The Capital Structure Decision and the Cost of Capital Essay Sample free essay sample

Advantages and Disadvantages of Debt funding Advantages The biggest advantage of debt funding is that it allows the laminitis to stay the proprietor without sharing the control with anyone else as it is the instance with equity funding. The proprietor can take determinations on his ain without holding to confer with or be influenced by anyone and therefore enjoys full authorization. The proprietor doesn’t have to portion the net incomes from operations with anyone and therefore can maintain it to himself or reinvest in the concern as it is to his ain advantage. There are no claims to the net incomes except for the installments owned to the debitor. The life of claims to the net incomes is limited till the loan is exhausted including the interested after that the full net incomes earned remain with the proprietor. in contrast to equity funding where net incomes are shared among the stockholders throughout the life of the concern. We will write a custom essay sample on The Capital Structure Decision and the Cost of Capital Essay Sample or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page As the company pays off its debt in clip it improves it recognition evaluation. which helps it to get fundss in future. as fiscal establishments prefer companies with high recognition evaluations to widen loans. The disposal of debts is easier as it does non necessitate you to execute complex processs. and fix certain studies sporadically to portion information with the stockholders. the lone disposal required is to refund the sum within the given clip restraints. The involvement disbursal is revenue enhancement deductible hence debt funding increases the net net incomes for the company. ( Ross. Westerfield. Jordan. and Jordan. 2003 ) Disadvantages The biggest disadvantage of debt funding is that it requires refunds at regular intervals which may turn out to be a hard duty for new companies as they may non hold regular hard currency flows and may default their payments and will subsequently hold to pay terrible punishments imposed through the contract. Not run intoing payments in clip will besides ache the company’s recognition evaluation and may do jobs for it to get funding in future. . ( Ross. Westerfield. Jordan. and Jordan. 2003 ) Lenders normally extend loans to established companies for their repute hence it is a job for newer companies to get loan and have to set heavy collaterals to acquire them. Interest is an disbursal that a company has to pay for the loan and it may do its interruption even point to lift and may make jobs at the clip of crisis where hard currency flows are few. The Affect of Debt funding on needed rate of return As explained by the Modigliani-Miller theorem the cost of equity additions with the addition in debt funding. This is due to a simple ground that company’s increased dependance on debt increases its exposure. because if the company is non able to run into the needed payments in clip it may hold to confront several effects including selling off of assets. hence the degree of hazard attached with puting in the company increases. For this ground the investors now requires a higher rate of return as compensation for the sum of hazard that he bears for puting in the company. ( Lacey and Chambers. 2007 ) As the revenue enhancements are included in this theoretical account the relationship between the hazard. debt and cost of capital remains the same but it raises superciliums at the company’s terminal as they witness that as debt additions replacing equity in the capital construction of a house the leaden norm of cost of capital ( WACC ) starts dropping as equity is eliminated and so is the cost attached to it and we end up accomplishing the optimum capital construction at a point where the capital construction of the house comprises 100 % of debt. This evidently holds true under the premises made for revenue enhancement payments that it will be most good for the company to wholly trust on debt for financing it undertakings. Optimum Capital Structure Capital construction refers to how a house has financed its assets. it comprises of two basic constituents debt and equity mixed in certain proportions. The optimum capital construction refers to such a mixture that maximizes the value of the house. ( Ghosh. 