Birmingham Letter Illusions Essay Example for Free

Birmingham Letter Illusions Essay Letter from Birmingham Jail Allusions in Section 3 Martin Luther King’s Letter from Birmingham Jail is one of the most well known documents in American history. King’s profound ability to articulate important ideas, values, concepts and Biblical perspectives made for some of the most powerful and inspirational pieces of American literature ever produced. One technique that King used in his public speeches and letters was his allusions to historical figures, the Bible and opposing congressmen. During the 60’s when cultural prejudice still held strong roots in Congress, it was King’s talent to inspire the public that revolutionized America’s racial injustices. King’s frequent use of allusions in his famous Letter from Birmingham Jail proved his intelligence and greatly attributed to his success and popularity during the 1960’s. His allusions demonstrated his referential capabilities while also making his messages readily relatable to the public. It was often said that it was not King’s intelligence that made him seem so acumen, but that he was â€Å"well read†(knew much from reading). His frequent allusions to major documents and famous statements in contest to his adversaries ultimately lead to his dominance in public speech. In the paragraphs 12 through 14 when king references the election of mayor Albert Boutwell, he states, â€Å"We are sadly mistaken if we feel that the election of Albert Boutwell as mayor will bring the millennium to Birmingham† in paragraph twelve. The millennium is an allusion to a specific verse from the Bible’s book of Revelation interpreted as the 1,000 years in which Jesus comes back to earth to restore peace. He made many correlations to the Bible and major public documents, such as the Declaration of Independence and the Bill of Rights to make his arguments accurate and mainly understandable by restating vital rules and quotes that even the illiterate could comprehend. In these paragraphs he quoted the Bible by using phrases like â€Å"moral light, â€Å"abyss of despair† and â€Å" unjust posture. † King used the word â€Å"wait† in this section of the letter multiple times as a allusion to the current denial of rights to African Americans that had been going on for the last 340 years. He also stated that â€Å"justice too long delayed is justice denied† in correlation to the current racial dilemma in America at the time. All of these direct references made for some of the most significant and powerful American literature ever created and made Martin Luther King one of the most successful authors in this period of civil revolution. By reinforcing his argument with allusions that the public could relate to, King was able to greatly impact the civil rights movement of the 1960’s and ultimately bring around the social turning point of the century that provided racial equality to all and smother prejudice in America thereafter.

Zhao Ji Essay -- Biography

Zhao Ji was the eleventh son of Emperor Shenzong of the Northern Song Dynasty. Being so far down the line for succession to the empire, he spent his time devoting himself to his loves of literature, art, and Daoism; surrounding himself in luxury and sophistication. He built up and catalogued an extensive painting collection, Xuanhehuapu, with over 6,000 paintings. To date, no earlier collection, neither court or private, is known to have as much detail as Huizong’s because book length catalogues of his paintings, calligraphies and antiquities all survived (Ebrey, p.5). Huizong wanted to reform court music that had been degenerated during the Five Dynasties Period and was an avid believer in ruiying, Heaven’s way of communicating with the earth. He is thought of as the only accomplished artist in a line of emperors all who loved and appreciated the arts (Oxford Art Dictionary). It is his love of the arts, and his decisions to favor art and religion over politics that i s associated with the fall of the Great Northern Song Dynasty, a dynasty that ruled from 960 until it was lost at the hand of Huizong in 1127. Huizong was a literati artist, well trained in poetry and calligraphy often looking at paintings in terms of these two arts, adopting many of the aesthetic concepts set forth in Ershisi Shipin (The 24 aspects of Poetry). As a literati artist he believed in â€Å"depth and primitive simplicity† in his work, and that painting was an enjoyable activity intended to please one’s self and one’s friends (Barnhart, p.3). His development as an artist was oversaw by three friends, all of high social rank, but of different interests. Zhao Lingrang was a painter and assisted the Emperor in his continual search for scrolls to adorn his colle... ... â€Å"In popular Chinese memory, Huizong is known as the Artist-Emperor (Ebrey, p.8)† He was talented enough to have made a name for himself, had he not become emperor. During his twenty six year rule he established the most impressive art collection anyone has put together to date. He established a school for court painters and restored music in China. It was simply his own misfortune that during his rule, his empire would fall to the Jin tribe from the North. Perhaps it is because â€Å"Huizong loved the beautiful so intensely that he had no head for the tough side of governing (Ebrey, p.11)†. However I do not think it would be fair to overlook all that Huizong did for the arts of China and simply concentrate on the ill fortune that forced him to lose his empire. A few bad decisions shouldn’t undo all the greatness that Huizong has enabled through his love of the arts.

