How Socially Useful Is Banking - Free Essay Example

Sample details Pages: 6 Words: 1712 Downloads: 9 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? For many companies in the real estate property development, the cost of construction equipment constitute the single most largest cost that can not be factored in to the final property price. Under current economic conditions, especially with respect to the housing market, developers must search every avenue for opportunities to minimize costs and maximize returns. Property developers have three basic options for meeting construction equipment needs needs: purchase the needed equipment, lease the needed equipment, or custom hire. Don’t waste time! Our writers will create an original "How Socially Useful Is Banking" essay for you Create order Custom hire may work well for certain jobs, but often does not allow the amount of control many operations require. Like purchasing, leasing allows the real estate developer to maintain control of the timeliness and quality of the work conducted on their operation. Therefore real estate developer should evaluate leasing versus purchasing based on the economic opportunities that each provides. Discussion: Most leases consist of four basic components: ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Periodic payment ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Length of lease ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Amount of use (hours, miles, etc.) ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Residual Under a standard lease agreement, the lessee (real estate developer) agrees to pay the lessor (bank, credit corporation, dealer, etc.) a specified amount (payment) at certain intervals over a certain length of time. Three-year leases with annual payments are very common, but any arrangement is possible. The lease will generally specify the amount of annual use permitted under the base contract. The amount needed to purchase the equipment at the end of the lease is the residual. Any and all of the components are negotiable. Lease arrangements are based on an initial price for the equipment. As with purchases, developers should negotiate the best deal possible, then consider whether to lease or purchase based on the negotiated price. Just as a lower negotiated price lowers the costs associated with a purchase, a lower negotiated price lowers the costs associated with a lease. Once the initial price has been established, the components of the lease can be finalized. Ideally for a real estate developer the lease agreement should be such that it fits their projects needs. It is imperative for the developer to evaluate the lease contracts for use levels above and below the expected use in order to determine the most economic level. The length of the lease should be determined by the needs of the project at hand. Consideration should be given to the length of time the equipment will be needed, the ability or desire to operate machinery past warranty, planned changes in the project (termination, expansion, etc.), and residual value. The residual is often the confusing part of a lease. The residual is the amount owed on the equipment at the end of the lease. Generally, the lessee may purchase the equipment for the residual value. The lease will often be designed so the residual is equal to the expected appraised value of the machinery at the end of the lease. The periodic lease payments will reflect the amount of the equipment used up during the lease term. Therefore, additional costs associated with excessive wear (hours, miles, etc.) or abuses over and above those designated in the base lease are usually quite expensive. Of course, the residual and the lease payments reflect a lease factor or discount rate. This discount rate may or may not be consistent with the interest rate of a purchase. If the desire is to purchase the equipment after the lease period, then the lessee may try to negotiate a lower residual as a result of higher payments. Depending on an individuals tax situation, this may be an attractive option; however, the tax man will not allow tax credits for leases if up front consideration is given to purchasing. Cost comparison example: When an asset is leased, the lessee loses the tax benefits of depreciation and interest associated with purchasing. However, the real estate developer can still deduct the full amount of the lease payment from taxable income as an operating expense. Determining which alternative provides the greater tax benefit is where the decision becomes most complicated. As a precaution, be sure to consult your accountant before signing a lease. There are a variety of leases, and many ways to interpret them for tax purposes. Most tax benefits associated with leasing and purchasing occur in the future. Therefore, the net cost of each alternative should be analyzed in terms of present dollars. Net present value (NPV) techniques can be used to compare the two options. In other words, the question of whether to lease or borrow can be answered by comparing the present values of the net cash outflows of lease payments and loan payments. In a lease versus purchase decision, the option with the lowest ne t present value of expense should be chosen. Choosing between Leasing and Purchasing: Getaway Real estate developers pay corporate tax at the rate of 40%. They need to purchase construction equipment to expand their business given they are still a small