2007 ) There are two basic determiners of Optimal Capital Structure: The revenue enhancement deductibility advantage of debt funding acts as a major attractive force for fiscal directors to fund the assets through debt The hazard associated with higher debt to the steadfast acts as a neutralizer. hence keeping the directors to wholly trust on debt and affect equity alternatively Harmonizing to the Modigliani-Miller theorem the optimum capital construction for any steadfast comprises 100 % of debt but it is non applicable in the existent universe in fact no proper expression can be calculated for any company to compose its capital construction. It depends from company to company and from state of affairs to state of affairs. ( Lacey and Chambers. 2007 ) The Case For the nutrient supermarkets company I have chosen Wal-Mart. it one of the largest corporations in the universe in services industry. It focuses on supplying broad assortment of merchandises under one roof at the lowest possible monetary value. it targets an mean adult male with a center and lower category income while non burying the upper category every bit good. It operates all over United States and has shops in legion states every bit good. the focal point of its service is availability and monetary value hence net income borders remain low. The company can afford a high debt ratio because it has a uninterrupted hard currency flow. it increases with seasons such as the vacations but else remains consistent throughout. I recommend a high debt ratio because due to uninterrupted hard currency flows it has an increased ability to pay off its debt and hence minimising the hazard of defaulting the payments. while making so it required return on equity may increase but as the debt rep laces the equity the WACC decreases supplying an Optimum Capital construction that comprises of a higher proportion of debt. For the vesture company I have chosen Nike. it manufactures athleticss dress for both work forces and adult females. its operations are expanded all over the universe. Costss are minimized by outsourcing the fabrication to states offering inexpensive labour. it targets people involved in athleticss and promises high quality athleticss good. the merchandises offered are good priced and surely non inexpensive hence its mark market are people belonging to middle to upper categories of income. Since it is an dress company that offers exclusivity and quality it can put a high monetary value and can hold high net income borders but it can besides easy be affected by a alteration of gustatory sensation in people or loss of involvement in a peculiar athletics hence hard currency flows although high but are non that assuring. sing that the company should keep a average debt ratio as the hard currency flows will be maintained but will non be consistent still the company will be able to run int o its payments. hence the optimum capital construction for Nike should hold about equal proportions of debt and equity. ( Ghosh. 2007 ) Marriott International was my pick for Hospitality Company ; the company offers hotels at all monetary values from extremely priced suites to cheap motel suites. It attracts people who travel a batch. corporate clients and tourers. since cordial reception concern is greatly affected by the political and legion events the exposure remains high. hence the company should keep a low debt ratio sing the fact that hard currency flows are non that assuring and holding a high debt ratio will expose the company to unneeded hazard. So the optimum capital construction for Marriott International must largely consist of equity for funding. As debt is a direct index of the hazard for puting in a peculiar company hence based on my recommendations. the beta for Wal-Mart should be comparatively high. for Nike should be comparatively low and for Marriott should be comparatively lower. As all three companies are immense and have certain reputation attached to their names hence their beta should be and is comparatively low to the market. Mention: Ghosh. Arvin ( 2007 ) .Capital Structure and Firm Performance. Piscataway. New jersey: Transaction Publishers. Ross. Stephen A. . Westerfield. Randolph W. Jordan. Bradford D. A ; Jordan. Bradford ( 2003 ) .Necessities of Corporate Finance + Self Study CD-ROM + PowerWeb. McGraw-Hill/Irwin. Lacey. Nelson J. . A ; Chambers. Donald R. ( 2007 ) .Modern Corporate Finance: Theory A ; Practice. Hayden-McNeil Publication.

