in this paper. Probably the most important rule is that you can’t touch the ball with your hands. If you do you will be penalized by the other team getting an indirect kick or a direct kick. The only time it will be a direct kick because of a hand ball will be when the hand ball is in the goalie box. Another rule of soccer is that you can’t hit the other players or curse at them. If you do hit another player you will either get a yellow card or a red card depending on the severeness of the hit and if was an accident or not. A yellow card is a caution and a red card puts you out of the game. Soccer is played al over the country and all over the world. It is a sport that is in the summer Olympics. The games will be held in Atlanta this year and teams from all over the world will be playing there. Hopefully we will get tickets to one of the games because I really want to see one. Soccer is a very fun sport and is very good for me. I love it and will always play it. You should try it you have not already tried it. Bicycling Riding my bike is my favorite recreational activity. I have a haro race group 1zI. I ride every day and often ride to school. Their are many tipes of bikes for sale these days. My freinds all ride too. Sometimes we go all over town just for fun. There are many kinds of tricks you can do on bikes. Some of them are very difficult and others are very hard and take a while to learn. I can only do a few simple ones. One of the tricks is called an indo. This one I can do and quite well. It’s really pretty simple all you have to do is get going pretty slow and hit the front brakes.

The Biblical Flood of Genesis Based Upon the Flood of the Epic of Gilga

Biblical  Flood Based Upon the Flood of Gilgamesh      Ã‚  Ã‚   In the middle of the nineteenth century, archaeologists unearthed twelve clay tablets. Around the turn of the twentieth century, archaeologists finally managed to decipher the tablets written in Akkadian, the language of ancient royalty and diplomacy. The tablets tell of the story of Gilgamesh. (1) The eleventh tablet tells that Gilgamesh, in his quest for immortality set out on a long journey to look for his ancestor, Utnapishtim. Utnapishtim was already bestowed with eternal life by the gods. Upon reaching the island of Utnapishtim's abode, Gilgamesh was told a story by his ancestor of a great flood that once swept the world. (2) The similarity between this story and that of Genesis is astounding. The table below gives a comparison of both these stories.    The Epic of Gilgamesh The Book of Genesis (Utnapishtim told Gilgamesh that he was a true worshipper of the god Ea. When the gods decided to destroy mankind by a flood, Ea warned his devotee and told him): â€Å"O man of Shurrupak, son of Ubar-Tutu, tear down your house and built a ship; abandon wealth seek after life; scorn possessions save your life. Bring up the seed of all kinds of living things into the ship; the ship which you shall built. Let its dimensions be well measured.† Genesis 6:13-14 And God said to Noah â€Å"I have determined to make an end of all flesh; for the earth is filled with violence through them...Make yourself an ark...† Genesis 6: 17-19 â€Å"For behold, I will bring a flood of waters upon the earth, to destroy all flesh...but...you shall come into the ark, you, your sons, your wife, and you sons’ wives with you. And of every living thing of all flesh, you shall bring... ... M. Readings in Ancient History: Thought and Experience from Gilganesh to St. Augustine. Third edition. Lexington, MA: D.C.Heath and Co., 1987.    Budge, E. A. Babylonian Story of the Deluge and the Epic of Gilgamesh. Montana, USA: Kessinger Publishing Co., n.d.    Gardner, John and John Maier. Gilgamesh: Translated from the Sin-leqi-unninni version. New York: Alfred A. Knopf, 1984.    Harris, Stephen L. â€Å"Gilgamesh.† The Humanist Tradition in World Literature. Ed. Stephen Harris. Columbus, OH: Charles E. Merrill Publishing Co., 1970.    Heidel, Alexander. The Gilgamesh Epic and Old Testament Parallels. Chicago: University of Chicago Press, 1949.    Ignatius Holy Bible. Revised Standard Version, Catholic Edition. San Francisco: Ignatius Press, 1966.    Sandars. N. K. The Epic of Gilgamesh. New York: Penguin Books, 1972.   