start up. Getaway employs the Modified Accelerated Cost Recovery System (MARCS) 150% declining balance method to compute depreciation. The construction equipments costs $1,250,000 and have a life of seven years. Getaway could either borrow and buy the equipments or lease them. Since insurance, taxes, fees and normal maintenance costs apply whether the equipment is leased or purchased, this are ignored in the analysis. Buy and borrow option; For this option, the underlying assumption is that Getaway will borrow the funds from a financial institution. The interest rate applicable is 8.75% and the financial institution requires a down payment of 25% to finance the deal. The repayment period will be for the life of the equipment-seven (7) years. Given that interest is a tax-deductable expense, it is necessary to calculate the annual interest that accrues on the borrowed money. Thus the yearly loan payment is calculated on the basis of equal loan and principal payments. Lease option; Getaway can get a lease contract for an annual payment of $208,440. This yearly payment was derived from a lease factor of 0.16675 provided by the lessor. Additionally, the terms put the lease time frame to be seven (7) years with a ten (10) percent residual at the end of the lease. The NPV of the lease expenditure-construction equipment; Year Tax Payment Cash Benefit PIVF Outflows PV of Cash @ 5% Outflows 0 208,440.00 208,440.00 1.000 208,440.00 1 208,440.00 97,133.00 111,307.00 0.952 105,964.26 2 208,440.00 97,133.00 111,307.00 0.907 100,955.45 3 208,440.00 97,133.00 111,307.00 0.864 96,169.25 4 208,440.00 97,133.00 111,307.00 0.823 91,605.66 5 208,440.00 97,133.00 111,307.00 0.784 87,264.69 6 208,440.00 97,133.00 111,307.00 0.746 83,035.02 7 125,000.00 97,133.00 27,867.00 0.711 19,813.44 Totals 1,584,080.00 679,931.00 904,149.00 793,247.77 The tax benefit of lease payments is given in column 3 and is arrived at by multiplying the lease payments in column 2 with the tax rate (46.6%). The Cash outflow in column 4 is the lease payment less the tax benefit. A present value of 5% is used to discount the cash outflows. Note that 5 percent is the after-tax cost of borrowing at 8.75 percent (8.75 % x (1- 0.466) = 5%). The reason for using 5 percent for the after-tax cost of borrowing is that the cash outflows include the tax benefit. To avoid counting the tax benefit twice, cash outflows should always be discounted at an after-tax rate, which in this example is about 5 percent. This method of determining to use 5 percent is debatable, but preferred. In some cases, the current rate of inflation is used. The total present value of the lease option is $793,248. NPV (in $) of Purchase with Equal Principal Payments Construction equipment (Loan Amount: $937,500) Year Loan Payment Interest Depreciation Ded. Exp @46.6% Tax Benefit per month Net Loan @ 5% PV Repayment after tax PV of Loan after Tax 0 312,500.00 1.00 312,500.00 1 215,960.00 82,030.00 133,930.00 215,960.00 100,630.00 115,322.60 0.952 109,787.20 2 204,240.00 70,310.00 239,130.00 309,440.00 144,199.00 60,041.00 0.907 54,457.20 3 192,520.00 58,590.00 187,880.00 246,470.00 114,855.00 77,665.00 0.864 67,102.50 4 180,800.00 46,880.00 153,130.00 200,010.00 93,204.70 87,595.30 0.823 72,091.00 5 169,080.00 35,160.00 153,130.00 188,290.00 87,743.10 81,336.90 0.784 63,768.10 6 157,370.00 23,440.00 153,130.00 176,570.00 82,281.60 75,088.40 0.746 56,015.90 7 145,650.00 11,720.00 153,130.00 164,850.00 76,820.10 68,829.90 0.711 48,938.10 1,578,120.00 328,130.00 1,173,460.00 1,501,590.00 699,733.50 565,879.10 784,660.00 NPV (in $) of Purchase with Equal Payments Center Pivot (Loan Amount: $937,500) Year Loan Payment Interest Depreciation Ded. Exp @46.6% Tax Benefit per month Net Loan @ 5% after Tax PV Re-payment PV of Loan after Tax 0 312,500.00 1.000 312,500.00 1 184,710.00 82,030.00 133,930.00 215,960.00 100,637.40 84,072.60 0.952 80,037.20 2 184,710.00 73,050.00 239,130.00 312,180.00 145,475.90 39,234.10 0.907 35,585.30 3 184,710.00 63,280.00 187,880.00 251,160.00 117,040.60 67,669.40 0.864 58,466.40 4 184,710.00 52,650.00 153,130.00 205,780.00 95,893.50 88,816.50 0.823 73,096.00 5 184,710.00 41,090.00 153,130.00 194,220.00 90,506.50 94,203.50 0.784 73,855.50 6 184,710.00 28,530.00 153,130.00 181,660.00 84,653.60 100,056.40 0.746 74,642.10 7 184,710.00 14,860.00 153,130.00 167,990.00 78,283.30 106,426.70 0.711 75,669.40 1,605,470.00 355,490.00 1,173,460.00 1,528,950.00 712,490.80 580,479.20 783,851.90 Including the down payment in the cash outflows for each loan scenario, total outlay is $1,578,120 and $1,605,470. This establishes the purchase option with the lowest cash outlay. The lease will have seven (7) payments of $208,440. Typically, the first payment is due at signing, which is assumed in this example. Also, as mentioned earlier, the lease includes a residual ($1,250,000) which is 10 percent of the entire principal of $1,250,000. Because center-pivots are used in this discussion, assume that the farmer will pay the residual and thus own the pivot at the end of the lease. Again, paying the residual is optional. If the farmer decided not to pay this, the lessor would retain ownership of the center-pivot. Thus, with the residual payment included, total cash outlay for the lease is $1,584,080. Given the analysis, it would seem obvious that the lease would be preferable to a fully amortized loan and only $5,960 less preferable than a loan with equal principal payments. However, the