Ethical Behavior for Professionals

Ethical Behavior for Professionals

Discuss some of the peer-reviewed research findings pertaining to why individuals behave unethically. In doing so, discuss using critical thinking what the academic literature has to say and apply that information toward police officer unethical conduct. No direct quotes should be utilized in the response.

Note: The essay response given should reflect upper-level undergraduate writing in accordance with current APA standards. The essay response is to include a minimum of 3 peer-reviewed scholarly sources listed in proper APA format with in-text citation(s) in proper APA format. In-text citations are to correspond to a source in proper APA format listed after the essay response.

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Valuation Analysis and NPV Calculations focused on Monogenic ALS

Valuation Analysis and NPV Calculations focused on Monogenic ALS. Calculations are needed.

Which is a better measure for capital budgeting, IRR or NPV?
In capital budgeting, there are a number of different approaches that can be used to evaluate any given project, and each approach has its own distinct advantages and disadvantages. Furthermore, every project is unique. The particular risk and reward characteristics of a given project usually will lead to one method being selected over another.

Still, the goal of reporting plays a tremendous role in determining which measure is used. For example, if management believes that a project will fail given expected market conditions, a particular measurement may be chosen over others for the purpose of skewing the return of the project to make it look less worthwhile. Conversely, management may wish to inflate reported returns from a particular project, so that the project for which they have a personal preference will be chosen.

All other things being equal, using internal rate of return (IRR) and net present value (NPV) measurements to evaluate projects often results in the same findings. However, there are a number of projects for which using IRR is not as effective as discounting cash flows using NPV. IRR’s major limitation is also its greatest strength: it uses one single discount rate to evaluate every investment. Although using one discount rate simplifies matters, there are a number of situations that cause problems for IRR. If an analyst is evaluating two projects, both of which share a common discount rate, predictable cash flows, equal risk, and a shorter time horizon, IRR will probably work. The catch is that discount rates usually change substantially over time. For example, think about using the rate of return on a T-bill in the last 20 years as a discount rate. One-year T-bills returned between 1% and 12% in the last 20 years, so clearly the discount rate is changing. Without modification, IRR does not account for changing discount rates, so it’s just not adequate for longer-term projects with discount rates that are expected to vary.

Another type of project for which a basic IRR calculation is ineffective is a project with a mixture of multiple positive and negative cash flows. For example, consider a project for which marketers must reinvent the style every couple of years to stay current in a fickle, trendy niche market. If the project has cash flows of -$50,000 in year 1 (initial capital outlay), returns of $115,000 in year 2 and costs of $66,000 in year 3 because the marketing department needed to revise the look of the project, a single IRR can’t be used. Recall that IRR is the discount rate that makes a project break even. If market conditions change over the years, this project can have two or more IRRs, as seen below.

Thus, there are at least two solutions for IRR that make the equation equal to zero, so there are multiple rates of return for the project that produce multiple IRRs. The advantage to using the NPV method here is that NPV can handle multiple discount rates without any problems. Each cash flow can be discounted separately from the others.

Another situation that causes problems for users of the IRR method is when the discount rate of a project is not known. In order for the IRR to be considered a valid way to evaluate a project, it must be compared to a discount rate. If the IRR is above the discount rate, the project is feasible; if it is below, the project is considered infeasible. If a discount rate is not known, or cannot be applied to a specific project  for whatever reason, the IRR is of limited value. In cases like this, the NPV method is superior. If a project’s NPV is above zero, then it is considered to be financially worthwhile.

So, why is the IRR method still commonly used in capital budgeting? Its popularity is probably a direct result of its reporting simplicity. The NPV method is inherently complex and requires assumptions at each stage – discount rate, likelihood of receiving the cash payment, etc. The IRR method simplifies projects to a single number that management can use to determine whether or not a project is economically viable. The result is simple, but for any project that is long-term, that has multiple cash flows at different discount rates, or that has uncertain cash flows – in fact, for almost any project at all – simple IRR isn’t good for much more than presentation value.

 

 

 

The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.

NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.

Formula:

NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. If the NPV of a prospective project is positive, it should be accepted. However, if NPV is negative, the project should probably be rejected because cash flows will also be negative.

