Review the Parable of the Sadhu

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Review the Parable of the Sadhu in this week’s readings.

What did you learn from this parable that might help you engage in ethical conduct in the workplace?

Identify any ideas or images from then parable that give you clues about how employees are to behave ethically in the workplace.  For example, who do we step over on our way to the top?

How do we treat older workers?

You should identify at least two other clues or messages from that parable.

Question #1

 

Review the Parable of the Sadhu in this week’s readings.

McCoy, B. H. (1997). The parable of the sadhu. Harvard Business Review, 75(3), 54–64. Retrieved from http://marc-lemenestrel.net/IMG/pdf/the_parable_of_sadhu_-bowen_h._mccoy.pdf

 

 

What did you learn from this parable that might help you engage in ethical conduct in the workplace?

Identify any ideas or images from then parable that give you clues about how employees are to behave ethically in the workplace.  For example, who do we step over on our way to the top?

How do we treat older workers?

You should identify at least two other clues or messages from that parable.

Cash Flow

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Cash Flow

The Genesis Energy team began to understand the importance of cash flow and financing in high-growth scenarios. The Genesis Energy accountant suggested that the focus should be on developing a financial strategy that would ensure operational needs are met through short-term financing. The Genesis Energy team instructed Sensible Essentials to explain in basic terms the factors and mechanics necessary to determine short-term financing needs.  As the finance expert for Sensible Essentials, do the following:

Explain the concept of working capital and its importance to Genesis Energy.

Describe the mechanism and methodology used to ensure that operational needs are met through short-term financing.

Explain why this methodology is important to Genesis Energy.

Explain how working capital represents the assets that are needed to carry out the day-to-day operation and how working capital can act as a source of financing or increase the need for financing.

In your response, be sure to consider the time value of money and the relative advantages and disadvantages of short-term loans versus internally generated funds.

Write your initial response in 300–500 words. Respond in a APA Style, and demonstrate accurate spelling, grammar, and punctuation.

Please see attached……

Due Friday November 17

Signature Assignment: Strategic Management Research Project Presentation

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Important:  The company is  Caterpillar Inc.’s …..not Caterpillar.

Create a 12- to 14-slide presentation, complete with speaker notes for Caterpillar Inc.’s leadership team, in which you summarize your key findings, propose recommendations, and provide a rationale for your recommendations.

It must include an introduction and a conclusion.  Each slider must have speaker notes not less than two paragraphs (4/5 sentences each).

Address the following topics and prompts in your presentation:

Topic: Caterpillar Inc.’s Vision

  • Summarize your evaluation of the alignment between what Caterpillar Inc. is currently doing and their mission, vision, or values statement.
  • Recommend any changes you would make to Caterpillar Inc.’s mission, vision, or values statements to improve organizational goals.

Topic: Caterpillar Inc.’s Competitive Advantages and Disadvantages

  • Summarize your analysis of the strengths and weaknesses of Caterpillar Inc.’s competitive advantages and disadvantages.
  • Recommend operational changes to improve Caterpillar Inc.’s competitive advantages and business performance.
  • Propose a plan to measure and monitor the effectiveness of your recommended operational changes in Caterpillar Inc.’s competitive advantages to achieve organizational goals.

Topic: Caterpillar’s Global Strategy

  • Summarize your assessment of Caterpillar Inc.’s global strategy.
  • Recommend operational changes to improve Caterpillar Inc.’s global strategy and business performance.
  • Propose a plan to measure and monitor the effectiveness of your recommended operational changes to Caterpillar Inc.’s global strategy to achieve organizational goals.Topic: Caterpillar Inc.’s Vision (Week 1 and Week 4 Strategic Management Research Journal assignments)

    ·        Summarize your evaluation of the alignment between what Caterpillar Inc. is currently doing and their mission, vision, or values statement. For example-Week 1

    · Mission: Caterpillar says “Enable economic growth through….. and protect the planet. Is Caterpillar doing this? If so or not present a slide summary and include speaker notes that aligns with your evaluation.