Analysis of the Nature and Culture Division

The advances in the understanding of nature in terms of scientific knowledge has been tremendous especially since the mid-1950’s with the discovery of the DNA structure, which precipitated more advances in molecular biology, genetics, and biochemistry.   However, in the end of the 20th century until now, our modern society has seen more and more debates about how nature has been altered and/or destroyed by our progress in technology, in particular biotechnology.Yet, one may wonder if the debate over technological progress affecting nature or more specifically, natural laws that govern our existence, does reflect a cultural bias in the general comprehension of technological progress in our society.   Consequently, three questions may be asked to completely analyze the problem.   First, is there a nature/culture problem to be discussed?   Second, if there is, how has it affected our global society with respect to a cultural shift caused by particular developments in scie nce and technology and when?   If there is a global effect, is there a tangible effect on our personal life?   This paper will deal with each of these questions.The amazing characteristics that humans possess, is to learn from previous generations, to improve upon their work, and to establish a momentum to human life and culture that has taken our civilization from cave art to quantum physics, and into the space age.   In addition, other scientific advances bring about technological progress in our direct environment and society, more so than being in space.   Even more so has biotechnology been altering the nature of our humanity, not only in terms of ‘programmed’ physical changes based on scientific discoveries, but also in terms of environmental changes.Unfortunately, people’s understanding of what science is capable of either to benefit our society or destroy it, has been undermined since the Industrial Revolution in the 19th century.   How do we kn ow that?   Simply consider the history of our society until now with the debate over cloning and stem-cell research that have come under fire in our western part of the world.   In both cases, a further division has taken place within the world scientific community.   Some countries allow the research whereas others do not.   Consequently, what can we draw from this chiasm, is it due to a cultural difference?   If it is, then do we really understand what the meaning of culture is?   If we do, can we reconcile differences?Raymond Williams tells us that there is a great difficulty in even defining the concept of culture. (Williams, ) Is it a division of the whole into parts (the individual) like Latour claims or a whole global entity like Tarde thinks? (Latour, Social in Question)   Furthermore, Williams is not even sure himself of what nature really means.   On page 78, he does tell us that there is a general confusion or disparity of what different people mean by nat ure.   Is it either the nature of man (biology), the natural nature of our environment, or both?   Latour seems to agree with Williams that there is a problem of defining the context of nature and culture.   Latour uses the illustration of one simple event like using an aerosol can after which people are taken on a journey to Antarctica, to touring scientific labs across the world, and the chemistry of inert gases. (p. 2 Crisis) (Latour, )This implies that the complexity of the division is based not only on the science of the natural environment, but also first on how people are affected by the effects of the ozone problem, and second how different people or the world as a single cultural phenomenon perceive the problem.   