For example, if a retail clothing business wants to purchase an existing store, it would first estimate the future cash flows that store would generate, and then discount those cash flows into one lump-sum present value amount, say $565,000. If the owner of the store was willing to sell his business for less than $565,000, the purchasing company would likely accept the offer as it presents a positive NPV investment. Conversely, if the owner would not sell for less than $565,000, the purchaser would not buy the store, as the investment would present a negative NPV at that time and would, therefore, reduce the overall value of the clothing company.

 

 

 
 
Using DCF In Biotech Valuation
February 14, 2006 | By Ben McClure, Contributor – Investopedia Advisor

It can be tricky to put a price tag on biotechnology companies that offer little more than the promise of success in the future. Just because someone in the lab cries “Eureka!”, that doesn’t necessarily mean that a cure has been found. In the biotech sector, it can take many years to determine whether all the effort will translate into returns for a company. But while valuation may appear to be more guesswork than science, there is a generally accepted approach to valuing biotech companies that are years away from payoff. In this article, we explain this valuation approach, which relies on discounted cash flow (DCF) analysis, and take you through the process step by step.

Portfolio Valuation Approach
Think of a biotech company as a collection of one or more experimental drugs, each representing a potential market opportunity. The idea is to treat each promising drug as a mini-company within a portfolio. Using DCF analysis, you can determine what someone would be willing to pay for that drug portfolio.

In other words, you determine the forecasted free cash flow of each drug to establish its separate present value. Then, you add together the net present value of each drug, along with any cash in the bank, and come up with a fair value for what the whole company is worth today. (To learn more, see our Discounted Cash Flow Analysis tutorial.)

A biotech company can have dozens, or even hundreds, of drugs in its developmental pipeline. But that does not mean you should include them all in your valuation. Generally speaking, you should only include those drugs that are already in one of the three clinical trial stages. (For more information, visit the U.S. Food and Drug Administration’s website.) As an investment, a drug that is in the discovery or pre-clinical stage is a very risky proposition, with less than a 1% chance of getting to market (according to an industry report published in 2003 by the Pharmaceutical Research and Manufacturers of America). So, drugs in the pre-clinical stage are usually assigned zero value by public market investors.

Forecasting Sales Revenue
Forecasting the sales revenue from each of a biotech company’s drugs is probably the most important estimate you can make about future cash flows, but it can also be the most difficult. The key is to determine what expected peak sales would be if – and this is a big “if” – a drug successfully makes it all the way through clinical trials. Normally, you will forecast sales for the first 10 years of the drug’s life. (For further reading, see Great Expectations: Forecasting Sales Growth.)

Market Potential
You need to start by making assumptions about the drug’s market potential. Look at information provided by the company and market research reports to determine the size of the patient group that will use the drug. Analysts typically focus on market potential in the industrialized countries, where people will pay the market price for drugs.

When making assumptions about a drug’s potential market penetration, you have to use your own best judgment. If there is a competitive drug market, with limited advantage offered by the new drug in terms of increased effectiveness or reduced side effects, the drug will probably not win substantial market share in its product category. You might assume that it will capture 10% of that total market, or even less. On the other hand, if no other drug addresses the same needs, you might assume the drug will enjoy market penetration of 50% or more.

Estimated Price Tag
Once you have established a sales market size, you need to come up with an estimated sales price. Of course, putting a price tag on a drug that addresses an unmet need will involve some guesswork. But for a drug that will compete with existing products, you should look at the price of the competition. For instance, pharmaceutical giant Roche’s recently introduced HIV-inhibitor drug, Fuzeon, costs just over $20,000 per year. Multiplying that price by the estimated number of patients gives you estimated annual peak sales.

The biotech company won’t necessarily receive all of this sales revenue. Many biotech firms – especially the smaller ones with little capital – do not have sales and marketing divisions capable of selling high volumes of drugs. They often license promising drugs to bigger pharmaceutical companies, which help pay for development and become responsible for making sales. In return, the biotech firm normally receives royalty on future sales. According to an article written by Medius Associates (“Royalty Rates: Current Issues and Trends”, October 2001), the royalty rate for drugs currently in Phase I of clinical trials is normally a percentage in the single digits. As they move along the development pipeline, royalty rates get higher.

