MoD 3 FIN501 Risk and Returns Protfoli Essay Example | Topics and Well Written Essays - 1250 words

MoD 3 FIN501 Risk and Returns Protfoli - Essay Example We can use the following models to determine a company's required rate of return: 1) Dividend Discount Model: The dividend discount model is an example of a present value model of stock valuation in which dividends are used as stream of cash flows and the present value of the stream of dividends is defined as the value of the stock. The basic assumption of this model is that an investor who buys a share receives return only in the form of dividends. This assumption strictly holds for dividend paying stocks and for companies that are stable and pay a constant amount of dividend to its share holders. Companies that are categorized as high growth companies do not pay out dividends to their share holders since the excess funds are invested elsewhere in the business to exploit the existing growth opportunities (Madura, 2008). Hence DDM is not a suitable model to use for high growth companies that do not pay out dividends to its shareholders. Another assumption of the model is that there a re no taxes and transaction costs. This is a false assumption since dividends earned are taxed in most of the countries. DDM is one of the oldest and easiest model to calculate a company's required rate of return. ... The required rate of return is very sensitive to the inputs used in the DDM constant growth formula and hence the value of required rate of return is as good as the assumptions used by an analyst. DDM also assumes that the prices are efficient and the intrinsic value of a stock is equal to the market price of a stock. This assumption does not hold in equity market indices of developing markets. In conclusion, DDM is appropriate for valuing a company's required rate of return when its key assumption of steady future dividends hold. Most of the Equity market indices of developed markets satisfy this assumption. Lastly, an analyst should be aware of the fact that the output of the model is very sensitive to the inputs used and the model's accuracy largely depends on the assumptions used by an analyst. 2) Capital Asset Pricing Model (CAPM): CAPM is an equation that can be used to calculate the required rate of return of a stock. CAPM is one of the widest used models in finance to calcula te the required rate of return because of its comparatively objective procedure of calculating a company's required rate of return (Jaffe, Westerfield, & Ross, 2005). Following equation can be used to calculate the required rate of return in CAPM: One of the assumptions of CAPM is that the shareholders are risk averse and they make the decision to invest in a stock based on the mean return and variance of returns of their total portfolio . This assumption does not hold in developing markets where investors are not very knowledgeable about the concepts of portfolio management. Another assumption of CAPM is that there are many investors in the market and all of those investors are price takers. This assumption does not hold true if the financial markets are not

Evaluate Essay Example | Topics and Well Written Essays - 750 words

Evaluate - Essay Example Evaluation Rationale The justification behind evaluation in human resource development can be attributed to instructional provision of empirical data that would be helpful in improving the outcome of the training program. Most organizations expect a better overall performance but this is attached to individual productivity. This explains the need for individual focused training that is likely to help trainees realize their unique and diverse potentials. There will be three general levels of evaluation and the first one will be perception. In this level, the recruits or employees will be initiated to develop sense of training environment where instructors use different approaches to express ideas (Piskurich, 2003). In this case, much attention will be shifted to level 2 type of evaluation which constitutes learning. This level of evaluation will be executed through administration of written test to find out the content knowledge of the trainees at the end of the program. In regard to biometric voter registration kits applications, this test may equally include practical requirement that trainees show their newly acquired skills in ease of using the kit, successfully assembling and disassembling it. The tests are taken through review by the human resource team to identify the strengths and weak points of each employee for further actions and improvement strategies. The last part and third part which is performance is critical as it will help the trainers and human resource team identify the pitfalls when the trainees have begun to undertake trials with the kit. The five W’s and H of learning as a critical aspect of training in human resource development and for the use of biometric voter registration kit is presented in the table below. Who What when where why how Perception Administered by electoral body Facilitator Measure recruits perception of the training Immediately after training session In the classroom before they leave the training program Determ ine if the recruits/staff were satisfied with the content and / or the instructor Survey Learning Administered by electoral body Facilitator Measure knowledge and skills learned in using the BVR kit Administered at the end of the training program In the classroom and on the job To ensure that recruits/staff have acquired necessary knowledge to use the kits Hands on test In class practice Performance Administered by electoral body HR Development and Training head. Measure of actual transfer of learning of assembling the BVR kit components, using it to successfully register potential electorate and disassemble after use. After the recruits finish a given stage of training On the orientation phase Determine recruits’ ability to understand and use the Biometric voter registration kit. Observation Supervisor assessment Performance checklist Evaluation Tools Level 1 Training Survey Evaluation Scale: Evaluation Scale (1) Superior (2) Excellent (3) Good (4) Fair (5) Poor The content of the module was practical and useful to my contract I will be able to use the knowledge and skills gained through this training program The content of this activity matched announced objectives The delivery method (handouts, videos and demonstration) were appropriate The instructor was