Abstract This paper examines the structure of the barbell trusts, believed to be one of the main causes of the capitalinvestment trust crisis 2001 - 2002. It looks at how the demand by investors seeking high annual returns in today's almost inflation free economy was successfully being met with barbell investment trusts in a period of buoyant stock markets and how the years 2001 and 2002 saw a fall in stock markets which these barbells could not handle. It shows how these investment trusts were structurally flawed, geared only to a bull market and were seeping in complex risk that very few really understood.
From the Paper "Falling markets and the forced selling of shares by banks, in an illiquid market lead to disproportionate share price drops. The asset base of these funds was being eaten away at. Consequently, an even higher yield was now required to meet dividends as there was less capital to work with. Analysts had warned that barbells were offering unrealistic high headline dividend yields. Barbell trusts found they could not meet the headline dividend yields that they had offered. Most barbells hadn?t been in operation long enough to build up revenue reserves. As a result, a few barbells failed to meet their dividends and dividends had to be cut. However a dividend cut by one trust did not solely affect that trust."
Abstract This paper addresses how financial managers make the tough decisions between interesting and profitable projects for a corporation to invest in. The paper presents a two-part case study. Part I addresses the purchase of new equipment. It presents an analysis, using net present value (NPV), internal rate of return (IRR) and payback and discusses how to determine if this new machine purchase is one that the company should pursue. Part II discusses what method (NPV or others) is the best method to use for capital budgeting purposes.
Table of Contents:
Part I
Part II
From the Paper "If two investments, X, and Y, are mutually exclusive, then accepting one of them means we cannot accept the other. Given that, a question always arise, as to which one is best? The answer is simple though: the best one is the one with the largest NPV. Can we also say that the best one is the one with the highest IRR? The answer is no. As we have stated earlier, the IRR is biased towards projects with higher initial cash flows, hence the IRR would be higher for those projects whose initial cash flows are higher, yet that does not necessarily mean that those projects would have the higher NPV. Here, we must consider a very important point: the bottom line for any capital budgeting decision is accepting the project that would create the highest added value for shareholders, hence the higher the NPV, the more attractive the investment (Ryan, 2002)."
This paper discusses capitalinvestmentdecision making methods as a means to minimizerisk under uncertain economic conditions: Budgeting, return analysis, cost, goals, Efficient Frontier and timing.
2,250 words (approx. 9 pages), 19 sources, 1994, $ 79.95
From the Paper "This research examines the process of business capital investment under conditions of uncertainty. Capital investment decision-making methods that accommodate conditions of uncertainty are reviewed.
Background
Effective and efficient decision-making is important in the capital investment process because financial resources are typically scarce.. Conditions of uncertainty, competing goals, and utility tend to complicate the decision-making process.. The selection from among alternatives in the capital investment process is generally referred to as capital budgeting. Capital budgeting involves the making of investment decisions related to fixed assets ... "
This paper is a research proposal to study the international management of cross-border risks and capital allocation decisions in a high risk environment.
Abstract This paper explains that, besides the risks inherent in domestic operations, banks, which are engaged in international activities also are exposed to "country risk," or the risk that economic, social and political conditions and events in a foreign country will adversely affect an institution's financial interests. The author points out that, from a practical perspective, accurate and timely country risk assessment is important not only because it affects individual investors but also because it can be systemic; one of the primary purposes of financial regulation is to manage systemic risk. The paper states that the research will be done using a case study methodology to study various country risk/cross border risk management models adopted by a sample of international banks and to assess their robustness and how well they are associated with a framework of planned management actions and capital allocation decisions.
Table of Contents
Introduction
Statement of the Problem
Overview of Study
Purpose of Study
Key Term Definitions
Capital Allocation Decision Country Risk Ratings
Risk
Preliminary Literature Review
Background and Overview
Current and Future Trends
The Countries' Performance in International Trade
Leverage
Various measures of liquidity
Methodology
Description of the Study Approach
Data-gathering Method and Database of Study
From the Paper "A significant amount of cross-border lending takes place through offices in a bank's home country (or even one of its subsidiaries located in a third country), with no subsidiary (or even branch presence) located in the country in which the borrowing firm is headquartered. Retail banking requires a physical presence of some sort to provide points of contact with customers; by contrast, wholesale banking requires a much smaller investment. "For example, banks with no physical presence in a country can lend substantial volumes of funds to firms and governmental entities of that country through project finance and loan participations." The composition of borrowers will differ, though, depending on whether a foreign bank has a physical presence in a country or manages its loans from offshore locations."