In Figure 1, we break down an estimate of the peak annual sales revenues for a hypothetical biotech drug in a competitive market with a potential market size of 1 million patients, an estimated sales price of $20,000 per year and a royalty rate of 10%.

Potential Market Size 1 million patients
Market Penetration Rate -Competition High 10%
Estimated Market Size 100,000 patients
Sales Price $20,000 per year
Peak Sales $2 billion per year
Royalty Rate 10%
Peak Annual Sales Revenues $200 million

Figure 1 – Calculating drug sales revenue

Drug patents usually last about 10 years. In our hypothetical example, we assume that for the first five years after commercial launch, sales revenues from the drug will increase until they hit their peak. Thereafter, peak sales continue for the remaining life of the patent.

Figure 2 – Hypothetical estimate of sales revenue for the chosen forecast period of 10 years


Estimating Costs
When forecasting future cash flows for a drug, you need to consider the costs of discovery and bringing the drug to market.

For starters, there are operating costs associated with the discovery phase, including efforts to discover the drug’s molecular basis, followed by lab and animal tests. Then there is the cost of running clinical trials. This includes the cost of manufacturing the drug, recruiting, treating and caring for the participants, and other administrative expenses. Expenses increase in each development phase. All the while, there is ongoing capital investment in items such as laboratory equipment and facilities. Taxation and working capital costs also need to be factored in. Investors should expect operating and capital costs to represent no less than 30% of the drug’s royalty-based sales.

Deducting the drug’s operating costs, taxes, net investment and working capital requirements from its sales revenues, you arrive at the amount of free cash flow generated by the drug if it becomes commercial.

Accounting for Risk
Our free cash flow forecast assumes that the drug makes it all the way through clinical trials and is approved by regulators. But we know this doesn’t always happen. So, depending on the drug’s stage of development, we must apply a probability factor to account for its probability of success.

As the drug moves through the development process, the risk decreases with each major milestone. The Pharmaceutical Research and Manufacturers of America reported in 2003 that drugs entering Phase I clinical trials have a 15% probability of becoming a marketable product. For those in Phase II, the odds of success rise to 30%, and for Phase III, they climb to 60%. Once clinical trials are complete and the drug enters the final FDA approval phase, it has a 90% chance of success. These improvements in the odds of success translate directly into stock value.

By multiplying the drug’s estimated free cash flow by the stage-appropriate probability of success, you get a forecast of free cash flows that accounts for development risk.

The next step is to discount the drug’s expected 10-year free cash flows to determine what they are worth today. Because you have already factored in risk by applying the clinical trial probability of success, you do not need to include development risk in the discount rate. You can rely on normal means of calculating the discount rate, such as the weighted average cost of capital (WACC) approach, to come up with the drug’s final discounted cash flow valuation. (To learn more, see Investors Need A Good WACC.)

What’s the Firm Worth?
Finally, you want to calculate the total value of the biotech firm. Once you have gone through all the steps outlined above to calculate the discounted cash flow for each of the biotech firm’s drugs, you simply need to add them all up to get a total value for the firm’s drug portfolio.


DCF Value Drug A + DCF Value Drug B + DCF Drug C … … = Total Firm Value


Conclusion
As you can see, valuing early-stage biotech companies is not entirely a black art. Intelligent investors can come up with solid stock valuation estimates if they are familiar with DCF analysis and are equipped with a basic understanding of the industry and how major developmental milestones can impact the value of a biotech firm.

By Ben McClure, Contributor – Investopedia Advisor

He does the fundamental analysis article bi-weekly. Ben is director of McClure & Co., an independent research and consulting firm that specializes in investment analysis and intelligence. Before founding McClure & Co., Ben was a highly-rated European equities analyst at City of London-based Old Mutual Securities.

