The Importance of the Act of Reading” by Paulo Freire essay

4 Bredahl Harlie Cheyenne Bredahl Professor Peter Epps Composition II 08 September 2014 IThe Importance of the Act of Reading by Paulo Freire, describes the importance of the act of reading beyond numerous experiences in his life as a child, a teenager, and an adult. Freire begins his article by taking readers back to where he was born, in his home city Recife, Brazil. He uses very itemized imagery to describe the trees, the house and the atmosphere of where he grew up and how the text, words, and letters were incarnated in the series of things, objects, and signs. He describes the trees, the house and the atmosphere of where he grew up and how the text, words, and letters were incarnated in the series of things, objects, and†¦show more content†¦Schools often require reading materials containing unfamiliar subjects to students. Recognizing that there is significance for critical understanding of the text itself as well as the act of reading, this explains why many students today struggle with reading material that is not relevant to their lifestyle. Freire por trays that by the statement, reading the world precedes reading the word, and reading the word implies continually reading the world (Freire 286). A person should read their world, and then interpret it. They can then use their existential experience of the world to connect to what they are reading in print, and better understand it. Reading a text as pure description of an object, and undertaken to mechanically memorize the discrimination, it is neither real reading nor does it result in the knowledge of the object to which the text refers (Freire 284). When a teacher gives a reading assignment, the students that read to memorize the text likely do not gain the significance of what that literary work contextually attempted to deliver, nor is it necessarily understood by the reader. If a student was really taught the significance and meaning of the text instead of mechanically memorizing it, the student should have better outcomes both with gaining the insight of the assignment and the memorization of key points. MechanisticallyShow MoreRelatedComparison Essay1541 Words   |  7 PagesMcDawson Eng. 101 Nov. 27, 2013 Comparison essay of Paulo Freire and Richard Rodriguez Paulo Freire’s essay â€Å"the banking concept of education† and Richard Rodriguez’s essay â€Å"the achievement of desire† talk about the topic of education. Education is explored in many different ways. In Freire’s essay â€Å"the banking concept of education† he expresses his dislike of the education system and the distribution of power and authority in the class room. In his essay, he says that all the power belongs to theRead MoreEducation Is Essential For A Positive Classroom Experience2100 Words   |  9 Pagesneeded to reach our full potential later in life. While education may seem straight forward, there are many ideas as to how it should be successfully presented. I believe that Pratt, Rodriguez, Freire, and I share that educational freedom is vital to a positive classroom experience. Throughout this essay, I will be using their ideas to support why the system of education requires radical reformation. Richard Rodriguez was the son of Hispanic working class parents during the 1940’s. From a very youngRead MoreArgumentative Essay : Argumentative Synthesis2113 Words   |  9 Pagesneeded to reach our full potential later in life. While education may seem straight forward, there are many ideas as to how it should be successfully presented. The authors, Pratt, Rodriguez, and Freire, all share my belief that educational freedom is vital to a positive classroom experience. Throughout this essay, I will be using their ideas to support why the system of education requires radical reformation. Richard Rodriguez was the son of Hispanic working class parents during the 1940’s. From a veryRead More Transcending Herbert Marcuse on Alienation, Art and the Humanities4411 Words   |  18 Pageslest we perish of the truth. Friedrich Nietzsche, The Will to Power #822 What is the relationship of truth to beauty, learning to art, political education to human flourishing? Philosophers from Confucius and Aristotle to John Dewey and Paulo Freire have investigated, as the axial human problem, how education is to help us in accomplishing our own humanization. The contemporary search for a genuinely critical theory and an authentically democratic society continues that project. But what canRead MoreImpact of Print Media on Society10439 Words   |  42 Pages.............................14 Figure 2: Importance (awareness) scores for groups 2 and 4 pretest and posttest ........................55 x LIST OF TABLES Table 1 Rotated Component Matrix of the Media and You Pretest .............................................49 Table 2 Rotated Component Matrix of the Media and You Posttest ..............................................51 Table 3 Results of the Repeated-Measures Analysis of Variance of Importance Scores ................54 Table 4 ResultsRead MoreAlternative Learning Systems9735 Words   |  39 Pagescourse at a medium-security women’s prison. At the beginning of the semester there were 14 students enrolled—8 black, 1 Latino, and 5 white. However, only 7 students completed the course— 3 black, 1 Latino, and 3 white. As critical feminist pedagogues (Freire 2000; hooks 1994) and researchers, our goal is to understand oppression and the reproduction of inequality and also the experiences of the people that live it (Kleinman 2007; Schwalbe et al. 2000). Our understanding of oppression stems not only fromRead MoreDeveloping Management Skills404131 Words   |  1617 PagesBRIGHAM YOUNG UNIVERSITY Kim S. Cameron UNIVERSITY OF MICHIGAN Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editorial Director: Sally Yagan Editor in Chief: Eric Svendsen Acquisitions Editor: Kim Norbuta Editorial Project Manager: Claudia Fernandes Director of Marketing: Patrice Lumumba Jones Marketing Manager:

Developing Manager - 4362 Words

Developing Manager Table of Contents 1.0 Principal and practice of management behaviour 2 1.1 Management Theories 2 1.2 Leadership 2 1.2.1 Leadership Styles 2 1.2.2 Manager vs Leader 2 1.2.3 Motivation 2 1.3 Organizational Culture 2 1.3.1 Types of Culture 2 1.3.2 Factors influencing changes in culture 2 2.0 Prospective Manager 2 2.1 Skill Audit 2 2.2 Personal SWOT Analysis 2 2.3 Development Plan 2 3.0 Roles and Responsibility 2 3.1 Roles 2 3.2 Responsibilities 2 4.0 Career Development 2 4.1 Career Development Plan 2 5.0 References 2 Task 1 1.0 Principal and practice of management behaviour When we consider any field like hospitality, travel, tourism there should be proper management. Effective†¦show more content†¦The autocratic leadership style is seen as an old fashioned technique. It has existed as long as managers have commanded subordinates, and is still employed by many leaders across the globe. The reason autocratic leadership survives, even if it is outdated, is because it is intuitive, carries instant benefits, and comes natural to many leaders. Many leaders who start pursuing leadership development are often trying to improve upon their organizations autocratic leadership style. It has the following characteristics: 1. Manager seeks to make as many decisions as possible 2. Manager seeks to have the most authority and control in decision making 3. Manager seeks to retain responsibility rather than utilize complete delegation 4. Consultation with other colleagues in minimal and decision making becomes a solitary process 5. Managers are less concerned w ith investing their own leadership development, and prefer to simply work on the task at hand. Democratic Leadership is the leadership style that promotes the sharing of responsibility, the exercise of delegation and continual consultation. The style has the following characteristics: 6. Manager seeks consultation on all major issues and decisions. 7. Manager effectively delegate tasks to subordinates and give them full control and responsibility for those tasks. 8. Manager welcomes feedback on the results of initiatives and the work environment. 9. Manager encourages othersShow MoreRelatedDeveloping Manager2016 Words   |  9 PagesTravel Tourism Management, developing manager is very important part. A particular small or big business organization has to raise a concern about the developing manager. Developing manager has now become a strategic achievement for the every organization. But success mostly depends on the organization choose to approach towards the development, organization manager very important part of it. The aim of this assignment identifies and evulate idea s and developing manager, which is based on case studyRead MoreDeveloping manager3489 Words   |  14 Pagesï » ¿The Developing Manager (Unit 7) Ferdousi Uddin Introduction There are certain skills that need to be learned in order to assess the potentiality of someone in becoming a manager. This assignment aims to achieve this by understanding principles and practices of management behaviour, reviewing own potentiality as a prospective manager via stimulations and role plays and how to show managerial skills within a business and services context. Then finally, addressing and analysing a realRead MoreThe Developing Manager1190 Words   |  5 Pagesmanagement is and the job of a manager. A good management can lead a business to success and a skilled manager can lead its team to achieve the goals of an organisation. Generally the term management is suitable for everyone because at one point in the life cycle an individual is managing its own time,is taking decisions,is controlling and planning its day by day life . Management on its basic view is about ,,making things happen,,within an organisation. A good manager will use systems and proceduresRead MoreDeveloping the Global Manager3985 Words   |  16 Pages| Leadership challenges faced by managers leading a multi-national workforce | Developing the Global Manager Report | | | | Glossary HCN: Host Country Nationalsg MNC: Multi-national Company MNW: Multi-national Workforce Contents Page Introduction 4 Aims 4 Objectives 4 Leadership Challenges 5 Recommendations 15 Conclusion 16 AppendixRead MoreConcept Of Developing As A Manager Essay1857 Words   |  8 PagesThe central theme on this is essay is evolved around the concept of developing as a manager. CIPD, 2016 defined management development as the â€Å"structured process by which management enhance their skills†¦. Of both individual and the organisation†. By using this definition I can use a swot analysis of three categories to be reflective upon myself in an organisation, these categories will be communication, teamwork and management research. In my current occupation I look at communication as a strengthRead MoreDeveloping A Training For New Managers1665 Words   |  7 PagesI: Analysis Four Square company is developing a training for new managers that focuses on conflict management. We have found that newly appointed managers sometimes lack the skills to carefully observe their employees behaviors and end up getting blindsided by conflicts that arise because of tension that builds over time. Due to discovering this need we have decided to start the needs analysis process to help us understand if this training should be required. According to Noe, the â€Å"needs assessmentRead MoreDeveloping Future Police Managers?1343 Words   |  6 PagesDeveloping Future Police Managers Introduction It is most probably every police managers’ dream to one-day retire from law enforcement and begin their new life in retirement. Retirement brings the time to enjoy all those things that they did not have time for due to the demands their job. As to when some police executives will retire revolves around the question of, â€Å"Is there someone within the organization that is ready to step-in and take over the operation of the department?