    · Vision: Caterpillar says “A world in which all people’s basic needs…. and the communities where we live and work”. Is Caterpillar doing this? If so or not present a slide summary and include speaker notes that aligns with your evaluation.

    · Value statement: Caterpillar says “INTEGRITY, Commitment, excellence, sustainability and teamwork.” Is Caterpillar doing this? If so or not, present a slide summary and include speaker notes that aligns with your evaluation.

     

    · You can review Caterpillar Inc’s annual report and sustainability report to help support your summary and evaluation.

     

    · Recommend any changes you would make to Caterpillar Inc.’s mission, vision, or values statements to improve organizational goals.

     

    · Caterpillar Inc’s short-term and long-term goals:

    · I suggest any change recommendations you have be made to help improve their short-term goals. Summarize your recommendations on the slides and explain in their speaker notes. And you should have some recommendations, right? For example:

    · On Caterpillar Inc web site they have two categories of short-term goals to choose from:

    · 2020 Goals for Operations (7 goals)

    · 2020 Goals for Product Stewardship (4 goals)

     

    Topic: Caterpillar Inc.’s Competitive Advantages and Disadvantages

    ·        Summarize your analysis of the strengths and weaknesses of Caterpillar Inc.’s competitive advantages and disadvantages.

    · Go to Caterpillar Inc and look for Press Release information or 2020 Annual report data etc. and see which of their business, divisions or product lines is having profitable growth and it is a strength. Where there is no profitable growth it is a weakness.

    · Put your summary analysis on the presentation slide.

    ·        Recommend operational changes to improve Caterpillar Inc.’s competitive advantages and business performance.

    · Put your recommendations on your speaker notes.

    ·        Propose a plan to measure and monitor the effectiveness of your recommended operational changes in Caterpillar Inc.’s competitive advantages to achieve organizational goals.

    · Put your proposal plans in the speaker notes.

    ·

    Topic: Caterpillar’s Global Strategy

    ·        Summarize your assessment of Caterpillar Inc.’s global strategy.

    · Go to Caterpillar Inc at ( https://www.caterpillar.com/en/company/global-footprint.html ) learn about Caterpillar Inc’s global locations footprint and determine which of the 4 strategies describe Caterpillar Inc and summarize your assessment.  Is it transnational or transnational or could it be transnational? …hint…hint!  

    ·        Recommend operational changes to improve Caterpillar Inc.’s global strategy and business performance.

    · Use Exhibit 10.7 integration-responsiveness framework

    · Recommend operational changes to improve Caterpillar Inc’s global strategy and business performance.

    ·        Propose a plan to measure and monitor the effectiveness of your recommended operational changes to Caterpillar Inc.’s global strategy to achieve organizational goals.

    · International, Multi-domestic, Global-Standardization, and Transnational Strategies: Characteristics, Benefits, and Risks matrix to help you propose a plan to measure and monitor the risk for Caterpillar Inc type of global strategy.

     

    From the Instructions:

    ·        Include relevant media and visual aids on each slide of your presentation. You may have more than 1 slide for an assessment or evaluation. But should be 12-14 slides not including the Introduction, Conclusion and Reference slide.

    ·    Throughout your presentation Include Speaker Notes and citations to support your analysis and or any recommendations for Cat’s leadership team.

The Debt Cost of Capital

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Question

12.4 The Debt Cost of Capital

 

Use the following information to answer the question(s) below.

 

Consider the following information regarding corporate bonds:

 

Rating AAA AA A BBB BB B CCC
Average Default Rate 0.0% 0.0% 0.2% 0.4% 2.1% 5.2% 9.9%
Recession Default Rate 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 43.0%
Average Beta 0.05 0.05 0.05 1.0 0.17 0.26 0.31

 

1) Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The corresponding risk-free rate is 3% and the market risk premium is 5%. Assuming a normal economy, the expected return on Wyatt Oil’s debt is closest to:

A) 3.0%

B) 3.5%

C) 4.9%

D) 5.5%

 

 

2) Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The bondholders expected loss rate in the event of default is 70%. Assuming a normal economy the expected return on Wyatt Oil’s debt is closest to:

A) 3.0%

B) 3.5%

C) 4.9%

D) 6.7%

 

 

3) Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The bondholders expected loss rate in the event of default is 70%. Assuming the economy is in recession, then the expected return on Wyatt Oil’s debt is closest to:

A) 3.5%

B) 4.9%

C) 5.5%

D) 7.0%

 

 

4) Rearden Metal has a bond issue outstanding with ten years to maturity, a yield to maturity of 8.6%, and a B rating. The corresponding risk-free rate is 3% and the market risk premium is 6%. Assuming a normal economy, the expected return on Rearden Metal’s debt is closest to:

A) 0.6%

B) 1.6%

C) 4.6%

D) 6.0%

 

 

5) Rearden Metal has a bond issue outstanding with ten years to maturity, a yield to maturity of 8.6%, and a B rating. The bondholders expected loss rate in the event of default is 50%. Assuming a normal economy the expected return on Rearden Metal’s debt is closest to:

A) 0.6%

B) 1.6%

C) 4.6%

D) 6.0%

 

 

6) Rearden Metal has a bond issue outstanding with ten years to maturity, a yield to maturity of 8.6%, and a B rating. The bondholders expected loss rate in the event of default is 50%. Assuming the economy is in recession, then the expected return on Rearden Metal’s debt is closest to:

A) 0.6%

B) 1.6%

C) 4.6%

D) 6.0%

 

 

7) Nielson Motors plans to issue 10-year bonds that it believes will have an BBB rating. Suppose AAA bonds with the same maturity have a 3.5% yield. Assume that the market risk premium is 5% and the expected loss rate in the event of default on the bonds is 60%. The yield that these bonds will have to pay during average economic times is closest to:

A) 3.50%

B) 3.75%

C) 4.00%

D) 5.50%

 

8) Nielson Motors plans to issue 10-year bonds that it believes will have an BBB rating. Suppose AAA bonds with the same maturity have a 3.5% yield. Assume that the market risk premium is 5% and the expected loss rate in the event of default on the bonds is 60%. The yield that these bonds will have to pay during a recession is closest to:

A) 3.50%

B) 3.75%

C) 4.00%

D) 5.50%

 

 

12.5 A Project’s Cost of Capital

 

Use the following information to answer the question(s) below.

 

Consider the following information regarding corporate bonds:

 

Rating AAA AA A BBB BB B CCC
Average Default Rate 0.0% 0.0% 0.2% 0.4% 2.1% 5.2% 9.9%
Recession Default Rate 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 43.0%
Average Beta 0.05 0.05 0.05 1.0 0.17 0.26 0.31

 

Company Market

Capitalization

($mm)

 Total

Enterprise

Value ($mm)

 Equity

Beta

 Debt

Rating
Taggart Transcontinental $4,500 8,000 1.1 BBB
Rearden Metal $3,800 7,200 1.3 AAA
Wyatt Oil $2,400 3,800 0.9 A
Nielson Motors $1,500 4,400 1.75 BB

 

1) Your estimate of the debt beta for Taggart Transcontinental would be:

A) 0.05

B) 0.10

C) 0.17

D) 1.00

 

 

2) Your estimate of the debt beta for Nielson Motors would be:

A) 0.10

B) 0.17

C) 1.00

D) 1.68

 

3) Your estimate of the asset beta for Taggart Transcontinental is closest to:

A) 0.42

B) 0.59

C) 0.66

D) 0.71

 

 

4) Your estimate of the asset beta for Rearden Metal is closest to:

A) 0.42

B) 0.59

C) 0.66

D) 0.71

 

 

5) Your estimate of the asset beta for Wyatt Oil is closest to:

A) 0.59

B) 0.66

C) 0.71

D) 0.90

 

 

 

6) Your estimate of the asset beta for Nielson Motors is closest to:

A) 0.59

B) 0.66

C) 0.71

D) 1.75

 

 

7) Suppose that because of the large need for steel in building railroad infrastructure, Taggart Transcontinental and Rearden Metal decide to into one large conglomerate. Your estimate of the asset beta for this new conglomerate is closest to:

A) 0.42

B) 0.59

C) 0.66

D) 0.68

 

 

Use the following information to answer the question(s) below.