 

** This article and more are available at Investopedia.com – Your Source for Investing Education **

 

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Coca Cola Company Financial Ratio Analysis

Company Ratio Analysis (easily the section that takes the most time to prepare) (75 points)
A. Compute ratios for 2 years for your company, most recent year for the competitor and use book from the library for industry (1 year), Yahoo comparisons, or the instructor.
B. You can use Yahoo! Finance or Reuters to get/calculate the ratios but need to interpret and explain them.
C. The ratios calculated and analyzed should be those presented on page 627 of the text.
D. Some companies, depending on the industry, may not have significant receivables or inventory. For these ratios which involve inventory and/or accounts receivable are not required. If in doubt, please pass this by the instructor before preparing Section 5.
E. Each ratio should have a paragraph for the meaning of the ratio (what it tells us), and a paragraph for your analysis, which includes how the company is performing over the two years presented, also compared to the competitor, and industry averages.
F. Students typically have a chart showing all the calculations.

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Forecasting and Budgeting

Forecasting and Budgeting (4 marks) -yifei
Draw up the aircraft patterns for a sample week of your airline timetable. i.e. schedule the
aircraft covering the routes you operate. Demonstrate the maintenance slots for the whole
fleet, and the city in which the maintenance takes place. You will have noted from the
simulation that curfews apply at many airports. You are only required to show a typical 1
week operation at any point of your future 5 year plan. This is meant to reinforce the
learnings from Assignment 1 so that everyone is clear as to how to present a 1 week
scheduled operating pattern.
Once the patterns are completed the next part of the task is to;
Create a revenue and expenditure budget for the airline using information from the
simulation where appropriate. Demonstrate airfares and cost elements where appropriate.
Show route profits, seat factors, overall profit and loss, and other financial indicators.
Costs will be presented on a cents per ASK basis rather than making a detailed examination
of all cost items. You should be sure to show how this develops over the 5 years of your
future business plan

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Personal Budget Journal

For this journal, complete two months (February and March) of the Personal Budget Template Download Personal Budget Template. Then, evaluate your personal budget information and numbers from your completed Personal Budget Template. You may complete the template using your own personal financial data, which will make the activity more meaningful, or hypothetical numbers. Discuss the most important concepts and facts you learned. For example, were there any surprises in the amount or category of your expenses? Your reflection should be a minimum of 350 words.
Attached a Filled-in Personal Budget Template for February and March Excel sheets.

**For journal requirements, please interpret the data entered within the February and March Tab**.
Submit both your completed template and your reflection to Waypoint.

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To Buy or Lease Dilemma

Supported Material, For the references are attached.
Sally’s Dilemma
A smiling woman with her arms folded.
Sally has been looking at properties for the restaurant with a realtor. She asks you whether it is better to buy or lease. You suggest that you and Sally discuss the available options and issues that might impede the operation or make a deal cost-prohibitive. You explain that some leases have a way of being great investments for the owners of the property. Often, leasing terms are designed to squeeze all of the profit out of the tenants’ operations. Although there are also pros and cons to owning the property. Our task right now is to decide if we should buy or lease.
First, calculate the potential profit. Here is the information you need:
Profit = number of seats (259 seats and 90% will be occupied on average) x the number of meal seatings (3 per night (6:00 pm, 7:30 pm, and 9:00 pm)) x average meal price of $250 x 365 days of operation.
Food and service expenses are 68% of your revenue. Additional costs including insurance, professional fees, etc. = 9.9 million per year.
Rent would cost $100 per seat per day. The cost of the mortgage is $125 per seat.

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Policies that fall under dollarization

Detailed Topic: Define and discuss the policies that fall under “dollarization.” Discuss some examples of countries that have dollarized. Has it been beneficial? What are the mechanics of dollarization? Discuss the “de-dollarization” that is occurring in Peru.
If the writer wants to choose or change the topic, they can choose from the following topics:
a.) Choose several global companies and compare how they hedge currency risk.
b.) Which countries are the most competitive in the global economy? Which are the least competitive? How do countries at the bottom move up to the middle ranking?
c.) What are the key indicators of a currency/sovereign debt/banking crisis? Which countries are most vulnerable to a crisis?
d.) What are the economic growth prospects for Africa?
e.) Will the new regulations affecting large global banks (Basel III) prevent another global financial crisis, or will they just drain banks of profits?
f.) Discuss the logic behind currency carry trades, and, using Bloomberg, analyze a couple current opportunities.
g.) Define the attributes of an Optimum Currency Area and determine if the Eurozone is one.
h.) Compare capital structures of companies in the same global industry across countries. Pick a couple industries and several companies from each industry.
i.) Discuss microfinance and how it might be used to diminish poverty in the developing world. Emphasize actual transactions and policies that have been implemented.
j.) The “shadow” banking system: its significance for global finance and the challenges faced by regulators.
k.) Analyze the effect of trade on real economic growth in both developed and emerging countries. Who are the winners and losers as trade volumes increase and decrease?
l.) Can cryptocurrencies be a socially useful financial tool, especially in developing countries that have little commercial banking infrastructure? What
positive role can governments/central banks play as regulators of cryptos?
m.) Demographics and investing. What are the implications of aging populations for global equity market returns? What countries are more vulnerable and less vulnerable to the effects of population aging?
n.) Analyze using data the importance of sovereign wealth funds in global markets.
o.) Is the world on the edge of a deflationary time? How should central banks and national governments respond?
p.) Analyze the many demonetization programs that have been implemented by both advanced and developing countries. Were the goals of demonetization achieved?