† Much debate hasRead MoreManagers Developing Analytical Skills1022 Words   |  4 Pagesinto parts so that you can visualize their relationships. Managers can plan and lead projects successfully if they have analytical skills. They can forecast financial results and develop plans accurately towards achieving goals and objectives by working together with their people. They can finally accomplish their plans and produce predictable results logically in a more systematic manner. Discussion In solving business problems, a manager frequently uses his analytical skills. When a crisis occursRead MoreMcdonald s : Developing The Executive Manager2068 Words   |  9 Pages Student Name:Usman Wahid Student Number: 968822 Unit: Developing the Executive Manager – M6.01 Lecturer: Emdad Aziz Introduction McDonald’s is one of the biggest food shackle all above the globe is assisting remarkable number of clients worldwide daily. McDonald’s has made a higher profile brand picture because its quality food, quick ability, cleanliness, everyday worth and so on. Experienced association, more working arrangement, customer-friendly strategy, present groundwork, dataRead MoreIndividual Analysis: Assessing and Developing Yourself as a Manager3143 Words   |  13 PagesOrganisational Behaviour 550 Assessment 2: Individual Analysis: Assessing and developing yourself as a manager 1.0 Introduction Self-assessment can be described as the means of examining oneself, the team or organisation that they working in, against certain aspects that are significant to ones personality, team or work structure. Self-Assessment tools can be a very useful way to test personal, management and organisational abilities, performance and goals. They

Astronomy 101 - Big Numbers - Lesson 4 Its A Big Universe

Our universe is huge, larger than most of us can even imagine. In fact, our solar system is beyond the grasp of most of us to truly visualize in our minds eye. The systems of measurement we use just dont stand up to the truly immense numbers involved in gauging the size of the universe, the distances involved, and the masses and sizes of the objects it contains. However, there are some shortcuts to understanding those numbers, particularly those for distance. Lets take a look at measurement units that help put the immensity of the cosmos into perspective.   Distances in the Solar System In perhaps a nod to our old belief of Earth as the center of the universe, our first unit of measurement is based on the distance of our home to the sun. We are 149 million kilometers (93 million miles) from the Sun, but its much simpler to say were one astronomical unit (AU). In our solar system, the distance from the Sun to the other planets can be measured in astronomical units as well. For example, Jupiter is 5.2 AU away from Earth. Pluto is about 30 AU from the Sun. The outer edge of the solar system is at the boundary where the Suns influence meets the interstellar medium. That lies about 50 AU away. Thats about 7.5 billion kilometers away from us.   Distances to the Stars The AU works great within our own solar system, but once we start looking at objects outside our Suns influence the distances get very hard to manage in terms of numbers and units. Thats why we created a unit of measure based on the distance that light travels in a year. We call these units light-years, of course. A light-year is 9 trillion kilometers (6 trillion miles). The closest star to our solar system is actually a system of three stars called the Alpha Centauri system, consisting of Alpha Centauri, Rigil Kentaurus, and Proxima Centauri, which is actually slightly closer than her sisters. Alpha Centauri is 4.3 light-years from Earth. If we want to move beyond our neighborhood, our nearest neighboring spiral galaxy is Andromeda. At roughly 2.5 million light-years, its the most distant object that we can see without a telescope. There are two closer irregular galaxies called the Large and Small Magellanic Clouds; they lie at 158,000 and 200,000 light-years, respectively.   That distance of 2.5 million light years is a huge one, but merely a drop in the bucket compared to the size of our universe. In order to measure larger distances, the parsec (parallax second) was invented. A parsec is approximately 3.258 light-years. Along with the parsec, larger distances are measured in kiloparsecs (thousand parsecs) and megaparsecs (million parsecs). One other way to denote very large numbers is something called scientific notation. This system is based on the number ten and is written like this 1 Ãâ€" 101. This number equals 10. The small 1 located to the right of the 10 indicates how many times 10 is used as a multiplier. In this case once, so the number equals 10. So, 1 Ãâ€" 102 would be the same as 1 Ãâ€" (10 Ãâ€" 10) or 100. An easy way to figure a scientific notation number out is to add the same number of zeros at the end as the small number to the right of 10. So, 1 Ãâ€" 105 would be 100,000. Small numbers can be written this way as well by using a negative power (the number to the right of 10). In that case, the number will tell you how many places to move the decimal point to the left. An example: 2 Ãâ€" 10-2 equals .02. Edited by Carolyn Collins Petersen.