Ways in which activities of international firms threaten sustainable development. The WritePass Journal

Ways in which activities of international firms threaten sustainable development. Introduction Ways in which activities of international firms threaten sustainable development. ) Ways in which activities of international firms threaten sustainable development. The issue of whether activities of international firms exert pressures on environment has fueled much of the ongoing debate on international trade and environment (Kirkpatrick et al. 2004). On one side, international firms are seen to contribute to sustainable development  whereas on the other hand, they serve as impediments to this transition. Some of the benefits of international trade include increased investment flows and production of goods in which a country has a comparative advantage in (DFID 2002). Countries also benefit through access to foreign markets that allow for better exploitation of economies of scale (Kirkpatrick et al. 2004). Beyond the economic benefits, FDI can also contribute positively to the environment. Multinationals may contribute to climate change mitigation in important ways. They can play a greater role in the shift towards a low carbon economy. Multinationals may contribute to sustainable development through international transfer and diffusion of low-carbon technologies to the host country (Randaccio 2012).The cleaner production technologies used by multinationals may be absorbed by local firms (Randaccio 2012). In fact, the presence of international firms in developing countries may yield substantial environmental benefits, a process known as Pollution Halo effect (Randaccio 2012). As pointed out by Dean Lovely (2010), FDI may bring greener technology to a countrys fragmented sector. This is particularly evident with top Chinese firms which have benefited from environment spillover effects. A study by Marconi Sanna-Randaccio (2011) found that top Chinese firms used Clean Development Mechanism (CDM) projects in many areas to adopt technology provided by leading foreign firms. It is clear from the above that activities of international firms may contribute to sustainable development through international transfer of cleaner energy production technologies and through the transfer of financial resources and managerial skills to resource-constrained economies (Randaccio 2012) However, while such multinational firms may have positive socio-economic benefits and environmental spillover benefits in the host country, their activities may as well threaten sustainable development. The negative effects can be categorized into: scale effects, structural effects, production and distribution effects and regulatory effects. Scale effects While cross-border investments may increase the scale of production and consumption; it may as well have adverse social and environmental impacts. The increase in production may be accompanied by an increase in resource material use and higher levels of pollution (Kirkpatrick et al. 2004). Structural effects Structural changes in the economy of a country may occur as a result of trade liberalization (Kirkpatrick et al. 2004). Where such changes favour industries that extract less natural resources, the impact on sustainable development becomes positive (Kirkpatrick et al. 2004). However, where such changes favour industries that extract more of the natural resources, the effects occur in the opposite direction (Kirkpatrick et al. 2004). Production and distribution effects The transfer of production from the foreign country to the host country may have certain distributional effects in the host country. The consequent distributional effects between trading partners may be damaging to the environment (Kirkpatrick et al. 2004). In particular, trade liberalization may result in pollution havens (Smarzynska Wei 2004) Regulatory effects The regulatory effect may be positive or negative. A positive effect may occur where increase in trade may stimulate adoption of environmental standards whereas a negative effect may occur where policies and regulations are constrained by the need to comply with multilateral agreements (Kirkpatrick et al. 2004).. Fig.2 Impact of trade policy on sustainable development (Kirkpatrick et al. 2004). Although activities of international firms may have positive or negative impact on sustainable development, the overall trend that has been observed across the globe has been negative. In many countries, the viability of the ecosystems has been threatened by the activities of multinational firms.   