 

Consider the following information regarding corporate bonds:

 

Rating AAA AA A BBB BB B CCC
Average Default Rate 0.0% 0.0% 0.2% 0.4% 2.1% 5.2% 9.9%
Recession Default Rate 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 43.0%
Average Beta 0.05 0.05 0.05 1.0 0.17 0.26 0.31

 

8) Galt Industries has a market capitalization of $50 billion, $30 billion in BBB rated debt, and $8 billion in cash. If Galt’s equity beta is 1.15, then Galt’s underlying asset beta is closest to:

A) 0.84

B) 0.92

C) 1.00

D) 1.15

 

9) Trucks R’ Us has a market capitalization of $142 billion, $78 billion in BB rated debt, and $10 billion in cash. If Trucks R’ Us’ equity beta is 1.68, then their underlying asset beta is closest to:

A) 1.00

B) 1.20

C) 1.32

D) 1.48

 

10) Luther Industries has a market capitalization of $23 billion, no debt, and $4 billion in cash. If Luther’s estimated equity beta is 1.32, then the beta of Luther’s underlying business enterprise is closest to:

A) 1.09

B) 1.32

C) 1.48

D) 1.60

 

11) Your firm is planning to invest in a new power generation system. Galt Industries is an all equity firm that specializes in this business. Suppose Galt’s equity beta is 0.75, the risk-free rate is 3%, and the market risk premium is 6%. If your firm’s project is all equity financed, then your estimate of your cost of capital is closest to:

A) 5.25%

B) 6.00%

C) 6.75%

D) 7.50%

 

 

12) Your firm is planning to invest in a new electrostatic power generation system. Electrostat Inc is a firm that specializes in this business. Electrostat has a stock price of $25 per share with 16 million shares outstanding. Electrostat’s equity beta is 1.18. It also has $220 million in debt outstanding with a debt beta of 0.08. Your estimate of the asset beta for electrostatic power generators is closest to:

A) 0.76

B) 0.79

C) 0.93

D) 1.10

 

13) Your firm is planning to invest in a new electrostatic power generation system. Electrostat Inc is a firm that specializes in this business. Electrostat has a stock price of $25 per share with 16 million shares outstanding. Electrostat’s equity beta is 1.18. It also has $220 million in debt outstanding with a debt beta of 0.08. If the risk-free rate is 3%, and the market risk premium is 6%, then your estimate of your cost of capital for electrostatic power generators is closest to:

A) 7.50%

B) 7.75%

C) 9.50%

D) 10.10%

 

 

14) The firm’s unlevered (asset) beta is

A) the weighted average of the equity beta and the debt beta.

B) the weighted average of the levered beta and the equity beta.

C) the debt beta minus the equity beta.

D) the unlevered beta minus the cost of capital.

 

 

15) The firm’s unlevered (asset) cost of capital is

A) the weighted average of the equity cost of capital and the debt cost of capital.

B) the weighted average of the levered cost of capital and the equity cost of capital.

C) the debt cost of capital minus the equity cost of capital.

D) the unlevered beta minus the cost of capital.

 

 

16) If a firm’s excess cash holdings are greater than its debt, using net debt as the measure of leverage will result in

A) its unlevered beta and cost of capital equalling zero.

B) its unlevered beta and cost of capital being greater than its equity beta and cost of capital.

C) the risk of the firm’s equity being increased by its cash holdings in excess of its operating needs.

D) the risk of the firm’s debt being increased by its cash holdings in excess of its operating needs.

 

 

17) Which of the following is true of asset betas?

A) Asset betas are expected to vary greatly within firms in the same industry.

B) Businesses that are less sensitive to market and economic conditions tend to have higher asset betas than more cyclical industries.

C) Businesses that are less sensitive to market and economic conditions tend to have lower asset betas than more cyclical industries.

D) A and B are correct.