Leadership Styles And Purposes Leadership - 857 Words

Essay 1.[LO 1] Process, Practices and Purposes Leadership Answer 1: Leadership clearly defines as the action of leading a group of people or an organization, or ability to lead. Here I discuss two styles of leadership that is: †¢ Autocratic Leadership †¢ Participative Leadership Below I discuss each style in details with example 1. Autocratic Leadership This style of leadership is described by controlling the individuals of the team over all choices and little contribution from the team leader in the association. This authority style has gotten to be something of a vestige in today s modern conditions for businesses. The reason for this is because most of the representatives work better without the bossiness of their supervisor around†¦show more content†¦2. Participative Leadership: This style of leadership builds up a cheerful way of going through the strategies for a business to work. The supervisors with participative style back-off and permit their team member to tap their inventively and think freely, while as yet keeping up enough control to direct the general vision of groups without forcing their own vision on their choices. To put it plainly, leaders give them a considerably more prominent lead and are all the more trusting of choices. It enhances the comprehension of issues required by the individuals who must complete their choices. Certain individuals are more dedicated to activities where they have included in the significant leadership. Participative managers are not so much aggressive but rather more community oriented when taking a shot at joint objectives. At the point when managers settle on choices made by the team and all agreed on that together, the social duty to each other is more prominent and subsequently expands their dedication to the choice. A few people choosing together settle on preferred choices over one individual alone. Example: Donald Trump The personality itself seen as more of a dictator rather than an executive, TrumpShow MoreRelatedM3.10 Introduction to Leadership and M3.36 Leading a Team Effectively966 Words   |  4 PagesINTRODUCTION TO LEADERSHIP AND M3.36 LEADING A TEAM EFFECTIVELY Criteria Descriptors Connect the team with vision and strategy †¢ Explain the importance of the team having a common sense of purpose that supports the overall vision and strategy of the organisation or project †¢ Explain the key role that communication plays in establishing a common sense of purpose and assess the effectiveness of own communication skills Referral †¢ What is meant by ‘having a common sense of purpose’ is not addressedRead MoreCore Elements Of Strategic Leadership Essay1379 Words   |  6 Pages2 The core elements of strategic leadership The above provides the basis for understanding strategic leadership, as it helps to forge the basis components of what the style is about. In order to go deeper into the workings of the framework, you need to examine the different components of it. In this section, we’ll first explore the essential components of the leadership style, before outlining the key steps a strategic leader needs to take for the framework to work efficiently and effectively. Read MoreTransformational Leaders : Organizational Values, Aspirations, And Ethical Measurement1428 Words   |  6 Pagesthe leadership and the followership. The developments further drive the followership to accomplish the necessary right and appropriate good that falls within the vision and mission of the organization. Believing in the core organizational values, the transformational leader expects high performance from the followers. The followers enter the process of being a transformational leader by adding increasing influence, inspiration, and intellectual stimulation from the leader. This leadership styleRead MoreThe Difference between a Leader and a Manager885 Words   |  4 PagesDecision making can be perceived to be the only defined hallmark of a genuine leader. This relates tour understanding of leadership as a verb; something we do as opposed to what we are. This narrow definition however, misses the point that leadership is not necessarily the function or role of only a leader rather, leadership as a concept represent the coming together of many component including organization hierarchy, strategy and those prepared to follow and enact. It is not simply enough thereforeRead MoreEthical Leadership Styles As Tools For Influencing Organizational Culture751 Words   |  4 PagesThe purpose of this paper is to discuss ethical leadership styles as tools for influencing organizational culture while respecting the diversity of cultures embodied by employees. The variety of leadership styles are because of the cultural influences, people of different cultures have diverse beliefs and expectations about what is perceived as effective leadership (Jogulu, 2010). Due to the global environment were organizations operate, it is necessary to identify leadership models that willRead MoreAuthentic Leadership : Leadership Theory And The Work Of Bass And Steildmeier1259 Words   |  6 PagesAuthentic Leadership Similar to servant leadership, authentic leadership has developed from questionable business practices and general societal fear and uncertainty in times of peril (Northouse, 2016). One of the newer areas of leadership, authentic leadership has risen from the search for honest, trustworthy, and positive leadership approaches (Northouse, 2016; Nyberg Sveniningsson, 2014). According to Northouse (2016), the concept of authentic leadership originates from transformational