Abstract This paper discusses venture capital as an investment strategy and as an element in portfolio management, noting that venture capital involves making investments in relatively unproven and high-risk enterprises, and it is generally expected that such an investment will yield a greater return than other types of investment. The paper shows that venture capitalists are also much more involved in the management of the business after making the investment, such as becoming members of the board of directors.
From the Paper "Venture capital is a form of investment in start-ups of one type or another, and such investments are exempt from the registration requirements of the Securities Act. Private placement investments can be made by individuals, by institutional investors, or by other businesses, but a particular type of private placement involves the provision of funds and other resources by one or more professional venture capitalists. Venture capital involves making investments in relatively unproven and high-risk enterprises, and it is generally expected that such an investment will yield a greater return than other types of investment. Venture capitalists are also much more involved in the management of the business after making the investment, such as becoming members of the board of directors: Although a venture capital investor may be a single individual, most venture capitalists are organized as a limited partnership."
Abstract The paper reveals that real estate is the most advantageous investment because it tends to act as a counterweight to inflation, it is not normally effected by the conditions on Wall Street and it generates a higher yield than a savings account or bonds. The paper focuses on the use of real estate in a preservation of capital strategy. The research explores residential and commercial real estate, real estate investment trusts (REITs), real-estate mutual funds and home builder stocks. The paper discusses the manner in which they can be utilized in a preservation of capitalinvestment strategy.
Outline:
Abstract
Chapter I: Introduction
Chapter II: Literature Review
Chapter III: Methodology
Chapter IV: Discussion, Conclusions and Recommendations
From the Paper "Preservation of Capital is defined as an investment strategy that has as a primary goal preventing the loss of the total value of an investment. The use of a capital preservation means that investors must guarantee their portfolios are generating a return that is at a minimum equal to inflation. The research also found that real estate serves as great portfolio investment because it is a counterweight to inflation. The literature asserts that most financial planners and investment managers alike recommend that individual portfolios consist of 5% and 20% real estate investment that does not include the investor's primary residence. In addition the research found that companies began increasing real estate investments in the 1980's and today a substantial percentage of many business investment portfolios are composed of real estate investment."
Abstract This paper analyzes why Thailand may be considered better for direct foreign investment than Ghana. The paper discusses exchange rate data, capital sources, sensitivity analysis, alternative investment and financing decisions, capital budgeting and contingency plans. It looks at the risks that may be involved with direct foreign investment in Thailand and describes the rationale used in the selection of Thailand as the clear choice for an investment.
Outline:
Country Selection
Exchange Rate
Capital Sources
Sensitivity Analysis
Alternative Investment/Financing Decisions Capital Budget
Contingency
Conclusion
From the Paper "As is readily apparent, decisions as to what country to select when considering a direct foreign investment are often highly complicated. Additionally, even when a country is selected, a multitude of complex factors make up the various strategies that a firm must implement to hedge the various risks involved in conducting business overseas. With regard to the service firm, the decision was made to expand operations in the country of Thailand. With a healthier economy, a relatively stable government, and friendlier business environment, Thailand was determined to offer better investment opportunities than Ghana. This is not to imply that Ghana would not constitute a wise investment decision, as many risks inherent to the country could be mitigated; however, Thailand's socio-economic, political, and exchange rate circumstances were determined to be more favorable than Ghana's."
Abstract This report looks at the feasibility of an equity investment by Thomas Venture Capital in Contiki Holdings as it expands into the outbound tour operating business. The report is structured in sections, each of which examines a different aspect of the decision. The first section provides a brief historical overview of the business, including its evolution to its current state. The second section provides a review of the market as a whole, concentrating on statistical data regarding volume and spending of travelers from the UK, as well as on the future growth trends within the industry. The third section looks at the profitability of the sector by examining the success or lack thereof of some major players in the market. The final section makes some conclusions based on the information included in the report and makes recommendations on whether the investment should be made.