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Abercrombie & Fitch Financial Statement Analysis

Financial Statement Analysis of Abercrombie & Fitch.

Abercrombie & Fitch sells casual apparel and personal care products for men, women, andchildren through retail stores located primarily in shopping malls. Its fiscal year ends on January 31 of each year. Financial statements for Abercrombie & Fitch for fiscal years ending January 31, Year 3, Year 4, and Year 5 appear in Exhibit 4.34 (balance sheets), Exhibit 4.35 (income statements), and Exhibit 4.36 (statements of cash flows). These financial statements reflect the capitalization of operating leases in property, plant, and equipment and
long-term debt, atopic discussed in Chapter 6. Exhibit 4.37 presents financial statement ratios for Abercrombie& Fitch for Years 3 and 4. Selected data for Abercrombie & Fitch appear here. You are provided with the financial statements attached.

Respond to the following questions relating to Abercrombie and Fitch. This summary of your responses should be a total of 2-5 pages in (APA format) double-spaced, single-sided, Times New Roman Font, 12 pitch, 1-inch margins, with no grammar or spelling errors; APA includes a reference page at the end.
The reference pages will not be counted in the 3-5 pages. You should have at least 2 references – your book along with at least 1 other reference. You must cite your references.
Calculate the ratios in Exhibit 4.37 for Year 5. The income tax rate is 35%.
Analyze the changes in ROA for Abercrombie & Fitch during the three-year period, suggesting possible reasons for the changes observed.
Analyze the changes in ROCE for Abercrombie & Fitch during the three-year period, suggesting possible reasons for the changes observed.

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Capital Budgeting Data

Submit a draft of the Capital Budgeting Data section of the final project, along with your supporting explanations.

Be sure to substantiate your claims.

Submit your calculations on the designated tab of the Final Project Excel Workbook and your supporting explanations as a Microsoft Word document.

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Financial Statement Analysis LIFO FIFO ROE RNOA

Each member will work on an individual company from the industry the group has chosen.
Step 3 of the Analytical Framework.
Assess the quality of the F/S.
Review of the purpose, underlying concepts and format of the financial statements.
Make any necessary adjustments to the financial statements (Chapter 5). Consider adjusting:
Depreciation,
R&D,
LIFO to FIFO,
Allowance for doubtful account
Obsolete Inventory
Make the necessary adjustments to your company’s financial statements for the past 2 year
Step 4 of the Analytical Framework. Analysis of Profitability and Risk. This is the ratio analysis.
After completing the adjustments above,
Rearrange the balance sheet and income statement into operating and financing sections (Chapter 3)
Use the adjusted rearranged financial statements to calculate 2 years of ratios for your company (Chapter 6)
Get the ratios from one of your team members.
Compare the current year’s ratios for your company with your competitor’s current year’s ratios and your company’s prior year’s ratios. This should include all the ratios we calculated in the homework
Discuss your company’s current year’s performance compare to last year’s performance and to your team member’s ratios. This should include ROE and its breakdown into RNOA Spread (RNOA-cost of financing), and Leverage,
the ratios for Liquidity, Solvency, Operating, and Investing.
Include an executive summary of your findings.
This is the first paragraph of your paper
It summarizes your findings
It should be approximately 50 words but total will be 500 word

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