Lessons Concerning Staffing Decisions and Bringing About School Change Essay

Gary Hopkins, in his article, enumerated some of the lessons learned by principals on making staff decisions and bringing about school change. These lessons came from the principals that have learned them from mistakes made first hand. They hope to give advice to new school administrators or even those current ones in decision-making regarding staff members, hiring new ones, and making changes with school tradition or policy. Hopkins (2004), in one of his headings, said that â€Å"hiring decisions are the most importatnt decisions. One principal confessed that he had hired a teachers who should have been on an IEP (Individualized Education Program) herself. The principal confessed that he had just listened to verbal recommendations only and did not make any further background check on the teacher before hiring her. The lesson: don’t do a â€Å"reference check without asking specific, detailed questions on the performance and personality background of a potential candidate† (Hopkins 2004). Another lesson when it comes to the staff is involving them to the decision-making. Collaboration and participation is imperative,† (Hopkins 2004) according to one of the principals in Hopkins’ article. Listening to staff members will ensure their support in any decisions made most of the time, whether they agree with it or not. â€Å"People will often accept a decision or outcome contrary to what they wanted oiginally if they believe their point of view was listened to respectfully and taken into consideration,† (Hopkins 2004) that’s according to another principal in Hopkins’ article. Another principal adviced that recognizing of teachers, or just saying ‘thanks’ for any favor will pay back tenfold. In the end, she held that â€Å"what we do is all about people, not policy. This is not to say that we don’t follow policy, but we have a lot of flexibility when deciding what is best for kids† (Hopkins 2004). However, the most difficult situation that the principal may face is when proposing or deciding to change something within the school, even if it is for the best interest of the students. One principal shared that â€Å"the biggest challenge I have found is balancing the need to both honor a school’s past and move it into the future†¦ I constantly struggle with how to delicately let people know that sometimes ‘the way we’ve always done it’ is just not good enough† (Hopkins 2004). Bringing about change is really a difficult task in any field, not just with education. Even when one has already made the step to listen to the members’ opinions, people most of the times are afraid of change and will oppose it rigorously. Finding the right blend of diplomacy and chiding, professional development and empowerment, top-down delivery and delegation are just a handful of the issues principals must consider as they lead their schools toward change,† according to Hopkins (2004). What really is alarming is that some people are reluctant at improvement. One principal stated that â€Å"the biggest goof I made early in my career as a principal was believing that everyone on the staff felt the same way I did about raising standards, improving academics, and reforming schools in general† (Hopkins 2004). He specified about one of the schools this principal led: â€Å"even though our test scores were near the bottom in our school district, most staff members were content. Our drop-out rates, discipline stats, and attendance were at the bottom too. As one teacher put it to me: Well, somebody has to be at the bottom† (Hopkins 2004). Hopkins’ article is an eye-opener for the realities of school administration. Other principals surely must learn something from this, but students and their parents, and other concerned teachers and school staff may also find something to learn and act accordingly to improve education standards.

Foundations Of Mythology Essay

Foundations I think that the word myth gets used quite a bit these days, and in the wrong context. You often hear people say â€Å"it’s a myth† to refer to something that is too good to be true. Or some outlandish story such as a big fish story. Traditionally, a myth is a story that offers an explanation to something such as â€Å"enduring and fundamental human questions: How did the universe and the world come to be? How did we come to be here? Who are we? What are our proper, necessary, or inescapable roles as we relate to one another and to the world at large? What should our values be? How should we behave? How should we not behave? What are the consequences of behaving and not behaving in such ways?† (Leonard & McClure, 2004) In an academic context, according to the text, a myth is â€Å"the study of myth is a field of inquiry that ranges from the earliest known history of humanity up to and including contemporary cultures and societies and even our own individual senses of self in the world.