final decision should be made using the net present value approach. Net Present Value of Loan Payments In NPV of Purchase with Equal Principal Payments table and NPV of Purchase with Equal Payments, column 2 gives the annual loan repayment from which the tax benefit of interest and depreciation should be deducted. The tax benefit, as shown in column 6, is calculated by multiplying the interest and depreciation expenses by the tax rate of 46.6 percent. By subtracting the tax benefit from the annual loan repayment, the loan repayment after tax is shown in column 7. In column 9, the present value of loan repayments has been determined, using the present value interest factor of 5 percent, to obtain a total value of $784,660 for a loan with equal principal payments and $783,852 for a loan with equal payments. As stated earlier, the decision process is: 1. If NPV lease NPV purchase, borrow and buy the equipment. 2. If NPV lease NPV purchase, lease the equipment. Because the present value of the purchase expenditure $784,660 or $783,852 is lower than $793,248 (lease), the purchase option is more economical. XYZ Farms could save as much as $940 in current dollars by purchasing rather than leasing the pivots ($793,248-$783,852=$9,396). Obviously, $9,396 is not a significant savings for this level of investment. However, this analysis has exposed some points for consideration. For example, it is easy to say that the cash expense of the lease option is $2,139 less than a fully amortized loan ($1,605,470-$1,584,080 = $21,390, Column 2 in Tables 1 3). One could also say it would be $596 less expensive to structure a loan with equal principal payments ($1,584,080-$1,578,120 = $5,960). However, simply looking at the cash outlay for each alternative is only scratching the surface. Consideration must be given to the tax benefits of both leasing and purchasing. In the example, purchasing proved to be the best choice over leasing, no matter how the loan payments were structured

E Business Model The Marketing Model - 885 Words

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Barn Burning (644 words) Essay Example For Students

Barn Burning (644 words) Essay Barn BurningIn â€Å"Barn Burning,† Faulkner incorporates several instances of irony. He utilizes thisliterary tool in order to help the development of his characters and to express his ultimatemessage to the readers. Some examples of his use of irony are the unintentional yetinevitable ending of the Snopes family time after time, the similarities and differencesbetween Sarty Snopes and his father, and finally, the two distinct purposes for whichAbner Snopes uses fire. Separately, each is able to contribute to the development of thetwo main characters in the short story. Collectively, they are also able to help Faulknerconvey his personal message that essentially, an individual’s sense of values compriseswho he/she is. The most obvious instance of irony is the uncanny fashion in which each endeavorof the Snopes family concludes every time. To the reader’s knowledge, it is neitherintended nor premeditated that each attempt of the family to make a new start results inthe same outcome. Each struggle is exactly that, yielding the invariable, undesired resultof a barn being engulfed in ravaging flames and the family being forced to search for anew beginning. These trials help Sarty understand that in order to take control of his owndestiny, he must separate himself from his family and venture out on his own. If he everwishes to live a life other than that of a vagabond with no real chance for happiness orstability, he must leave now. Another case of the use of irony is the comparison between Sarty Snopes and hisfather. While they physically resemble each other, their morals could not differ more. Sarty is â€Å"small and wiry like his father (p267, paragraph 7).† However the similaritiesare strictly limited to physical characteristics. The values and principles that the fatherand son embrace reveal the true contrast between the two. Abner allows his emotionsand pride to get the better of him, controlling his actions and making him react in anirrational manner. This tears young Sarty apart because although he wishes to obey andhonor his father, he cannot morally respect Abner and his deeds. Faulkner uses thiscontrast in ideals to help Sarty realize that he is does not want to grow up like his fathernor is he obligated to follow in his footsteps. It helps him to see that he must escape if heever wants to change his way of life. The final example of irony is perhaps the most important and effective. AbnerSnopes uses fire for two very distinct purposes which is the epitome of irony. He usesthe fire in a very destructive manner each time he burns down a barn. This immenseblaze serves no purpose but to keep intact his pride, â€Å"the element of fire spoke to somedeep mainspring of his father’s being,as the one weapon for the preservation ofintegrity (p 270, paragraph 1).† However, when it comes to keeping his family warm,Abner sets only â€Å"a small fire, niggard almost, a shrewd fire (p 270, paragraph 1).† Tospare the warmth of a large fire for his family while setting grand ones for theunnecessary purpose of demolishing a barn seems ridiculous. Abner Snopes clearly hashis priorities out of order. He is too caught up in his own egotism to realize that hisfamily is suffering right before him. Although literally, Abner’s habit is to burn barns,perhaps what he is really burning is th e very bridge his family needs to cross in order toachieve contentment, success, and stability. .u05ab67d1dc3f1ea6da5c0f5a5f15d704 , .