The conclusion is that the division exists but its very existence is very confusing to any person from any part of the world or the whole world, perhaps minus the scientists.   Rabinow’s expose supports this idea of confusion when she claims using Michel Foucault’s and Gilles Deleuze’s arguments that there has been a shift caused by this division, particularly on how we as a species comprehend ourselves and our environment.   Specifically, on p. 91, she states:â€Å"In the modern form, finitude establishes a field of life, labor, and language  within which Man appears as a distinctive being who is both the subject and object of his own understanding, but an understanding that is never complete because of its very structure.† (Rabinow, )Toxen is convinced that this magnitude of this shift has actually been more like a revolution with respect to science and technology in our society. (Toxen, 1983) On p.1, he emphasizes that there is a total reshaping of â€Å"industries, companies, universities, and laboratories to sustain the present mode of production.†Ã‚   He adds that the cause of this shift seems to be linked to a push for biotechnological advances, especially in our time (he wrote this art icle in 1983).So, how do this shift and the nature/culture division affect our own existence?   Callon speaks of auto engineers in France becoming sociologists in order to manufacture the first electric car.   As a consequence, engineers define what society will be like and how it will be changed because of the introduction of such a new mode of transportation.   Their resulting conclusions motivate their work while reshaping our ideas or shall we say our cultural acceptance. (Callon, )   In the same vein, biotechnology has been hailed as the only way to remedy problems that our society faces.   For example, Lappe and Collins cite the example of how biotechnology is supposed to solve world hunger but people are starving more than ever. (Lappe-Collins, )An illustration of this idea is cited by Pollan with Monsanto genetically engineering a bug-killer potato that may be hazardous to our health so we would not be able to eat it anyway! (Pollan, ).   In the context of ecolog y, Schwartz and Thompson speak of â€Å"Nature benign gives us global equilibrium.† (Schwartz, Thompson, 1990) This idea implies that science and technology cannot help the way that is propounded.   The reason is simple: there is not enough comprehension of us as individuals and as a civilization (culture) to solve the mostly self-inflicted obstacles encountered with our nature as a species as well as our environment (nature).In conclusion, there is a real doubt whether science and technology can help our society.   Since there is a fuzzy picture of how we understand the division between culture and nature, science and technology cannot claim that they understand what shapes our society for the better while they certainly do not understand how they can shape society for the worst.ReferencesCallon, ?. (Year?). Engineers as sociologists. Publication? 210- 216.Lappe, ?, Collins, ?. (Year?). World hunger: twelve myths.   Publication? 48-66.Latour, B. Joyce, P. (editor). (Ye ar?). The social in question. New bearings on history and the Social Sciences. London: Routledge.   (year?). Crisis. Publication? 2-12.Pollan, M. (date and year?). Playing God in my garden. The New York Times. 1-12.Rabinow, P. (Year?) Artificiality and enlightenment: from sociobiology to biosociality. Publication? 91-110.Schwartz, M., Thompson, M. (1990). Divided we stand: redefining politics, technology, and social choice.   London: Harvester & Wheatsheaf.Toxen, L. (1983). The life industry in gene business: who should control biotechnology? London: Association Books.Williams, R. (Year?). Title? Publication? 68-84.