Since most of these international firms are purely profit driven, their activities have led to the depletion of tropical forests, marine pollution, habitat destruction, and extinction of endangered species, land degradation and loss of crop cover (Moir Carter 2012). A prime example can be seen with Shell’s operations in Nigeria. Given the abundance of natural resources, particularly the vast reserves of petroleum, Nigeria has played host to oil multinationals (Kadafa 2012). The activities of Shell have turned hitherto productive areas into wastelands, adversely affecting the livelihoods of the local community who are predominantly small-scale farmers (Kadafa 2012). The loss of natural capital and degradation of land especially in the delta region has forced the affected delta community to migrate to other productive regions (Kadafa 2012). This has also heightened tensions between the local community and oil operating companies (Kadafa 2012). This notwistanding, gas flaring in the region has contributed significantly to greenhouse gases and air pollution which has had dire consequences on ecology. A similar scenario can be seen with the activities of Multinational oil companies in Angola. Oil exploration in Angola has also adversely affected fish farming in Cabinda (Agostinho et al 2005). Other popular examples include Exxon Valdez and BP oil spills, which have had the largest and most damaging impact on the environment. Ways in which government can seek to reduce the threat Governments have a greater role to play in reducing such threats. Governments can adopt a number of measures which include: Offering financial incentives to encourage environment friendly activities. Closely monitoring activities of international firms to ensure compliance with the set environment standards Ensuring adherence to the ‘polluter pay principle’ which require the person responsible for pollution to bear the cost (Harris 1995). Ensuring that areas under agriculture, forestry and aquaculture are managed sustainably (Carvalho 2001) Safeguarding endangered species and protecting their habitats (Carvalho 2001). Auditing environmental and social management systems of international firms (Harris 1995) Ensuring that multinationals have contingency plans in place to prevent the adverse impacts of their activities on environment Engaging and consulting with the local community when undertaking projects (Harris 1995) Requiring multinationals to disclose information on project risks and their approach to mitigation Ensuring a robust environment and social impact assessment (ESIA) is undertaken by international firms before commissioning of a project (Harris 1995) Promoting international trading system that enhances sustainable development. Conclusion It is clear from the above that the activities of international firms threaten sustainable development in a number of ways. Cross-border investments increase production which is accompanied by an increase in resource material use and higher levels of pollution. Trade liberalization may result in pollution havens. Also, environment policies and regulations may be constrained by the need to comply with multilateral agreements. On the contrary, the activities of international firms may contribute to sustainable development through international transfer of cleaner energy production technologies and transfer of financial resources and managerial skills to resource-constrained economies. The overall trend on sustainable development has however been negative. In many countries, the viability of the ecosystem has been threatened by the activities of multinational firms. Reference Anon, 2010. Republic of Angola national marine oil spill contigency plan. BCLME region Angola Carvalho, G.O., 2001. ‘Sustainable development: is it achievable within the existing international political economy context?’ Sustainable Development, 9, 61-73 Dean, J. M. and Lovely, M. E., 2010, Chinas Growing Role in World Trade, NBER Conference Report series. Chicago and London: University of Chicago Press, pp. 429-69, DFID,   2002. Sustainable Urbanisation: Achieving Agenda 21, UK Department for International Development and UN Habitat, Harris, G., 1995, ‘Transnational Corporations’ Strategic Responses to â€Å"Sustainable Development†Ã¢â‚¬â„¢ , In: Helge Ole Bergesen, Georg Parmann, and Øystein B. Thommessen (eds.), Green Globe Yearbook of International Co -operation on Environment and Development 1995, Oxford: Oxford University Press, pp.93–106. Kadafa, 2012. â€Å"Oil exploration and spillage in the Niger Delta of Nigeria†. Civil and Environmental Research, vol.2 (3) Kirkpatrick, C., George, C., Scrieciu, S.S., 2004. The implications of trade and investment liberalization for sustainable development: review of literature. The University of Manchester Marconi, D. and  Sanna-Randaccio, F., 2011, The Clean Development Mechanism and Technology Transfer to China. Social Science Electronic Publishing, Inc Moir, S. and Carter, K., 2012. ‘Diagrammatic representions of sustainability a review and synthesis’. In: Smith, S.D (Ed) Procs 28th Annual ARCOM Conference, Edinburgh, UK, Association of Researchers in Construction Management, 1479-1489. Randaccio, F.S., 2012. Foreign direct investment, multinational entreprises and climate change. Review of Environment, Energy and Economics Smarzynska J. B. and Wei, S.J., 2004, Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?, Contributions to Economic Analysis Policy, 3: 1-32. World Commission on Environment and Development, 1987, Sustainabilty, Oxford University press

