INTRODUCTION TO FINANCIAL MANAGEMENT-unit 3, question # 2 Essay

INTRODUCTION TO FINANCIAL MANAGEMENT-unit 3, question # 2 - Essay Example This is achieved by randomly selecting observations from all the distributions that influence the outcome of the project and this goes on until a representative record of the probable outcome of the project is obtained. An illustration for this is a chemical producer who wants to extend its processing plant. The first step will be to determine the probability distributions for all factors that will influence the returns of the project such as investment required, fixed costs, operation costs, selling price, market size among others. After this, the computer randomly picks out one observation from this list according to the chances of its actual occurrence in the future. The observations are then combined and a Net Present Value (NPV) or Internal Rate of Return (IRR) figure is calculated. This is repeated severally until a clear portrait of the expected outcome is obtained (Keown et al, 1998). Unlike the risk-adjusted discount rate method which gives one value for the risk-adjusted NPV, simulation gives the investment’s IRR or NPV probability distribution. According to Keown et al (1998), this method provides the range of possible outcomes for the project under the best, worst and most likely cases. It should also be noted that the inputs to a simulation comprises of all the key factors affecting the profitability of a project. In addition to this, the output obtained provides the probability of various outcomes occurring. This output is a probability distribution of the internal rates of return or the net present values for the project. From the above explanation, it is reasonable to state that the value of this method is quality decision making. Decision makers will use the whole range of possible outcomes of the project to determine the level of risk of the project and use this information to make the most appropriate decisions. Simulation is also very important for the

Business management work Essay Example | Topics and Well Written Essays - 1250 words

Business management work - Essay Example Economic recessions and periods of growth are noticeable and instantaneous demonstration of change, which have a direct consequence on the experience of employees, households as well as work organizations, and would be drawn upon in any elucidation of actual events. Though, fluctuations in the economy, significant though they are, have to be renowned from fundamental trends which might cause pressures towards a more basic reshaping of social institutions. Here we would categorize a series of associated developments which have frequently been discussed under the general rubric of a supposed transition from 'Fordism' to 'post-Fordism'; i.e., a shift from the predominance of economies driven by manufacturing industries characterized by a mass, somewhat homogeneous, semi-skilled workforce, towards economies dominated by employment in services, linked with a more heterogeneous, fragmented workforce. These 'ideal-typical' production systems have their organizational associates. Large-scale productive activities were escorted by bureaucratic systems of personnel administration and steady organizational careers. The growth of flexible production systems, it is argued, has been escorted by organizational 'delayering' and the turning down of the long-term, single organization, career. The move to service employment ca... For instance, in Britain, employment in services has grown from fifty-three per cent of total employment in 1971, to seventy-three per cent in 1993. Developments in technology have been of substantial importance in facilitating flexible systems of production and work organization in services, which by their very nature frequently have to be accessible outside the 'standard hours' linked with the 'standard worker'. In addition the product of service work the service needs the exercise of different qualities and skills, often of an interpersonal nature compared with those linked with manual and low-level work in manufacturing industry. The coming out of new occupations, and the restructuring of old occupations and skills, has produced new problems of control, classification and regulation. During an industrial era (in the West) dominated by large-scale manufacturing industry, the regulatory systems which emerged leaned to be dominated by those established in the leading industries, even though there were, certainly, noteworthy cross-national variations in this regard. 'Fordism' and the supremacy of manual trade unions have as well been associated to Keynesian economic strategies of demand management and other forms of macroeconomic intervention. In Britain, the Conservative government has since 1979 rejected such efforts to regulate the economy, and has been committed to a fundamental market philosophy, endorsing increased labour market flexibility. Therefore succeeding Conservative governments have hunted to remove or privatize welfare protections and regulatory institutions, to rouse the market for labour and skills by dropping rates of income tax at the upper levels, as well as to shift the balance between direct and indirect