High-Risk Family Assessment Essay

Homelessness can occur even in the most stable income families. Families that have a one income household can find themselves without employment suddenly from companies that are experiencing economic difficulties which lead to reduction in forces. The United States homeless populations decreased by one percent in 2011. The nation went from 643,067 homeless people to 636,017. The largest decrease was among homeless veterans. The number of homeless veterans declined from 75,609 in 2009 to 67,495 in 2011 (US Bureau of Statistics, 2012). Homeless families have many medical needs that need to be addressed by a health care provider. Nursing plans are based on the assessment of family needed and interventions should be individualized. In the following paper, the writer will provide an assessment of how homelessness affects family processes. Healthy People 2020 objectives related to homelessness are identified and, a list of nursing interventions was developed. Homeless families are mostly s ingle parent families with women as head of household. The age range is 20-35 years old. Members of the family are often from minority groups. The primary causes of homelessness are the inability to pay rent, overcrowding and family conflict. Homeless families experience extreme poverty which put the family at risk for numerous health conditions (US Bureau of Statistics, 2012). The more serious acute and chronic illnesses as well as mental illness and children are vulnerable for a wide range of disease processes. It is estimated that 90 percent of homeless mothers has a mental illness with substance abuse and children have a high rate of development impairment (Wagner & Menke, 2002). Mothers demonstrate a high level of intense stress along with inability to cope. Children react to their homeless condition through hyperactive and aggressive behavior; their behavior can range from being withdrawn to becoming emotionally clinging (Wagner & Menke, 1992). The family’s life is marked by confusion, turmoil, constant chaos and stress so that family violence is common. Their  lives are also commonly marked by crime and victimization. Homeless families commonly suffer from malnutrition, infections, a wide number of diseases, and mental health problems (Cotton & Roden, 2007). The Homeless Family Assessment Assessment can be performed from several approaches. Wagner and Menke (1992) emphasize the value of case management because it is a holistic approach, uses comprehensive knowledge of health and illness, and has the capability to screen for deviations from the norm. Case management is able to take into account the fragmented nature of the homeless family and the use of many different agencies in care. Because homeless families are extremely vulnerable populations with highly complex needs, the clinical nurse specialist is the most appropriate health care provider for these families (Wagner & Menke). Healthy People 2020 Objectives Healthy People 2020 has the general goal of improving mental health and access to mental health services. Among the objectives is the improvement of people with co-occurring mental disorders and substance abuse problems. Another objective is to make assessment, diagnosis, and treatment available for these people. Nursing Interventions Nursing interventions need to focus on the mother’s strengths and allow her to maintain control over the family’s functioning. When homeless mothers have mental health problems, the first intervention should be providing access to care. Ensure a safe place for medications and adapt medication regimen. Provide for patient education and screen the children for physical and mental problems. Most especially, the clinical nurse specialist needs to collaborate and coordinate with ancillary care as the family will have ongoing issues. Health teaching must include all the psychosocial aspects of care and certain problems experienced by the family will require advocacy. Nutrition should be the first concern after shelter and the strategies may involve coordination, referrals and advocacy as well as guidance and teaching. Lack of good nutrition and an adequate daily diet is a source of impairment in all areas. The clinical nurse specialist will also act as advocate both for individual homeless families and all families that  require solutions to problems brought on by homelessness. Nurse Case Manager and the Homeless Family The homeless family would benefit from the assignment of a case-manager. The case manager may encounter the homeless mother with children on the streets in a situation of extreme instability. The case manager will follow the family and monitor any physical and mental health issues and make sure that the family is having proper care. Conclusion Although homeless families are decreasing slightly in the United States, it is still a high-risk area. A large proportion of these families are made up of single mothers with at least one child. The families are very vulnerable to acute and chronic physical and mental conditions while they have little or no access to care. Families can find themselves abruptly in the most extreme and stressful situation but they still have certain strengths as is observed in the fact that these families are intact. Single mothers of these families manage to maintain family functioning despite the odds. Stress as experienced by homeless mothers is intense and can lead to or exacerbate mental illness. Rather than focusing on mental illness, the health care provider needs to make shelter, nutrition and rest the main priorities because they contribute to mental health. Case management is the best approach to serve the needs of the homeless families. The health care provider’s role is teaching and counseling. One of the most valuable roles to the family is for the health care provider to be an advocate for them. References Amerson, R. (2008). Mental illness in homeless families. The Journal for Nurse Practitioners, 4(2), 109-114. Cotton, A. & Roden, J. (2007). Using patterns of knowing in nursing as a possible framework for nursing care of homeless families with children. Contemporary Nurse, 23(2), 331-342. Healthy people 2020: The road ahead. (2008). Journal of Environmental Health, 70(10), 82. Retrieved from http://search.proquest.com/docview/219721672?accountid=458 United States Bureau of Statistics, 2012 retrieved from www.usbureauofstatistics.gov Wagner, J. & Menke, E. (1992). Case management of homeless families. Clinical Nurse Specialist, 6(2), 65-71.