From the Paper "The UK travel industry is regulated by the Association of British Travel Agents (ABTA), which came into existence in 1950 and since has overseen the developments in the travel industry in the intervening years. These developments include the improving economic circumstances of the mass of the population of the United Kingdom in the years following the Second World War; the invention of the jet aircraft engine and the consequent popularity of air travel as a means of taking holidays and the emergence of tour operators as wholesalers as distinct from retail travel agents for providing people with their holiday needs (Association of British Travel Agents, 2003)."
Abstract In this article, the writer looks at the historic patterns of Canadian-owned investmentcapital since the middle of the last century and explores how investment patterns were impacted by the arrival of the Free Trade Agreement. Specifically, the paper delves into which industries appear to be receiving Canadian investmentcapital, which ones are not, if that investmentcapital is staying in Canada, who among Canadian investmentcapital owners appear to be benefiting from the free trade regime, and what the future holds for Canadian-owned capital and those who determine to which ends it is put. In the final analysis, the writer maintains that Canadian-owned capital, largely because of free trade, will become more internationalized, more concentrated in service sectors, and more aggressively invested.
Outline:
Introduction
Historic Patterns of Canadian-Owned CapitalInvestment - From the 1950s Onward
The Introduction of Free Trade: How it Impacted Canadian-Owned Capital Conclusion
From the Paper "As one might expect, Canadians have long sent their disposable investment capital south of the border; indeed, by about the middle of the twentieth century, Canadians were sending more investment capital to America than they were to any other country. By the early 1960s, Canadians also constituted the largest group of foreigners engaging in "issue borrowing" in New York - so it is evident that many Canadian investors and borrowers preferred to deal with New York at least much as they did Toronto or Montreal. Naturally, this investment approach rather complicated nationalist policies put forward by Canadian governments which would have preferred that investment monies remain in Canada."
Abstract This paper defines and discusses the business of venture capital. The paper discusses the purpose of business ventures and the goals of the venture capital firm. Case study examples of two leading equity companies in Europe, 3i and Apax, are provided and their ventures and challenges are discussed. The paper also examines current critical financial concerns, as private equity houses regularly change their investment focus. Several graphs, tables and figures are included with the paper.
Table of Contents:
Chapter I
Introduction
The "Business" in/of Venture Capital European Venture Capital Association Figures
Growing Businesses
3i and Apax Partners
Study Focus
Concern for the Future of Venture Capital in the UK and Europe
Aim and Objectives
Hypothesis
Study Structure
Significance of this Study
Chapter II
Apax Partners
History
Investments Changes in the Company
Interviews Created, Conducted and Considered Reveal...
Interview 1
Interview 2
Interview 3
Chapter III
3i Group
3i's Movement Away from Early-Stage VC
History
Landmark Deals
LBO: One of 3i's Former VC Recipients
Interview 4
Interview 5
3i's Expectations
Chapter IV
Analysis
"Venture capital...is a sub-category of private equity"
In Corporate Venturing...
"Typical" Losses
Key Facts
Less Attractive Investments Deeper than Surface Reasons
Chapter V
Conclusion: Future Implications for Venture Capital in the UK and Europe
Conclusion
Aim and Objectives
Hypothesis
Opportunities That Challenge
Appendix
From the Paper "During 1993, venture capitalists debated what to call themselves. Purists contended that the term "venture" ought to only denote early stage investment. Private equity, investment capital and development capital served as preferred alternatives for the title. (Eadie 1994) Venture capitalists, albeit "stuck" as the name for the typically former executives or investment bankers, who turned to raising a private fund to make particular investments. The venture capitalist not only aims to increase the targeted company's equity value, but to also, in time, utilizing a liquidity event such as initial public stock offering (IPO) or sale to another investor, monetize the investment through to ultimate reap financial rewards from the investment (Kenney, Haemmig, and Goe 2007; "How Venture Capital Works" 2008)."
Abstract This paper discusses capital budgeting within the recreation industry. It discusses the areas that businesses need to focus on in order to be competitive, such as corporate culture, product mix, prices, promotion strategy and the place where the company competes. The paper presents City Point Club as an example to describe strategic investmentdecisions and capital budgeting.
