Answers to Exam Questions Essay Example | Topics and Well Written Essays - 1250 words

Answers to Exam Questions - Essay Example First, the model is simple and easy to understand as well as to implement. It should be noted that the variables in the formula can be easily accessed from public sources except the beta-coefficient which is not usually available for small and non-publicly traded business organizations. Secondly, it can be seen that the CAPM does not rely on dividends or have any assumptions on the growth of dividend which makes it applicable to companies that do not pay dividend or are not expected to experience a constant growth rate for dividends (Keown , et al. 2004). However, the CAPM is also widely criticized because it does not adequately explain the variation in stock returns. Empirical studies including the work of Black, Jensen, and Scholes reveals that low beta stocks may offer higher returns than the model would predict. CAPM will not also work for individuals which are risk averse as it assumes that investors will generally favor a stock with higher returns even if holding it entails more risks. Also, it can be seen that CAPM doesn't take into account the associated transaction costs and taxes (Capital Asset Pricing Model 2006). It should be noted that in using CAPM, companies with different debt leverage will generate different cost of capital even if they belong to the same industry. Debt leverage is reflected in the CAPM formula as the company's beta coefficient. Accordingly, higher debt leverage will yield to a higher as debt is seen a riskier source of financing. References: Capital Asset Pricing Model 2006, Retrieved 14 October 2006, from http://en.wikipedia.org/wiki/Capital_asset_pricing_model Keown, A., Martin, J., Petty, W., & Scott, D. 2004, Foundations of Finance, Upper Saddle River, New Jersey McCracken, M. E. 2005, CAPM, Retrieved 14 October 2006, from http://teachmefinance.com/capm.html 2. Debt leverage is the amplification of the return earned on equity when an investment or firm is financed partially through borrowed money (Walker n.d.). In order to illustrate how debt leverage works, let's look at a company who wants to buy a building as an investment which costs $1,000,000. In turn, it wishes to find customers who would want to rent the spaces. It expects to generate $15,000 per month. If the company has enough cash, it can immediately buy the building find tenants and can sell it at $1,200,000 after one year. Thus, the company will have a total gain of $380,000 from the sum of the rents and appreciation in the building's market value. This represents a 38% return on investment. However, if the company has only paid $200,000 and opted to borrow the remaining $800,000 with a mortgage rate of 12%, then the company will be paying $8,000 per month. Since interest payments are tax deductible, the company's monthly rent income of $15,000 will be more than enough to co ver the expenses. Even taking only the $200,000 appreciation of the building, the company is already able to recoup 100% of its initial investment. In the illustration above, we can see that debt leverage helps the company to maximize the gains of its

Early Childhood...learning through play Assignment

Early Childhood...learning through play - Assignment Example Generally, play performs an important role in children development. Role of play in Child Development According to Johnson et al., (2004), play is necessary in development because it generates cognitive, physical, social and emotional well-being of children. Through play, children employ their creativity in developing their imagination, skills and physical, emotional, and cognitive powers. Children participate and interact in the world around them via play. In addition, play enables children to discover and generate ideas that they can master by practicing adult roles without fear (Ginsburg, 2007). Children’s development needs such as enhanced self-confidence and resiliency for future challenges are obtained through play as they posses knowledge about practical issues. Play enables children develop teamwork through learning how to participate in groups and to share. Play enhances children’s ability to learn how to settle and resolve conflicts, and understand self-advoca cy abilities. However, Ginsburg, (2007) argue that if play is permitted to be self-driven, children perform decision-making skills, establish their own areas of interest, and involve themselves in the passions they desire to practice in future. Moreover, play also builds energetic and healthy bodies. Development needs such as speech and language skills are met through child play. Play also gives opportunities for children to practice listening. However, children reinforce their language skills by replicating other children and adults. Considering that, the play is companion based, children talk and listen to each other in the course of playing. Social interaction skills and competence are developed through play. Johnson et al., (2004) claim that imaginative play and role-playing assist in brain development. Play facilitates brain development by inspiring the brain through configuration of connections between nerve cells. Children who participate in plays exhibit high levels of inter action than those who do not. Play is critical in children’s academic environment. Ginsburg, (2007), argues that play makes certain that school setting focus on social, emotional and cognitive development. Children are able to adjust to the school settings and develop their learning readiness and behaviors through play. Use and Value of Play within the Program Play is valued and used in early childhood development program by having child advocates who should consider all the factors, which interfere with optimal development and establish situation that enable children benefits of play since every child deserves the right to their exceptional prospective (Ginsburg, 2007). Play enhances children problem-solving skills for example, children playing games and puzzles boost their problem-solving abilities. In addition, children learn several roles of family members through play. For example pretending to be the father or mother in a play role enables the children understand the ro le of father and mother in a family. Role of the Environment in Support of Play Environment facilitates children development through learning and play. According to Malone et al., (2003), the best play environments for children are those established considering children’s natural play needs and play behavior involved in at diverse developmental eras, involving social, physical, and cognitive types of play. The method in which the environment is designed and configured manipulates children’