Corporate finance and Volatility

Corporate finance and Volatility Introduction Stocks’ beta expresses how much the stock prices may change as a result of changes in the financial market prices. A stocks beta of 1.06 indicates that for a 1% change in general market prices, the price of the particular stock will change by 1.06%. Such a stock price is considered to be less volatile.Advertising We will write a custom assessment sample on Corporate finance and Volatility specifically for you for only $16.05 $11/page Learn More Assets’ beta is the average of the different sources of finance that a firm chooses. The assets’ beta for a company that has been financed without debts is equal to equity’s beta. Weighted cost of capital represents the least amount of return that an investment can offer stakeholders. When the expected rate of return from a project is lower than WACC, it is considered unviable. Managers may consider those that break-even because of the economic level of returns. However, a proj ect must have a higher rate of return than WACC before wealth is created for holders of securities. A majority of firms uses debts to finance growth rather than wait for the profits. Fabozzi et al. (2008, p. 507) discuss that when a firm has no debt, â€Å"the beta of its equity is the same as its assets’ beta.† They also note that it is very rare for a company to operate without incurring some debts. Using debts makes a company’s equity riskier. Fabozzi et al. (2008, p. 507) explain that financial leverage causes â€Å"the market risk of a company’s stock to be higher than its asset’s risk.† In that case, equity’s beta exceeds assets’ beta. When the firms choose to fund assets by a combination of equity and debts, the risk involved is shared between the two groups of stakeholders. Fabozzi et al. (2008, p. 508) discuss that the â€Å"asset market risk is the weighted average of the company’s debt beta and equity beta be cause the asset’s risk is shared between creditors and owners.† In simple terms, the asset beta = debts beta (fraction of assets from debts) + equity beta (fraction of assets from equity). The equation of assets’ beta average is true because the variations from equity’s and stocks’ betas are correlated. The effect on one source of capital influences the chance of the other sources volatility.  Corporate taxable income is generated after deductions of interest paid on loans. The effect reduces what a firm pays as tax which makes their burden less. On the other hand, interest received by creditors is taxed after it is paid to them.Advertising Looking for assessment on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More As a result of interest on debt being deductible, debts beta in most cases is assumed to be negligible.  WACC is used to â€Å"evaluate the impact of debt-financin g on risk and returns to investments† (Geltner et al. 2010, p. 307). Leverage is a term used to describe the common practice used by firms to fund their projects from debts, and equity. The WACC is derived from the formula of basic holding period return (HPR). The formula expresses assets as a sum of debts and equities. It also equates property cash flow to the sum of debt cash flow and equity cash flow. The returns received are shared by holders, and creditors. It is derived from the returns to capital generated by the firm. WACC represents the least rate of return on a project that evaluators consider before allowing a business plan to be implemented. The formula for WACC as presented by Hawawini Viallet (2011, p. 410) is shown below. In this case, kE represents cost of equity and kD is the cost of debt before taxation. Bierman (p. 195) discusses that WACC can be interpreted as â€Å"the cost of both current capital and an additional dollar of new capital if the existing capital structure is maintained†. The existing capital structure refers to the percentage of debt and securities that have been used to finance a project. Debts tend to reduce WACC because of tax deductions. As it can be seen in the formula â€Å"1 – tax rate† has a lesser effect on WACC compared to equity when the cost of capital is considered equal for both equities.  