Abnormalities in returns and gains in financial markets Assignment

Abnormalities in returns and gains in financial markets - Assignment Example Questionable interests have been raised as a means of gaining an insight in causes of the abnormalities in the financial market studies. Much of the interest raised has been directed towards understanding the nature of the gains on both the two major types of offers. It is important to know whether the gains are truly anomalous or whether they are communal with the firms that are nonevent with features that are connected to the average returns. According to Famar & French (1993), book to market equity and size are the two variables believed to have connection with the average stock return (ASR). The long term buy and hold returns only apply for the size and this may result to the outcome being affected by additional variables that are common with the average return. Famar and French’s research aimed at comparing the half a decade period buy-and-hold gains on initial public offers that had gains on portfolios that matched the initial public offers on size and book to market equ ity. The two types of public offers were not considered in the research. The study led to helpful findings. A half decade relative wealth increased from a percentage of seven to about a hundred percent. The study showed that buy and hold gains on securities equity discount are almost equal to the one produced by the non event portfolios with common size and BE/ME. Independent studies conducted by different researchers led to the deduction that the two types of public offers were minimal growth stocks.

Charles Manson Research Paper Example | Topics and Well Written Essays - 1250 words

Charles Manson - Research Paper Example The presence of malice aforethought as implied by the conduct of the accused constitutes murder; thus, without malice the homicide becomes manslaughter. Apart from malice being a statutory requirement for murder, the unlawful killing must be of a human being; even though, what constitutes a person is controversial issue in law in US since the fourth amendment of the constitution does not recognise foetus as a person yet some states recognise foetus as human being (Carper, McKinsey and West 2008). Charles Manson was notoriously linked to the slaying Sharon Tate an actress and other Hollywood residents even though he was not convicted of carrying out the murders himself; moreover, he was associated with the famous ‘Tate-La Bianca’ killings that immortalised him as the embodiment of the evil. Manson together with his loyal disciples are believed to have carried out at least 35 killings that mainly were never tried because of the lack of proof or because the architects were sentenced for life for the Tate/La Bianca killings. At his birth, he was named as Charles Milles Maddox by his mother, who was at the time, was an alcoholic and a prostitute. The mother later got married to William Manson; nevertheless, the marriage was short-lived and Charles ended up in a boy school. Charles came back to his mother, but she was not interested in him and soon Charles commenced a street life surviving on petty crime (â€Å"Charles Manson†, n.d.). Probation reports revealed that he was suffered from high degree of rejection, psychic trauma and instability thus the struggle for a status; moreover, the reports indicated that he was dangerous, unpredictable and only safe under supervision. Since 1958, Manson was arrested and released for various offenses such as passing of stolen checks and ‘pimping’ which sent him to McNeil Island prison for ten years. While Manson was incarcerated, he discovered his creative talent, gained knowledge in reading musi c and playing guitar, and finally freed in March of 1967. The next year, Manson organized a murderous operation that made him a considerable figure in criminal history. Therefore, Manson indicates a personality trait of passion associated with cult groups, which emerged in 1960’s. He pathologically believed that he was the forerunner of doom regarding the future of the planet similar to the way cult and evangelistic figures claim prophetic knowledge of the end of the world. Drugs, artworks, and music that prevailed at the time influenced Manson; moreover, Manson had strong belief and interest in the concept of the Armageddon in the bible (â€Å"Charles Manson†, n.d.). The first victims of Manson’s criminal activities were guests at a Beverly Hills home that included Sharon Tate an actress of who was seven months pregnant, where Manson gathered most of his devoted followers to accomplish the task. Moreover, the next day, Manson initiated another killing spree at the home of a wealthy couple Leno La Bianca and his wife, for this task, Manson chose his most obedient comrades. Even though, Manson was never directly involved in the killings, he manipulated his disciples and taught them to kill (â€Å"Charles Manson†, n.d.). Developmental life-course considers crime as a product of developmental process that begins prior to birth and progresses throughout an individual’s life. The developmental-life course theory considers the interaction of individual factors like personality and social factors like