leadershipRead MoreEssay on Applied Business Research Case Study935 Words   |  4 Pagesthe world’s biggest corporations to failure, researchers and business leaders realize the need for ethical and sound leadership. The need for ethical and sound leadership helps to facilitate and manage daily operations and to sustain their competitive advantage within the global economy. However, with this evolution, numerous research studies add to the understanding of leadership theories and the effects on organization al climate and culture. The following findings concentrate on research limitationsRead MoreIlm Leadership859 Words   |  4 PagesTitle: Assessing your own leadership capability and performance (M5.29) 5 6 Assessment criteria (the learner can) 1.1 Review the prevailing leadership styles in the organisation Assess the impact of the prevailing leadership styles on the organisation’s values and performance Level: Credit value: Learning outcomes (the learner will) 1 Understand leadership styles within an organisation 1.2 2 Be able to review effectiveness of own leadership capability and performance in meetingRead MoreMalaysian Leadership Style and Employees Organizational Commitment 953 Words   |  4 PagesBibliographical Entry Lo, M.C., Ramayah, T., and Min, H.W., (2009). Leadership styles and organizational commitment: a test on Malaysia manufacturing industry. African Journal of Marketing Management, 1 (6), 133-139. Problem In Malaysia it was a common complaint that employees were no more loyal as they used to be in the passed. Employees would tend to leave their companies for slightly better pay due to low commitment. Hence, the biggest challenge for Malaysian organizations was to provoke aRead MoreThe Effect Of Leadership On Performance Essay1167 Words   |  5 PagesIntroduction Various research efforts have aimed to examine the effects of leadership on performance. In recent times, however, the emerging focus on leadership has particularly been on leadership styles. Beginning from business organizations, the influence of leadership styles has been studied even in educational settings. Among the leadership styles that have received significant coverage is the transformational leadership style. It is of significance for one to have the ability to analyze the research

Illegal Drug Control Free Essays

Those questions are addressed in this report which reviews drug ppolicy and results in Australia. In 1998, United Nations Member States met in a Special Session of the General Assembly and agreed to take tougher action to reduce both the illicit supply of, and the demand for, drugs before 2008. Australia has taken that pledge seriously. We will write a custom essay sample on Illegal Drug Control or any similar topic only for you Order Now In 1998 it introduced a â€Å"Tough on Drugs Strategy† that aims to reduce drug supply, trafficking, and demand as well as the harm caused by drugs. This Strategy seems to be working: drug use levels have dropped significantly. Indeed, the turn around has been dramatic. To improve global efforts to contain the threat posed by drugs, the United Nations Office on Drugs and Crime (UNODC) seeks to increase the body of knowledge available to ppolicy makers. That includes collecting success stories. If Australia continues to build on its recent progress, it too could become a success story and provide inspiration and valuable lessons for other countries. This report, following a ssimilar UNODC study of Sweden’s drug ppolicy (2006), aims to contribute to a growing body of evidence that will help countries bring their drug problems under control. Antonio Maria Costa Executive Director United Nations Office on Drugs and Crime 3 In response to increases in drug abuse in the 1990’s Australia implemented a vigilant drug control strategy. As this report makes clear, drug control has long been a priority of recent Governments and effective changes in recent years were due to pro-active, empirically-based drug control strategy, and a well developed system of services at the state and local levels. This report analyses the developments and changes in Australia’s drug policies over the last decades and their impact. Australia implemented a rather repressive drug control ppolicy from the beginning of the 20th century. This worked well until the 1970s. Australia shifted to harm-reduction approaches as of the mid 1980s, with a sthrong emphasis on prevention and treatment. This helped Australia to avoid a large-scale injecting drug use (IDU) related HIV/AIDS epidemic. In contrast to alcohol and tobacco where Australia achieved remarkable demand reduction through prevention activities, drug abuse continued rising and reached alarming levels by 1998. In 1998 Australia introduced a National Illicit Drugs Strategy â€Å"Tough on Drugs† which strengthened the supply control aspects without weakening demand-side interventions or giving up harm-reduction approaches. In the case of heroin, the strategy focused clearly on a reduction of supply. There followed higher heroin prices, lower heroin purity and ultimately substantially lower levels of heroin consumption. Drug related deaths declined, as well as drug related crime. WHICH OF THE FOLLOWING PROVIDES THE CLEAREST INDICATION OF A DRUG ADDICTION? Answer at this question at  https://donemyessay.com/unit-5-review/ Use of other drugs also declined, both among the general population and among secondary school sstudents- mainly due to improved prevention and treatment activities and more funds made available by the authorities to drug control in general. The Australian National Council