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .postImageUrl , .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .centered-text-area { min-height: 80px; position: relative; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 , .u05ab67d1dc3f1ea6da5c0f5a5f15d704:hover , .u05ab67d1dc3f1ea6da5c0f5a5f15d704:visited , .u05ab67d1dc3f1ea6da5c0f5a5f15d704:active { border:0!important; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .clearfix:after { content: ""; display: table; clear: both; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704:active , .u05ab67d1dc3f1ea6da5c0f5a5f15d704:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .centered-text-area { width: 100%; position: relative ; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704:hover .ctaButton { background-color: #34495E!important; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704 .u05ab67d1dc3f1ea6da5c0f5a5f15d704-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u05ab67d1dc3f1ea6da5c0f5a5f15d704:after { content: ""; display: block; clear: both; } READ: Fibonacci Numbers EssayFaulkner’s message about the importance of individual values and ideals iswell-expressed through â€Å"Barn Burning.† It is clear that Abner lacks both and is thereforeunable to provide for his family and induces his own untimely death. Sarty representsthe hope that could have easily fallen into the footsteps of an overbearing father butinstead was wise enough to realize the fault in Abner’s ways and realign himself. English Essays

Nike Ppt Essay Example

Nike Ppt Essay â€Å"Greeks say when we go to battle and win,we say it is NIKE† INTRODUCTION TO NIKE †¢ Est. in 1960 in Oregon †¢ Phil knight and Bowerman- founder †¢ Started small and now has covered U. S and international markets †¢ Nike is now one of the biggest mfd. Of the world BACKGROUND †¢ Most of the factories are located in Asia including Indonesia,China,Taiwan,India Thailand,Veitnam,Pakistan ,Philippines and Malaysia †¢ Nike outsourcing contracts around 500 factories in 45 countries. Nike currently controls more than 45% of the US sportswear market. Background cont. †¢ The company initially operated as a distributor for Japanese shoe maker Onitsuka Tiger, making most sales at track meets out of Knights automobile. †¢ The companys profits grew quickly, and in 1966, BRS opened its first retail store, located on Pico Boulevard in Santa Monica, California. By 1971, the relationship between BRS and Onitsuka Tiger was nearing an end. ANALYSIS OF CASE STUDY †¢ Child labour †¢ Not satisfying customer needs †¢ Ignorance of mkt. trends Accusations In 1996-1997, Nike was accused of labor violations and human rights abuses in foreign countries (mainly Asian). Contrary Evidences †¢ Thousands of mostly young, female workers in Southeast Asia (Indonesia, Vietnam, China) were being exposed to reproductive toxins and suspected carcinogens. †¢ Some workers were not earning a living wage even though they work oftentimes 12 to 14 hours per day. †¢ Nike workers in Southeast Asia have suffered corporal punishment and corporal abuse. †¢ Nike young female workers have suffered sexual harassment. Nike workers in Southeast Asia have been forced to work overtime in violation of applicable laws. Core issue of Nike NIKE PRATICES CHILD LABOUR †¢ Children are not only the easiest to intimidate, theyre also the cheapest workers. Twelve-year-old Tariq, one of thousands employed in Pakistans soccer ball industry, which produces five million balls a year for the U. S. market, stitches leather pieces in Mahotra. He earns 60 cen ts a ball, and it takes most of a day to make one (Schanberg, 1996: 38). We will write a custom essay sample on Nike Ppt specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Nike Ppt specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Nike Ppt specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Silgi is only three. Her hands are so tiny she cant handle a scissors. But she started stitching soccer balls recently to help her mother and four sisters. Together they earn 75 cents a day working in their shanty home in Jullundur, India (Sidebar to Life Magazine Story, p 41 NOTE: There is a photo (Source) of a young girl dressed in town and soiled clothing next to the soccer ball clutching a needle and thread. The needle is longer than her fingers. †¢ CONSEQUENCES Nike executives have been targets at public place †¢ Students have pressed administrators and athletic directors to ban products that have been made under â€Å"sweatshop† conditions †¢ In 2002 an individual sued Nike, alleging that the company knowingly made false and misleading statements in its denial of direct participation in abusive labor conditions abroad. REMEDIES †¢ Nike defended, through corporate news releases, full-page ads in major newspapers, and letters to editors †¢ Nike gav e $1. million to the Washington D. C. based Fair Labor Association (FLA) †¢ In 2003, company employed 86 compliance officer †¢ But stigma of past practices remains emblazoned on its image and brand name. Nike’s Responses †¢ Nike responded with†¦ – Press releases – Letters to the newspaper – Personal letters to university presidents and athletic directors – Campus Visits – Independent audit of factories – Speak at conferences COMPILED BY AKRITI JHA DEEPTI SINGH TRIPTI SINGH