† (Leonard & McClure, 2004) My interpretation of the definition is that they are stories that have been passed around for years about and forming our culture and beliefs. Commonalities â€Å"Some of the recurring themes include a Golden Age, a fall from a heavenly state, resurrections from death, virgin births, worldwide floods, creation stories in which â€Å"one becomes two,† and a future apocalypse.†(â€Å"Analyzing Mythology†, n.d.). Many different cultures have some of the same stories with different details or characters. Usually they have the same outcome though. These myths help form the society and culture that they live in. It is they view certain things. According to Rosenberg, â€Å"In their theory,  innate psychological characteristics, common to all human beings, determine how people throughout the world and throughout history experience and respond to the process of living. The contents of the collective unconscious are divided into archetypes—such as the mother, the child, the hero, the trickster, and the giant—but these are simply image frameworks.† When I think of mythology and how people use them to explain the unknown or how mankind is shaped, I think of the Illiad and Odyssey, two unbelievable journeys that have lasting themes. â€Å"Many famous heroes walk through the pages of Homer’s Iliad. Achilles and Agamemnon, among the Greeks, and Hector, among the Trojans, must choose between their own desires and the needs of their people. Their war is ancient, but their agony is modern. Once again, the courage with which they meet the challenges in their lives makes them impressive, yet very human, models of behavior for all of us.† (Rosenberg, 2006) Religion and Mythology Religion and mythology share a very thin line that often intersected. Religion is in a sense the same thing as a myth; it’s a story that explains origins. Many religions were based around the mythology of the people, such as Egyptians. They had many gods and goddesses and they believed in polytheism, which allowed them to worship more than one god/goddess. There isn’t a lot of research that has a specific answer as to what is the relationship between religion and mythology. It seems to me that there would be an argument that they are one in the same, while others believe they are completely different. Since mythology is often thought to be untrue, many would not want to believe their religion has anything to do with mythology. Relevance Many of the themes that are addressed by mythology are still very relevant today. â€Å"Rather, the American mythologist always saw myth as the story of the rugged individual who realizes his true nature through heroic struggle. Archetypal symbols and universals there may be, Campbell seems to say, but mythology is ultimately and always the vehicle through which the individual finds a sense of identity and place in the world.† (Leonard & McClure, 2004) People need to believe that the struggles they go through are common.  Everyone needs to believe in something. The Trojans were tricked by a giant horse that they thought was a gift. Almost everyone out there can think of a time when they were tricked. It resonates with them. Conclusion The foundations of mythology were established many, many years ago. Almost every culture of people has their own set of myths that they believed in. While they had their own stories, many of them had the same explanation of something, such as creation. The themes were and are still today very universal. While mythology offers explanation to life’s questions, many cultures still had their own set of religious beliefs. Many of those beliefs intertwined with their mythology but not always. As mentioned before, the themes of mythology are universal. They are also quite timeless. Many of the same moral dilemmas or questions of life are the same and can still be answered by myths. References Leonard, S., & McClure, M. (2004). Myth & knowing: An introduction to world mythology. New York, NY: McGraw-Hill. Rosenberg, D. (2006). World mythology: An anthology of great myths and epics (3rd ed.). Chicago, IL: McGraw Hill. Analyzing Mythology. (n.d.). Retrieved from http://www.mythome.org/mythII.html

Ifrs 10 Application to Hyundai and Kia

————————————————- ACCT333 Advanced Financial Accounting ————————————————- Group Project Assignment (IFRS 10) Cheong Wang Shen Gordon Prepared for: Prof Bernardine Low Prepared by: Gordon Cheong Wang Shen Jason Tan Zhu En Twain Teo Wei Ren Wee Huixiang (G4) Table of Contents Question 1: IFRS 10 flowchart3 Question 25 (a) Identifying ambiguity of control5 Background5 Control issues5 Co-owning of subsidiaries5 Inter-company director relations6 Same platform manufacturing6 b) & (c) Application of IFRS 10 flowchart to determine existence of control by Hyundai7 Step 1: Determine the purpose and design of investee (Kia)7 Step 2: Determine relevant activities7 Step 3: Determination of ability to direct relevant activities8 Step 4: Determine if exposed to variable returns9 Step 5: Determine if Hyundai is a principal or an agent10 Question 310 Identification of four requirements in IFRS 10 that are challenging to interpret and apply10 Considering the purpose and design of the