on Drugs (ANCD) incorporated many of the leading drug experts of the country and strengthened calls for higher budgets in the fight against the drug problem. Australia’s drug ppolicy has been based on a broad ppolicy mix of supply reduction, demand reduction and harm minimisation policies. In addition, Australia has made commendable efforts at advancing the knowledge base for policy making. The country has consistently conducted in-depth research and evaluations of its various strategies and programmes – subsequently adjusting them according to efficacy. This concentration on empirically-based ppolicy formulation continues to demonstrate positive results. The drug ppolicy was largely bi-partisan in nature as the States as well as the federal Government participated in its formulation and implementation (Until recently, the individual States were governed by different political parties than federal Australia). A new Australian Government, elected in late 2007, is yet to leave its mark on domestic drug strategies. How to cite Illegal Drug Control, Papers

Capital Asset and Pricing Model

Questions : 1.A Critical Assessment of The Capital Asset Pricing Model (CAPM)You are required to- (a) Describe the Capital Asset Pricing Model, including the assumptions underlying the theory. (b) Explain the relationship between the Security Market Line and the Capital Market Line, using diagrams and examples to illustrate your explanation. (c) Briefly set out arguments in favour of and against - the theory, outline its uses and make a critique of its underlying assumptions. (d) dentify any alternatives which have been suggested in place of CAPM. (e) Conclude with an overall assessment of the theory and state any recommendations you may have from your study. (f) Conclusion a brief overall assessment of the CAPM theory. 2.You are required to work the following problem, using a discounted cash flow (NPV) analysis. Gordon Hall is considering replacing an old machine with a new one from Li Ho. The old machine (bought 5 years ago from Tom Lee) cost $340,000, while the new one will cost $280,000, fully financed by a 5 year 9% per annum interest only loan. The new machine will be depreciated prime cost to $50,000 over its 5 year life. Gordon estimates that it will be worth $40,000 (salvage value) after 5 years. The old machine is being depreciated at prime cost to zero over its original expected life of 10 years. However, George can sell the old machine today for $86,000. The new machine will save Gordon $70,000 a year in cooling costs. Other costs are that, one year ago, a feasibility study on the new machine conducted for Gordon by an external firm of consultants, cost Gordon $20,000. With the new machine, Gordon will also lose $10,000 of sales of another product to Tom Lee. With the new machine, a one-off amount of cleaning supplies (current assets) at a cost of $9,000 will be required, and Henry estimates that accounts receivable (also current assets) will increase by $14,000. Both of these increases in working capital will be recouped at the end of the new machines life in five years time. Gordons cost of capital is 9%. The tax rate is 30%. Tax is paid in the year in which earnings are received. (a) Calculate the net present value of the proposed change, that is, the net benefit or net loss in present value terms of the proposed changeover. (b)Should Henry purchase the new machine? State clearly why. Answers : (1)Introduction Capital Asset pricing Model (CAPM) has been on the most important theories related to financial management and modern financial economics that has applications in project financing and securities market with respect to estimation of cost of capital of the firms and evaluation of the performance of the portfolios respectively. It is one of the most widely used models although has been challenged several times with respect to its applications and accuracy. This essay provides the basic understanding of the CAPM by highlighting the assumptions underlying the theory. Further the relationship between the Security Market Line and the Capital Market Line is studied. The essay also discussed the applications, benefits and limitations of CAPM. Lastly the recommendations have been made for the alternative of CAPM or what adjustments can be made to CAPM to reduce the effect of limitations. Capital Asset Pricing Model CAPM provides the relationship between risk and expected return. This relationship is given by the mathematical formula Here is expected return is the risk free return is sensitivity of the asset to the changes in return on market is the expected return of the market The relationship that is given by the CAPM is useful in two ways. Firstly it provides benchmark rate of return that has to be expected from the given investment opportunities. Secondly it is employed for forecasting the returns to a certain extent. There are certain assumptions based on which CAPM has been developed. These are as mentioned below Risk Return interest of investors: The investors are risk averse and desire more return on investment. The risk will be avoided if the return is same on two investment options. Diversified portfolio is held by the investors: This assumptions is based on the fact that it has been assumed that there is no unsystematic risk and that Borrowing at risk free rate: Another assumption is that the investors can invest in high return investments by borrowing at risk free rate. Short Selling: There is no restriction on short selling in the market and all the investors can trade in all the available options. The buying or selling