WACC includes returns to creditors and shareholders. Baker and Martin discuss that WACC is the â€Å"cost of raising funds to the firm† (2011, p. 192). On the other hand, it is the rate of return that investors consider before lending a firm. Creditors receive interest on money owed to them. Shareholders expect dividends, and gains in market value. The gains in market value are only possible if the firm chooses growth opportunities with higher rates of return than WACC. A firm can only add value to its capital after exceeding the rate of return owed to investors. The investors evaluate th e firm’s strategy, opportunities of growth, and risk.Advertising We will write a custom assessment sample on Corporate finance and Volatility specifically for you for only $16.05 $11/page Learn More When a business opportunity promises slow growth, investors consider it as a high risk investment. Slow growth reduces a firm’s ability to repay its debts. For this reason, investors may require higher interest rates which may make a project unviable. The rate of return expected by investors also depends on what other financial assets receive as returns. Firms choose to finance their assets with a mixture of debt, preference shares and common equity. They choose a mixture that optimizes the price of their stock. Besley and Brigham (2009, p. 485) discuss that WACC â€Å"represents the minimum return the firm must earn on its investments to maintain its current level of wealth†. Besley and Brigham (2009) provide the formula below for calculati ng WACC. The WACC of most companies represents the average cost of its capital. Lumby and Jones discuss that the WACC of most companies may not be used to rate individual projects because most companies have their investments diversified (2003, p. 427). The WACC in most cases reflects the â€Å"average level of systematic risk throughout all its operations† (Lumby and Jones 2003, p. 427). Companies consider diversification as a means of reducing risk. The volatility of an individual project carried out by a company is unlikely to be represented by WACC because most companies calculate the overall value. The returns expected from different securities vary. Different capital sources carry different weights. Lumby and Jones (2003, p. 748) explain that â€Å"changing a firm’s capital structure changes its WACC†. Debts are an obligation. They are considered before financial assets. Dividends and other benefits are paid to preference shares before common shares.Adver tising Looking for assessment on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Importance of WACC A higher WACC will require that the performance must be higher before generating wealth for stakeholders. Megginson Smart discuss that firms use WACC to value the amount of effort needed before the firm can actually generate returns for shareholders (2010, p. 420). The firm’s market value declines if its WACC increases as a result of factors that the firm cannot control. Megginson Smart discuss that when a firm’s WACC is increased by an event it cannot address â€Å"its existing assets and its prospective investment opportunities become less valuable† (2010, p. 420). Such an effect can be expressed through a drop its market value. Such investments may go for a long period without dividends. Calculating the cost of capital Cost of capital involves what investors are willing to receive regularly as a result offering finances. Benninga Czaczkles discuss that the present value of stock can be obtained from the discounted annuity values using an ticipated growth in dividend streams (2000, p. 28). They give an example in which the expected growth of dividends is 10%. The following year, the dividend received on each share is $3. The present value of each share (Po) can be expressed as shown below. In this case, rE is the cost of equity/discount rate. D1 is used to represent the expected dividend, and g to represent the expected dividend growth rate. According to Benninga Czaczkes (2000, p. 29), the formula is summarized as shown below. This formula holds only for firms with normal growth. This is the Leonhard Euler derivation. For supernormal growth where g rE, the Gordon Model is applied. The formula for the Gordon Model which has been discounted over five years can be expressed as shown below. According to Benninga Czaczkes (2000, p. 31), the cost of equity under Gordon Model is expressed as shown below. Considering that anticipated dividends can be expressed in terms of the dividends received in the current year (Do ). The formula for the cost of equity is expressed as shown below. In the classic SML (Security Market Line) model, the formula for calculating the cost of equity is expressed as shown below (Benninga Czaczkes 2000, p. 35). In this case, rf represents the rate