investee10 Determining the relative size of voting rights11Considering related parties12 Determining if investor is a principal or agent12 References14 Question 1: IFRS 10 flowchart Question 2 (a) Identifying ambiguity of control Background The Hyundai Motor Company (hereafter referred to as Hyundai) is a multinational automaker based in Seoul, South Korea. Hyundai is one of the two best-known divisions of the global conglomerate Hyundai, the other being Hyundai Heavy Industries, the largest shipbuilder globally. A famous Korean businessman, Chung Ju-yung, founded Hyundai in 1974.Following the Asian Financial Crisis in 1997, Hyundai bought over Kia Motors Corporation (hereafter referred to as Kia) in 1998, which resulted in the formation of the Hyundai Kia Automotive Group (HKAG) . It consists of multiple affiliated companies related through complex shareholding agreements, although Hyundai is taken to be the de facto representative in transactions done with HKAG. During the acquisition of Kia in 1998, Hyundai out-bidded Ford motors to acquire 51% of the company’s shareholding. After a series of divestments over the years, the total ownership of Hyundai in Kia has been reduced to only 33. 5%. Hyundai and Kia are both listed individually on the Korean Stock Exchange. In 2008, Hyundai was ranked the 8th largest automaker in the world. It was also the fastest growing automaker globally for 2 consecutive years (2010 and 2011). The chairman and CEO of Hyundai is Chung Mong-koo, one of the surviving sons of Chung Ju-yung. Control issues Hyundai currently has a 33. 75% direct shareholding in Kia, with the remaining shareholdings being presumably widely dispersed. As such, it evidently has significant influence over the operations and running of Kia’s business.However, establishing direct control between Hyundai and Kia is not as straightforward. There are a number of issues that we have to look at. Co-owning of subsidiaries Hyundai and Kia co-own a large number of subsidiaries. As evidenced by the 2010 consolidated financials of Hyundai, the global branches of the Kia Motors Group are 100% held by Hyundai through Kia themselves. Both companies also have percentage ownership in Hyundai’s various component manufacturing companies like Hyundai HYSCO Company Limited and Hyundai Powertech Company Limited.Aside from this, they also have holdings in Autoever Systems Corporation, where their main Research and Development unit is located. Inter-company director relations The current Chairman and CEO of HMC is Chung Mong-koo. He took over Hyundai in 1992 when the Hyundai Group split into its various divisions. The Hyundai group itself follows a South Korean Business form of conglomerate known as chaebol, where the unique characteri stic is that it is usually a huge family controlled corporate group.As such, it is not surprising to see that many of the third generation members of Chung Ju-yung’s family are heading many of the different divisions of the Hyundai Group. Chung Mong-koo’s only son, Chung Eui-sun was a key operating officer in various corporate planning divisions in Hyundai-Kia before eventually heading Kia as its president from 2005 to 2009. Currently, he is the vice chairman of Hyundai and is on the internal board of directors for Kia. Aside from this, Chung Mong-koo also has a 5% shareholding in Kia. Same platform manufacturingBoth Hyundai and Kia co-own manufacturing subsidiaries that produce component parts to both companies. As a result, their production facilities get the similar component parts from the same suppliers. The companies also use the same power trains (engines and transmissions) all manufactured largely from the Hyundai Powertech Company Limited. A majority of the au tomobile electronic components from both brands also come from Hyundai MOBIS Limited. Both these companies are co-owned subsidiaries of Hyundai and Kia. Both Hyundai and Kia also share design studios.In fact, the vice president of design based in HMC actually oversees the design management of both brands. The family controlled heading of both Hyundai and Kia allows us to consider the possibility of Hyundai having a controlling influence over Kia, especially with Chung Eui-sun’s dual positions on both companies’ board of directors. Furthermore, given the fact that both companies virtually sprout from the same supply chain, and control over their research and development and design of the vehicles are headed by staff based in Hyundai, we can see hat these revenue generating activities greatly affect the business operations of both companies. Even though Kia is clearly not a subsidiary at first glance, given the meagre 33. 75% ownership by Hyundai, it would appear that Hy undai may be exerting more than just significant influence over Kia through the various factors mentioned. (b) & (c) Application of IFRS 10 flowchart to determine existence of control by Hyundai Step 1: Determine the purpose and design of investee (Kia) Hyundai purchased shares in Kia for 1. 