of the stock will not have any impact on the prices. Perfectly efficient market: It is assumed that the market is perfectly efficient and that same information is available to all the investors. There is no transaction cost or any other tax that is applicable. Based on these assumptions the CAPM model has been developed. The other aspects with respect to CAPM have been discussed below. Security Market Line Capital Market Line Capital Market Line (CML) is used in CAPM for illustrating the return from efficient portfolio which is dependent on the risk free rate and the level of risk associated with the portfolio. CML is the relation of return with risk measured in terms of standard deviation. On the other hand Security market Line (SML) shows the relationship between the beta of the stock and the return associated with it. The efficient frontier that has been shown in the above diagram is the set of all optimal portfolios that offer highest expected return for a given risk level or the lowest risk. The portfolios that lie below the efficient portfolio are over-valued as optimum expected return isnt there whereas the portfolio that are above the CML have higher risk. The equation of CML is shown below. The securities, asset or portfolio that are above the SML are underpriced whereas that below the SML are overvalued. One of the most important differences between the CML and SML is that CML is applicable to the portfolio whereas the SML is applicable for security, asset or portfolio. Further the other difference between the SML and CML is that SML identifies risk in terms of beta whereas in CML standard deviation is the measure of risk. Applications of CAPM CAPM has its applications in different segments. These have been discussed below Portfolio analysis: CAPM has its application in portfolio analysis. Based on the CML that has been discussed above it can be estimated whether the portfolio is under-valued or over-valued. Efficient portfolios lie on the CML. Further the assets that are above the SML are underpriced relative to as expected based on CAPM whereas the assets that lie below the SML are overpriced in relation to as signified by CAPM. Investment Decisions: the investment decisions with respect to the value of the project and the return it can generate may be estimated based on the CAPM. Applications to capital Budgeting: CAPM is employed for establishing the hurdle rate for the projects. Thus based on the CAPM WACC can be estimated which can further be used for the estimation of the Net Present value (NPV) or Internal Rate of Return (IRR). The above applications suggest that decision making has been simplified based on the CAPM model and the consideration may be given to other factors rather than the cost of capital or the estimation of returns at the primary level. Benefits and Limitations CAPM has been one of the most important and has been implemented vastly in various studies. There are certain benefits which support CAPM in contrast to other theories and models that have been developed. Systematic Risk Estimation: the linear relationship that has been mentioned above is represented by the Security market Line highlighting the relation between the beta, market risk and the expected return. Further the unsystematic risk is eliminated making the model quite simple and easy to understand and implement. The empirical testing of CAPM shows that despite its inaccuracies it is much more reliable than the other models such as arbitrage pricing model etc. It is believed that CAPM can be the basis for the further study and improvement in the estimation of return in comparison to other models. There are certain limitations of CAPM that have been discussed below Firstly CAPM is based on certain assumptions. The assumptions that have been mentioned earlier such as no transaction cost, taxes or effect of inflation on the market are unrealistic. This effects the reliability of the CAPM. For example in the recent past the CPM has poorly explained the stock returns in USA and UK market as there has been considerable impact of these factors. There are certain limitations with respect to the methodology that is adopted in CAPM. The return measured by the CAPM is a function of risk. The relative volatility of the investment is the basis of estimation of return. However this is important to understand that the volatility may be higher in comparison to what is depicted by CAPM. Secondly the index that has been selected as the market proxy may not be relevant enough to measure the returns on the investment. Lastly, as mentioned above the applications of CAPM is in estimation of weighted average cost of capital. Since CAPM uses historical data and it is expected that the same relation as depicted by the historical data will be applicable. However the impact of other factors impacting the performance in future also has to be considered. Conclusion Recommendations CAPM is certainly one of the most useful models that has its applications in budgeting, securities and project appraisal. The various benefits of the model show why this has been adopted across the financial sector. On the other hand the limitations highlight the need to conduct studies on the model and develop alternatives to CAPM and ways by which this can be implemented (Fletcher Kihanda, 2005). One of the ways is to introduce the parameters such as kurtosis and skewness in the CAPM. Certain recommendations have been discussed below to improve the reliability of the CAPM and reduce the limitations associated with the model. Multi Beta Models: CAPM is single beta model which