at which investment is considered safe, and E(rM) represents the interest rates that the financial market are expected to generate. The risk-free rate of return is reflected in financial assets with the least amount of risk such as interest rates on securities issued by government (Bennninga Czaczkes 2000). Treasury bills are considered risk-free indicators because governments are unlikely to default. When the expression is adjusted to integrate corporate tax, the expression becomes as shown below (Benninga Czackles 2000, p. 36). TC is the corporate tax rate. The cost of newly issued stock is expressed as shown below (Calculating the Cost of Capital n.d., p. 3). The cost of retained earnings is expressed below using ris k-free rate, market expected rate, and stocks beta (Calculating Cost of Capital n.d, p. 2). using the discounted cash flow approach. Cost of debt The cost of debt has different approaches. Benninga Czaczkes (2000) discuss that the cost of debt can be estimated using a firm’s existing average cost of debt even though it is not an accurate measure. The cost of debt is expressed as shown below (Calculating Cost of Capital n.d., P. 1). rd is the rate of return expected by investors to be paid on debts. Cost of preference capital Preference capital is associated with preference shares. Debts reduce the amount of corporate tax that a firm is entitled to pay. Khan Jain (2007) discuss that preference share differs from debts because payments on preference shares are made after tax deductions. Some preference shares are redeemable at maturity while others do not have a fixed maturity date. Both types receive annual fixed rates of return. Khan Jain (2007, p. 11.10) express the co st of irredeemable shares in two expressions as shown below. In this case, kp represents cost of preference capital, Dp is the fixed dividend, Po is the expected preference share price, f is the floatation costs expressed as a percentage of share price, and Dt is the tax rate on preference shares dividend. Preference shares that have a maturity date and a stream of earnings are discounted to a present value. Khan Jain (2007, p. 11.10) express that the cost of preference shares with a maturity date â€Å"is the discount rate that equates the net proceeds of sale of preference shares with the NPV of future dividends and principal repayments†. This means that capital gains that an individual obtains today from sales are compared to the gains of holding the preference shares to maturity. The cost of preference shares with a maturity date is expressed as shown below. Po represents share price, f is the flotation cost expressed as a percentage of share price, Dp is for dividend, and Pn is the amount paid at maturity. Kumar (2010) gives a more simplified formula for the cost of redeemable share capital as shown below. D represents dividends, M.V is the value on maturity, N.P is the net streams gains received on preference shares, n is the number of years. Using the average cost of 25% tax, the asset beta can be calculated using the formula below. The asset beta is expressed as: asset beta= Equity beta/ (1 + (1 – tax) D/E) (Asset Beta n.d.). D is the percentage of financing received from debts, and E from Equity. Asset beta = 1.06/ (1+ (1 – 0.25) 0.35/0.65)) = 0.755 However, since the tax rate is still unknown, the cost of equity can be estimated using stocks’ beta and market rate of return. The WACC is then used to express the volatility of expected returns. From this formula equity beta can be generated as follows: cost of equity = risk free rate of return + beta (market rate of return – risk free rate) Cost of equity = 0.0395 + 1.06 (0.0601 – 0.0395) = 0.061336 KE is the cost of equity and KD is the cost of debt before taxation The value of Equity/ total capital can be expressed as: Equity = 45/60 * 100% = 0.75 The value of debt as a fraction of the total capital is represented as: Debt = 15/60 * 100% = 0.25 WACC = (0.75 * 0.061336) + (0.25 * 0.0485) = 0.046002 + 0.012125 = 0.058127 This is approximately 0.058. The WACC estimates the least returns expected from investments. It influences the volatility of stock prices. From the expression in the question: This indicates that the assets’ beta can be calculated from the sum of the product various sources of capital and their beta. Asset beta = (0.75 * 1.06) + (0.25 * 0.058) = 0.795 + 0.0145 = 0.8095 Asset beta = 0.8095 The volatility of the stock market is derived from the asset beta. A value of less than 