18 trillion won in November 1998.The purpose of this acquisition in Kia is for Hyundai to gain significant foothold and widen its market share in the auto industry. By taking over Kia Motor, the Hyundai-Kia group was able to forge a solid position having over 70% of domestic market share and become the 7th or 8th global automaker by combining its affiliates’ production capacity into the total volume of 2. 9 million units in 1999. Step 2: Determine relevant activities Activities| Does it significantly affect investees’ returns –> relevant activities? | Example of decisions about relevant activities| How decisions about relevant activities are made? Research and development| Y es| Reduce the number of platforms to 718 by the end of 2005, in order to save the costs of product development and manufacturing and produce a variety of car models having differing external styling and interior options for the brands of Hyundai and Kia| Decisions are made by a joint R&D Division led by the Chief Technology Officer (for Hyundai and Kia combined)| Auto-assembly| Yes| Which type of vehicle that each plant should produce? Whether Hyundai and Kia should share power-train parts (i. e. engine and transmission) to be supplied to assembly plantsWhether Hyundai and Kia should share production technology| Decisions are made by top management of the Hyundai-Kia group, where the de facto representative is Hyundai| Auto parts supply| Yes| Which vendor should supply auto parts to the companies? How many vendors should they engage? | Decisions are made by Joint Material Handling Division that Hyundai and Kia set up| Marketing and competition| Yes| Whether to focus on price or non price competition such as customer service and product quality| Decisions are made by top management of the Hyundai-Kia group|Step 3: Determination of ability to direct relevant activities Hyundai owns 33. 75% of the shares in Kia Motors. In addition, Chung Eui-sun, the son of the Hyundai Motor Group Chairman, owns another 1. 73% of the shares. This presumably gives Hyundai control of 35. 48% of Kia Motors, which is significantly less than the 50% shareholding that would give Hyundai the majority of the voting rights. However, we are unable to find any evidence that anyone has control of a large proportion of the remaining shares, and thus we feel that the assumption that the rest of the shares in Kia are highly dispersed is a reasonable one.If that is the case, then it is almost impossible that all these shareholders will collectively outvote Hyundai when a decision needs to be made, so Hyundai can be said to have power over the relevant activities. Another factor to consider is t hat Mr Chung is both the vice chairman of Hyundai and an internal director of Kia. As Mr Chung sits on Kia’s board, he should have a certain amount of influence over Kia’s decision-making process. This factor, coupled with Hyundai’s holding of voting rights, lend much weight to the claim that Hyundai can direct the relevant activities.Last but not least, we notice from the table above that the Hyundai and Kia managements jointly make most decisions regarding relevant activities. In fact, Hyundai and Kia share almost the same supply chain. Many companies in the supply chain are subsidiaries or associates co-owned by these two parents. However, because Hyundai owns a larger portion of shares, and hence voting rights, in most of these entities, Kia is understandably at risk if it goes all out to oppose Hyundai in some way or another.It can be seen that when decisions are made, Hyundai is better represented because of both the presence of its management and its voti ng rights, and Kia would tend to concede ground to Hyundai when there are disagreements. So, even though Hyundai owns less than 50% of the shareholding in Kia, they probably still have enough power to direct the relevant activities. Step 4: Determine if exposed to variable returns If Hyundai has actual control of Kia, they will be exposed to returns, which can be positive, negative or both.Also these returns must be variable rather than fixed. The returns that Hyundai is exposed to can be classified into two categories: 1) Returns not available to other interest holders. This refers to cost savings and synergies that arise from Hyundai owning Kia, which other shareholders in Kia would not be entitled to. In this case, they are mostly in the form of cost savings, due to the similar operations of the two companies. Consolidation of R&D centres of Hyundai and Kia, sharing of R&D centres allowed both companies to lower costs by reducing number of employees in the R&D centres * Products share similar core platforms leads to savings and economies of scale * Sharing of factories leads to further specialisation, for example, Kia’s Kwangju plant was designated as a specialised assembly plant for small-sized commercial vehicles for both Hyundai and Kia, leading to cost reduction * Sharing auto-part suppliers to apply greater pressure on suppliers for cost savings on supplies 2) Dividends Kia paid out 96 billion won in dividends in 2010 * Hyundai’s ownership of common stock entitles them