is for highlighting the relation of return with the market. However there can be several other factors impacting the returns and thus it may be useful to introduce several other factors related to other factors impacting the returns Market Price Based Models: The beta calculated by the CAPM is based on the correlation of stock and the market, standard deviation of the market and the stock. The correlation factor may be highly unstable and may have huge variance over the period. The market based models estimate the relative risk and thus dispense off the correlation factors. The relative risk is estimated by the division of standard deviation of the stock by the average standard deviation of all the stocks in the market. This may be lengthy and complicated. Accounting based Models: This is the accounting based risk measurement also known as accounting beta. Under this method the detailed study of the cost structure of the company is conducted. Based on this asset beta is developed from the equation shown below This is more realistic as the return is dependent on the profitability rather than the movement in the stock price. Another method to use accounting information based model is creation of scaled risk measurement with respect to certain accounting ratio that is important from the viewpoint of the asset. Apart from this various other studies have been conducted and it shows that the validity of CAPM may be improved by using more data and data that isnt too old or is based on different market conditions. This ensures that the realistic market parameters and conditions are employed. (2) The NPV has been calculated for the proposal. This has been shown below Year 0 1 2 3 4 5 Value of Old Machine 170000 Cost of New Machine 280,000.00 230,000.00 180,000.00 130,000.00 80,000.00 30,000.00 Depreciation/ Principal Payment 50,000.00 50,000.00 50,000.00 50,000.00 50,000.00 Loan for the year 255,000.00 205,000.00 155,000.00 105,000.00 55,000.00 Interest Payment for the year 22,950.00 18,450.00 13,950.00 9,450.00 4,950.00 Salvage Value of Old Machine 86,000.00 Salvage Value of New Machine 40,000.00 Saving in Cooling Cost 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 Loss of sales 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 Working Capital Requirement 23,000.00 Working Capital Recoup 23,000.00 Cash Flow 63,000.00 (12,950.00) (8,450.00) (3,950.00) 550.00 38,050.00 Tax - - - - 165.00 11,415.00 Net Cash Flow 63,000.00 (12,950.00) (8,450.00) (3,950.00) 385.00 26,635.00 Discount Factor 1.00 0.92 0.84 0.77 0.71 0.65 PV of Cash Flow 63,000.00 (11,880.73) (7,112.20) (3,050.12) 272.74 17,310.92 NPV 58,540.61 Several assumptions have been made. These have been mentioned below 1. No tax will be applicable on the sale of the old machine. This is because the originalprice of the machine is $340,000 and its life is 10 years. Since it is depreciated based on straight line method the value of the machine after five years will be $170,000. Since the machine is being sold at a price less than its actual value no tax will be applicable. 2. The depreciation that is being calculated for the new machine is considered as the repayment amount of the loan that has been taken for the purchase of the new machine. This has been reduced from the cash flow. 3.The interest is calculated on the average of the principal amount at the start of the year and that at the end of the year. 4. All the payments, savings, losses and sale are considered to be occurred at the end of the year. 5. At the end of five years, tax is paid for the sale of new machine for the amount in excess of the salvage value. After considering the depreciation of $50,000 for the five year period the salvage value is $30,000 whereas the sale of old machine is at $40,000. There is gain of $10,000 and tax has been calculated on this amount. 6. The working capital requirement is considered at the start of the year while the recoupment of this is considered as the gain and tax is considered on this as well. 7. The cost associated with feasibility study has not been considered as this is the sunk cost for the company. This is because even if new machine is not purchased the cost cannot be recovered. In the given situation the purchase of the new machine can be considered. This is because there is significant cash inflow and the NPV is positive. However further study with respect to the savings and the discount rate may be conducted. Even if the discount rate increase the cash flow will be positive as the inflow from the old machine is there. If this inflow from the sale of old machine is not considered, because there is loss of $84,000 in old machine, the NPV will be negative. Considering this the machine should not be purchased. However this may not be considered since only the cash flow will have to be seen. This has been shown above based on which NPV is positive. References Damodaran, A. (2011). Alternatives to the CAPM: Part 1: Relative Risk Measures. [online]. Fletcher, J. Kihanda, J. (2005). An Examination of Alternative CAPM-Based Models in UK Stock Returns. Journal of Banking Finance. volume 29. no. 12. Pp. 65-66 [online]. Knox, D.R. (2011). Examining CAPM in Today's Markets. Toms, S. (2012). Accounting based risk measurement: An alternative to CAPM derived discount factors. The York Management School. Working Paper No. 68. ISSN Number: 1743-4041. [online]. Machado, J.J.G. (2013). THE CAPITAL ASSET PRICING MODEL (CAPM). Fama, E.F. French, K.R. 92004). The Capital Asset Pricing Model: Theory and Evidence. Journal of Economic PerspectivesVolume 18, Number 3. Page 25-46. [online].