1 indicates that the assets are less volatile. b) The same formula is applied to calculate the asset value of Coral Gambles’ Asse t beta by first calculating the WACC. This is used as an estimate of the debt beta. From, the explanations above, the debt beta is always close to zero. WACC = (0.65 * 0.061336) + (0.35 * 0.0545) = 0.0398684 + 0.019075 = 0.0589434 WACC value of 5.9% (0.0589) indicates that an additional unit of capital may cost the firm 5.9% interest. The firm must invest in projects that generate above the 6% rate of return for shareholders to get capital gains. Asset beta = (0.65 * 1.06) + (0.35 * 0.059) = 0.689 + 0.02065 = 0.691 According to Bragg (2012, p. 142), the cost of common stock is â€Å"risk-free return rate + beta (average stock return – risk free return†. From this formula, it can be derived that stock beta = (cost of stock – risk-free rate) / (expected market return – risk-free rate) Cost of stock = 0.0395 + 0.691 (0.0601 – 0.0395) = 0.054 Coral Gambles’ Stocks beta = (0.054 – 0.0395) / (0.0601 – 0.0395) = 0.0145/ 0.0206 = 0.703 9 The common stock’s beta indicates the value by which the firm’s stock price changes as a result of variations in the general stock prices. A value of 0.7039 indicates that when the market value changes by 1%, the stock price of Coral Gambles varies by 0.7%. This shows that Coral Gamble stock price is less volatile that the overall market prices. WACC = (0.65 * 0.0601) + (0.35 * 0.0545 (1 – 0.25)) = 0.039065 + 0.0143 = 0.053365 From this calculation, it can be interpreted that investments must generate above the 5% rate of return for the project to add value to shareholders. The least acceptable cost of capital is 5%. This is the point where the firm operates at break-even. Conclusion The market stock’s beta of the similar company is more volatile than Coral Gamble stocks or the general market price. Coral Gamble stock price is less volatile than the average market prices. The WACC for both companies indicate that the CFO needs to search for growth oppo rtunities that generate more than 6% rate of return. Investors may consider interest rates that are close to 5%. The price (Po) generated in the calculation of share price is the discounted value of the current share price, and expected income streams. The income streams are paid to shareholders as yield per share or dividends. The assets’ beta indicates less volatility than stocks’ beta. However, the stock’s beta generates its volatility from assets’ beta. The Coral Gamble assets’ beta indicates that the firms assets are more stable than shifts in market prices, and interest rates. The asset beta has been calculated as a sum of the impact caused by the volatilities of different sources of capital. It can also be calculated from the equity beta, ratio of debts to equity, and tax rate. Equity beta is the beta quoted by financial reports as stock price volatility. Assets’ beta is equal to equity in situations where a firm has not used debts to finance its assets. The impact of debts’ beta on asset beta is reduced by the fact that it reduces corporate tax. Reference List Asset Beta n.d. Web. Baker, H, Martin, G 2011, Capital Structure and Corporate Financing Decisions: Theory, Evidence, and Practice, John Wiley Sons, Hoboken. Benninga, S, Czaczkes, B 2000, Financial Modeling, Massachusetts Institute of Technology, Cambridge. Besley, S, Brigham, E 2009, Principles of Finance, South-Western Cengage Learning, Mason. Bierman, H 2010, An Introduction to Accounting and Mangerial Finance: A Merger of Equals, World Scientific Publishing, London. Bragg, S 2012, Business Ratios and Formulas: A Comprehensive Guide, John Wiley Sons, Hoboken. Calculating the Cost of Capital n.d. Web. Fabozzi, J. F, Drake, P. P, Polimeni, S. R 2008, The Complete CFO Handbook: From Accounting to Accountability, John Wiley Sons, Hoboken. Geltner, D, Miller, N, Clayton, J Eichholtz, P 2010, Commercial Real Estate Analysis Investments, Ceng age Learning, Mason. Hawawini G, Viallet, C 2011, Finance for Executives: Managing for Value Creation, South-Western Cengage Learning, Mason. Khan, M, Jain, P 2007, Financial management, Tata McGraw-Hill, New Delhi. Kumar, V 2010, Cost of Preference Share Capital. Web. Lumby, S, Jones, C 2003, Corporate Finance: Theory and Practice, South-Western Cengage Learning, Mason. Megginson, W, Smart, S 2010, Introduction to Corporate Finance, South-Western Cengage Learning, Mason.

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