to receive dividends from Kia. Thus, it can be seen that Hyundai meets all our requirements that would allow it to classify Kia as a subsidiary. Our last step would be to ensure that Hyundai is acting in the capacity of a principal, rather than that of an agent, which is holding delegated power. Step 5: Determine if Hyundai is a principal or an agentIn determining whether Hyundai is acting as a principal or an agent, we need to consider four factors: 1) Scope of decision ma king authority * Unable to find information proving that Hyundai has any limits to the decisions it can make for Kia * Presumably, Hyundai can make most decisions for Kia 2) Rights held by other parties * No evidence of rights held by other parties 3) Exposure to variability of returns from investees * High cost savings due to economies of scale Many of Hyundai’s subsidiaries depend on Kia for revenue * Affected by dividends paid out by Kia 4) Remuneration * Almost solely dependent on dividends, which are highly variable * No actual fixed remuneration In consideration of all the four factors, Hyundai is most likely a principal and not an agent. Hence we can reasonably conclude, after thorough application of the framework, that Kia is a subsidiary of Hyundai. Question 3Identification of four requirements in IFRS 10 that are challenging to interpret and apply Considering the purpose and design of the investee Paragraph B5 of IFRS 10 explains that â€Å"when assessing control o f an investee, an investor shall consider the purpose and design of the investee in order to identify the relevant activities, how decisions about the relevant activities are made, who has the current ability to direct those activities and who receives returns from those activities†.Paragraphs B51-B53 then goes on to explain the factors to be considered when determining the purpose and design of the investee. However, IFRS 10 does not explain how the purpose and design of the investee can be used to â€Å"identify the relevant activities, how decisions about the relevant activities are made, who has the current ability to direct those activities and who receives returns from those activities†, which paragraph B5 suggested. A simplistic scenario is given in paragraph B6, whereby the investee is controlled by means of equity investments.Beyond this straightforward case, paragraph B7 directs readers back to the factors listed in B3 to determine control (relevant activities , ability to direct relevant activities, variable returns and ability to use power over investee to affect returns). Furthermore, the factors provided in paragraphs B51-B53 are hard to determine and require much professional judgment. For instance, paragraph B51 states that in the process of assessing the purpose and design, we â€Å"evaluate whether the transaction terms and features of the involvement (at investee’s inception) provide the investor with rights that are sufficient to give it power†.No conclusive elaboration is provided by IFRS 10, and it is uncertain whether being involved in the investee’s inception signifies control. This creates much ambiguity and inconsistent interpretation across firms. Rather than making it seem like an isolated step with little purpose, IFRS 10 should provide clearer guidance for the objective of determining the purpose and design of the investee. Clearer linkages, between the consideration of purpose and design of invest ee and the other factors to be considered when determining control, could also be provided to improve the flow of IFRS 10.Furthermore, more comprehensive and conclusive guidelines could be included to standardise the interpretation of the purpose and design of the investee. Determining the relative size of voting rights According to paragraph B42, an investor can consider the size of its holding of voting rights relative to the size and dispersion of other holdings of the other vote holders to determine whether its rights are sufficient to give it power. However, because relativity encompasses the use of personal judgement, this section may be open to manipulation.In Hyundai’s case, it holds around 35% of the voting rights, including those held by its vice chairman, Chung Eui-sun. If the rest of the voting rights are very widely dispersed, with nobody else holding more than 1%, Hyundai can say that it has control because it is very improbable that all the other parties will c ome together to collectively outvote Hyundai. On the other hand, Hyundai can also claim that there is still a possibility that the other shareholders will collectively vote against Hyundai if it introduces a policy that does not benefit them, so in that case, Hyundai does not have control.We notice that the voting structure remains the same, yet different interpretations can be derived. Paragraph B42 also says that other circumstances, such as voting patterns at previous shareholders’ meetings, can be considered, but it is hard to say if the historical patterns are able to predict the future. Shareholders might not have voted in previous meetings because there were