Electronic commerce Essay Example | Topics and Well Written Essays - 1750 words

Electronic commerce - Essay Example It has also resulted to a difference in the way the companies relate to each other. The increased use of the internet has been contributed to by the need to perform business on line (Baye, Morgan, 2001). Various companies have managed to place their products on internet servers, where they have managed to advertise even using virtual brochures. In order for companies to attain competitive advantage, the virtual market should be untapped so as to reach so the many internet users (Baye, Morgan, 2001). Electronic commerce is defined as the buying and selling of goods, services or information through computer networks using the internet. E -commerce offers new ways of doing business that no company can ignore. Electronic commerce has brought with it several benefits, and it is also extremely convenient. Some of the benefits of e-commerce include; shortened remittance time, companies have managed to easily promote their product, both consumers and the companies have saved on the cost; it has enhanced the provision of timely information. E-commerce has also ensured a consistent flow of information; better customer relationship, it has enhanced the customization of products, and it has also brought with it the convenience of doing business (Baye, Morgan, 2001). ... The informational strategy has proved to be productive for most companies. An example showing the use of this strategy is Insight Direct, where a discount computer cataloger marketing mostly to business, obtains only 10 per cent of its deals from its on-line collection; however, such a company manages to get more than more 75 percent new customers from the site (Baye, Morgan, 2001). Another strategy used in e-commerce is the on-line or transactional strategy, which normally uses an electronic catalogue of goods for sale. Those visiting the site can normally go through the catalog and purchase products online. Despite the fact that the informational strategy provides an electronic catalogue and ordering information, it does not enhance online business transactions. The informational strategy does not, therefore, exploit the ability of the web to be used as an interactive medium. The transactional strategy is what most consumers relying on e-commerce would expect. In e-commerce for a c ompany to increase its overall performance, it is essential that the company establishes a website. This strategy may have a disadvantage, which is transaction insecurity. Online transactions have proved to be successful both for the small and medium sized companies. Such companies that have benefitted using this strategy include; the Virtual vine yards and Amazon.com. The use of the online transaction strategy has enhanced the growth of various enterprises; this is because the web has proved to be a potential money making vehicle that can be used in e-commerce (Baye, Morgan, 2001). The two strategies, however, have both advantages and disadvantages. The advantages of using the informational strategy include;