From the Paper "In order to compete in the tightening market for almost every industry, each big and (even at a greater degree) small company must constantly improve the business mix of the company, corporate culture, product mix, prices, promotion strategy, place where it competes and the other essential attributes. In order to fulfill these tasks, the management must constantly have sufficient resources to be able to single out promising innovative investment ideas, implement them and then receive the rewards of the profits . The management must always be at least two steps ahead of the competition and of the tastes and perceptions of the customers in order to be able to satisfy the changed demand of the sophisticated clientele when the tastes shift."
Abstract This paper examines the link that timing and scale have on investment at airports, particularly those in Australia. It analyses the affect that the complexity of airport operation has on development proposals and how airport managers must create investment rules, priority groups and networking teams to overcome specific problems in the airport management field. It also discusses how productive commercial relationships with airport customers, that is, airlines, are essential in determining precise requirements for airport development.
From the Paper "The potential investment at functioning airports is an inevitable challenge faced by airport managers at some stage of an airport's life. Although it might seem a case of traditional economic theory, investment in the development of airports is far more complex and multifarious (Lawrence, 1999). Investment in indivisible, capital assets such as runways and terminal buildings, requires meticulous preparation, research and industry consultation. This is for a number of reasons associated with factors attributed with both primary and secondary airports."
Abstract This paper explores whether or not the human resources (HR) within an organization should be used as critical investments. To support this exploration, the terms ?human capital?, "human assets", and ?intellectual capital? are discussed, on the merits of each specific term, as well as in relation to one another. Finally, a conclusion is drawn that determines if human resources should be viewed as any or all of the above terms and if HR managers should utilize them as critical investments in an organization's future.
From the Paper "All of the above aspects of HRM are interrelated, with decisions in one area affecting all other areas. The means by which a firm approaches any of these six areas will therefore have an impact on the organization's overall human resources practices. Generally an organization's Human Resource Manager coordinates the key components of HRM. However others, such as line managers, employees, unions and even shareholders can have important contributions to make to the overall HRM practices of the organization. Irrespective of who is involved in the HRM practices of an organization, ?HRM must be engaged in creating institutional change capacity, identifying social trends impacting future business opportunities, and building organizational cultures that can accomplish radical innovation.? "
Abstract This paper explains that the Real Option Valuation technique, which involves the prediction of the returns with an assumption that the asset valuation is closely connected to the management of assets, is an alternative over the discounted cash flow technique. The author clarifies that the Real Options Valuation technique emphasizes the value of the flexibility of the management while making decisions during the operation of the project; thus, it integrates the strategic planning options, such as to include, defer, abandon and other choices, which prevents committing error decisions. The paper relates that a weakness of the Real Options Valuation approach is that it neglects the influence of other parties.
From the Paper "The terminology, Economic Value Added, is also used to mean the economic profit. A positive economic profit indicates greater returns of the company over the cost of capital. In order that the company operates with a real profit it should be ensured that the returns are more than the cost of capital conversely it leads to loss. The long term investments are associated with uncertainty, and therefore necessitate firm decision making techniques analyzing and estimating the probability of outcomes taking and the values of these expected outcomes. Even though the firm managers try to put all their efforts for reducing risk taking assistance of the best possible information available, the uncertainty of weather and markets cannot be avoided. This makes essential the firms to depend upon the various decision making techniques while making strategic long term investments."
Tags: prediction, valuation, assets, flexibility, capital
Abstract The paper explains that capital budgeting is the process of project selection and lists the criteria for the most viable and desirable projects in which to investcapital. The paper discusses the concept of a "positive net present value" and how it is determined by a formula. An example of capital budgeting is provided in order to demonstrate how a positive net present value is determined from an initial capitalinvestment. The paper also shows how while the capital budget provides mean figures, inflation, interest rates and the value of money are factors that impact the relative value of the capital budget terms.
From the Paper "Research cites examples of the most common potential projects for cash outlay as investment in property, plant, and equipment, research and development projects, large advertising campaigns. However, the range of potential capital expenditures, or investments, is virtually limitless, and new ways to invest are manifesting or being created on an ongoing basis in this day and age. The capitol budget or schedule on virtually any project requiring a capital expenditure that results in the generation of a future cash flow should be examined further by the manager of the capital budget."
