The Net Present Value (NPV) Assignment Example | Topics and Well Written Essays - 1500 words

The Net Present Value (NPV) - Assignment Example Therefore, discounting gives us the present value of money that is consequently useful in determining the net present value of any given project. d) Approximately 25% discount rate gives a zero NPV. This rate is the Internal Rate of Return and rates below this give a positive NPV hence showing the viability of a project. On the other hand, rates above 25% give a negative NPV and such projects should not be undertaken. This model could be extended by adding the effect of the energy bill on an individual’s disposable income. The higher the bill, the higher the cost implications on the individual’s net disposable income. A Decision Support System (DSS) is a computer-based information system that is used in organisations to assist in making decisions. A DSS is an interactive computerized system that supports the decision-making activities of decision makers using technology, documents, data and knowledge to complete their tasks. The 2012 London Olympics involved a lot of logistical arrangements that the organisers had to consider in order for the games to be a success. One aspect of the games that had to be carefully planned out was transport. Given the number of people that flocked the country and the city of London in particular, the transport infrastructure had to be well laid out so that there was order in the city. The road network, public transport and the effects of disrupting transport for businesses and other services had to be of particular interest to the organisers of the games. Additional or new resources have to be deployed in the areas related to incident detection and also the DSS for network managers. The transport legacy after the games should be of three types. First and foremost is the physical infrastructure that would be made to enhance the rail and road networks and vehicle fleets. There are also the enhancements to the operations and systems by designing and deploying state of the art techniques in order to detect

Based on recent events, discuss whether the stock markets are Essay

Based on recent events, discuss whether the stock markets are efficient according to the EMH - Essay Example Whether the market is efficient or not remains a debatable topic among the stock market investors. Secondly, according to this hypothesis, a single investor is never able to get higher profitability than another investor by investing the same amount of fund. Lastly, EMH asserts that no investor would be able to surpass the average annual returns that all the funds and investors are able to achieve cumulatively. Discussion A competitive information market would allow private gains from producing private information, and tests of competition would require estimates of the cost of private information production. According to the efficient market hypothesis, stock market participants tend to form rational expectations of the future in the aggregate by comprehending all the information available in the market. Assuming the stock market efficiently discounts the rational expectations of investors, the prices of stocks accurately reflect an assessment of the intrinsic value based upon the r elevant information available (Gorda, 2005, p. 234). Thus, only the unexpected new information is likely to affect a movement in stock prices. A close look at stock prices sometimes reveals day-of-the-week effects wherein stock prices tend to rise on Mondays and fall on Fridays; time-of-the-year effects wherein stock prices tend to rise in January; and small firm effects wherein the prices of small firms’ stocks may rise by a more difference than those of large companies. But there is no evidence that an average market investor can follow these effects to earn super normal profits after the transaction costs are considered (Forbes, 2013). According to Fama (1970, p. 72), an efficient market is one in which the prices are always reflective of the information available, and the sufficient conditions for a market to be efficient are: the information is available without cost to all the market participants; there are no transaction costs involved in trading of securities; and all market participants agree on the implications of the current information. In practice, the information generated in the market has a significant effect on the stock prices of related companies. For example, after Microsoft announced that it would acquire Nokia, the share prices of Nokia almost doubled, increasing its value to about 22 billion Euros. Also, as a series of lawsuits occurred between Apple Inc. and Samsung Electronics over the design of smartphones and tablets, the share prices of both companies declined in the stock market. The stock market has been inefficient in recent times because of the substantial frictions that the market has been experiencing (Beechey, 2000, p. 57). Efficient market is not likely to exist even when there is complete absence of frictions and irrationality in the market. The central bank plays an appropriate role in the intervention in the financial markets with the objective of stabilising the asset prices. The market shows patterns of inefficie ncy due to the financial instability majorly driven by human myopia and imperfect rationality. The market does not show such quick adjustment to the receipt of new information as is stated in the efficient market hypothesis. The market is not efficient considering that the stocks with lower price to earnings ratios have higher risk adjusted returns than the stocks with higher price