Analysing the business of Merck and Davanrik

Analysing the business of Merck and Davanrik The recommendation is that, Merck should license the new drug Davanrik. The company is facing serious situation that most of their drug patents are going to expire soon. For maintaining companys value and profit, it is vital to invest into new drug development. In the other part of the report, a preamble of Merck and Davanrik, decision support data and the answers of important questions are provided in detail. Merck The Company is discovering new innovative products and developing new indications for existing products the result of its continuing commitment to research (Annual Report, 2000). Several products face expiration of product patents in the near term. U.S. product patents expired in 2000 for Vasotec and Pepcid and will expire in 2001 for Prilosec, which is supplied exclusively to AZLP, Prinivil and Prinzide, for which co-marketing rights have been licensed to a third party, Mevacor and Vaseretic. In the aggregate, domestic sales of these products represented 19% of Merck human health sales for 2000 (Annual Report, 2000). The patent expiration can cause deeper drop in overall sales. (Mercks Consolidate Balance Sheet: See Appendix A) Davanrik Davanrik originally developed by Lab Pharmaceutical Company to treat depression. Lab Pharmaceutical offered Merck to license her new developing drug. Lab Pharmaceutical is only 15 years old company. FDA has recently denied to approval one of their drug which completed all three phases. In response to this decision, Lab lost 30% of her overall sales. As a result, LAB was hesitant to issue additional equity to finance the testing of Davanrik and was seeking a larger pharmaceutical company to license the drug and provided the following facilities: Needed Cash Fund for clinical testing Manufacturing and Marketing Royalty on the eventual sales of Davanrik Decision Support Data Merck The patent of Mercks most popular drug is going to expire by 2002 Expiration of Patent can cause a deeper drop in overall sales. Merck needs new drug development to maintain its values and refresh portfolio. The company sales reflect continuous growth in earnings. The success of Davanrik would keep Merck Company in the black for the following seven years, while the failure of Davanrik would ultimately force Merck Company to quickly develop other profit producing drugs. Davanrik and Merck Davanrik is drug compound for treatment of depression and neurological disorders. Its need 7 years or more to approve form FDA in three phases. Phase I would take 2 years. It was expected to cost $30 million, including an initial $5 million fee to Lab for licensing the drug. There was 60% chance that Davanrik would successfully complete Phase I Phase II would take 2 years. It was expected to cost $40 million, including $2.5 million fee to Lab. Phase III trial would cost $200 million including a $20 million payment to lab. Merck Co. should analyze the following different types of factors to make a decision to license Davanrik: Expected revenue Expect royalty fees to lab License fees for each phase Success probability at each phase Marketing cost Merck responsibility at each phase Phase I Testing would cost $30 million including $5 million to lab Total duration of phase 2 years Probability of Success 60% Phase II Testing would cost $40 million including $2.5 million to lab Total duration 2 years Probability of success for depression only 10%, for weight loss 15% and for both 5% Phase III Cost and success probability are depend on the result of phase II Testing would cost for depression only $200 million including $20 million to Lab and probability is 85% Testing would cost for weight loss only $150 million including $10 million to Lab and probability is 75% Testing would cost for both (Depression and Weight loss) $500 million including $40 million to Lab and probability is 70% Depression only cost $250 million to launch with a PV of $1.2 billion Weight loss only cost $100 million to launch with a PV of $345 million Both depression and weight loss would cost $400 million to launch with a PV of $2.25 billion Overall Failure Risk Questions and Answers Should Merck bid to license Davanrik? How much should they pay?   There is an extreme risk of failure in taking Davanrik. However, pharmaceutical drug producing industry does have to be risk seeking, because no any drug can get an approval. It is recommended that Merck Co. should accept Lab pharmaceutical offer for Davanrik. The expected value of Davanrik is around $14 millions. What is the expected value of the licensing arrangement to LAB? Assume a 5% royalty fee on any cash flows that Merck receives from Davanrik after a successful launch.   LAB would also receive a 5% royalty fee on any from future sales of Davanrik separate from the milestone payments and regardless of the costs associated with getting the drug to market. Expected value of the licensing arrangement to Lab: Phase I (100% chance of success): $5 million Phase II (60%): 2.5 million Phase III depression (10%): $20 million Phase III weight loss (15%): $10 million Phase III both (5%): $40 million Depression Success (85%): $1.2 billion * 0.05 Weight Loss Success (75%): $345 million * 0.05 Depression Success [Lower path] (15%): $1.2 billion * 0.05 Weight Loss Success [Lower path] (5%): $345 million * 0.05 Both Success (70%): $2.25 million * 0.05 How would your analysis change if the costs of launching Davanrik for weight loss were $225 million instead of $100 million as given in the case?   Analysis is depending on the success probabilities and failure risks. At phase III, there is only 5% chance of success on weight loss. BY using decision tools the values will be calculating again. What other issues should Merck consider in taking this decision?   Merck Co. should consider the cost of marketing, administration and overall sensitivity of each testing phase. The royalty, cost and overall failure risk is also vital factors to be considered for the decision. Merck should also consider that their drugs patents are going to expire and their many other drugs are not approved by the FDA. How has Merck been able to achieve substantial returns on capital given the large costs and lengthy time to develop a drug?   Merck Co. is a big and economically stable company which can afford large costs and lengthy time to develop a drug. In other hand Lab pharmaceutical is a small company which is not very flexible to handle such type of task. Research and Development is the strength of Merck. Once the drug approve, Merck can produce it for long time period. Appendix A Source: Mercks Annual Report 2000 Appendix B Source: Unknown

Death Penalty Essay -- essays research papers

In society today there are murders committed everyday. Everyday the people who commit these crimes are found guilty in a court of law and sentenced in prison. Some even get chances for parole. What the courts should do is take every murderer, give every one of them the death penalty, and follow through with it. The death penalty should be legal in all 50 states and carried through when given out as a sentence. Gary Gilmore faced a firing squad at the Utah State Prison on January 17, 1977. There have been 55 murders in that state during 1976. During 1977, in wake of the Gilmore execution, there were 44 murders: a 20 percent decrease. As you can see, the execution had some effect on the murder rate in Utah (Solotaroff 2001). There are very few proven facts about capital punishment decreasing crime at this time. This is so because capital punishment is not used enough to actually have an effect on people. It is a fact that of all murder sentences that 38 percent get the death penalty. Of that 38 percent only 0.1 percent are executed. If we use the death penalty more often and actually carry through with it, it will have an effect on the crime rate in the country. People will see that finally we have justice in this country and if they do this, there is a good chance they are going to be caught and they are going to receive the death penalty. We also need the death penalty in this country because if we execute the murderer that person has no chance to ever kill or harm another p...