no major decisions that affected them, but if Hyundai intends to propose something revolutionary, the voting situation will definitely change.IFRS 10 can provide more detailed guidance to ensure that this section is applied appropriately and consistently. For example, when determining how widely dispersed the rest of the voting rights are, an investor should consider only the next 10 largest shareholders. If their combined holding is larger than that of the investor, then the investor does not have control based on this requirement alone. When assessing previous voting patterns, the investor should only look at shareholders’ meetings where issues of similar impact were raised.If previous meetings did not encompass such issues, then the voting patterns for those meetings cannot be considered. Considering related parties Paragraph B18 states that an investor can consider whether the investee’s key management personnel are related parties of the investor when determining if the investor has the practical ability to direct relevant activities unilaterally. However, it does not specify how much influence the related parties must have over the investee, so this may not always be a good indicator of power.For example, Hyundai’s vice chairman, Chung Eui-sun, is also on Kiaâ€℠¢s internal board of directors. According to paragraph B18, this should provide evidence that Hyundai has power over Kia. But in order to determine whether Hyundai can direct relevant activities through Chung Eui-sun, we must also consider the amount of influence that he has over Kia’s decision-making process. Kia has 9 directors on its board, of whom two are also presidents in the company, so Chung Eui-sun may not always have his way. If the investor does not take this into consideration, then the determination of control would be flawed.In that sense, this requirement would be more complete if guidance on the influence commanded by related parties was given. Instead of only determining whether there are related parties in the investee’s governing bodies, the investor should also take into account the role and power of the related parties. If the related parties have the final say when it comes to decision-making over relevant activities, then this factor can conclusi vely determine that the investor has power. But if the related parties do not have the final say, then only a minimal weight should be placed on this factor.Determining if investor is a principal or agent Being able to determine if the investor is a principal or an agent is crucial to determining whether the investor has control over the investee. A principal would have power over the investee, but an agent would only have delegated power. Delegated power is held on behalf of a third party who ultimately controls the investee. The method prescribed in IFRS 10 for determining if a decision maker is an agent is the consideration of the factors listed in paragraph B60.Upon further elaboration of the factors, IFRS 10 provides certain cases where the investee is definitely a principal or an agent. For example, paragraph B70 states that â€Å"a decision maker cannot be an agent unless the conditions set out in paragraph B69 (a) and (b) are present. † However, if none of these extre me conditions are met, we must assume that we would have to take all five conditions into account when trying to decide if the investor is an agent. However, there is no prescription in IFRS 10 about how to consider these conditions.In a situation where some of the conditions point towards the investor being an agent and some point towards them being a principal, there is a certain amount of ambiguity in whether the investor should be classified as a principal or an agent. This gives the company some leeway in choosing the decision that would reflect a better financial position of the firm. This could lead to reduced accuracy of financial statements and less comparability among financial statements of different companies.To make this requirement easier to interpret and apply, IFRS 10 should clearly state the relative importance of each factor. For example, the factors which are given a higher relative importance would have a higher influence on whether the company is a principal or an agent, as compared to those with a lower importance. As such, in ambiguous cases, companies will know which factors should be considered first. Given this, all companies will have more similar definitions of principal/agent, thereby reducing the ambiguity and increasing comparability among different financial statements.References 1) Hyundai 2010 Annual Report http://worldwide. hyundai. com/company-overview/investor-relations/financial-information-Annual-Report-view. aspx? idx=13&&nCurPage=1&ListNum=11 2) Kia 2010 Annual Report http://www. kmcir. com/eng/library/annual. asp 3) Merger and Reconfiguring of Hyundai-Kia (Byoung-Hoon Lee, Sung Jae Cho) http://gerpisa. org/rencontre/9. rencontre/S13Lee-Cho. pdf 4) HYUNDAI MOTORS’ DE-CHAEBOLIZATION EFFECTS (Hyunjoong Jun) http://gerpisa. org/rencontre/9. rencontre/S13Jun. pdf