Thursday, January 30, 2020
The Value of Hennes Mauritz Essay In the last year the world economic recovery has come a long way. The Swedish economy has been at the forefront of that recovery and has showed impressive GDP growth. With still a lot of economic stress worldwide, mostly concerning national debt, it is still unclear if we have seen all that the financial crises, culminated in the late 2008, has to offer. With this said, the last years high volatility in the financial markets, will have an impact on this thesis. In almost all forms of valuation, some input will always be historical, why the past extreme years will affect the valuation. The models that are being used are the Dividend Discount Model and Free Cash Flow To Firm. Both of these valuation method has a couple of governing assumptions; mainly the assumptions of no transaction cost, perfect information and perfect competition. In reality none of these assumptions is hundred percent accurate. There exist transaction costs, everybody has not the same level of information, and there is evidence of not perfect competition. Nonetheless investors use these models and assume that the assumptions hold good enough for their purposes. This is Hennes Mauritz HM (Hennes Mauritz) is a Swedish clothing company headquartered in Stockholm, Sweden. The business idea is; Fashion and Quality at the best Price. With 87 000 employers in forty countries and with revenues over 126 000 000 000 SEK it is the third largest chain store in the world. HM has over 2200 stores on four continents and their goal is to increase the number of stores with 10-15% annually and keep a high profitability and increase sales in comparable numbers. In 2010 HM opened 218 new stores and in 2011 250 new stores are planned to open1. HM is a family business founded in VÃ ¤sterÃ ¥s, Sweden, 1947 by Erling Persson2. Today Erling PerssonÃ¢â¬â¢s son, Stefan Persson, is chairman of the board and Stefan PerssonÃ¢â¬â¢s son, Karl-Johan Persson is chief executive. As a token of the success of HM Stefan Persson is now the second richest man in Sweden and thirteenth richest in the world, with 159 000 000 000 SEK in wealth3. In 2008 Financial Times announced HM as the most valuable brand in Europe4. In the upcoming years HM is planning to expand in Kina, USA and Great Britain. Even though they are first and foremost a clothing company HM is also active in home equipment, shoes and cosmetics5 HM rents all their storage space or set up stores as franchise. In UK, Germany, Sweden, Norway, The Netherlands, Finland, Denmark and Austria online shopping is available. All expansion and growth is financed by equity6. The Purpose The purpose of this thesis is to establish the value of Hennes Mauritz. The valuation will eventuate in the conclusion if the stock is under- or overvalued. To arrive at this conclusion we will use two valuation methods; Dividend Discount Model and The Free Cash Flow to Firm valuation method. 2. Theoretical Framework 2.1. The concepts of Value and Discounted Cash Flow valuation Before we are getting into the theoretical aspects of our two valuation models, we are going to give a brief explanation about the concept of value for shareholders and discounted cash flow valuation. The most basic question one can ask about a valuation is: What is Value? When talking about a companyÃ¢â¬â¢s performance there tends to be a focus on earnings and revenues. But must two companies that have the exact same earnings and revenues, over time, be worth equally? The answer to this question is no and the reason is that the cash flow may differ. Cash flow is the difference between earnings and invested capital. Even if earnings and revenues are the same, one of the companies may have to invest a lot more capital to gain the same earnings and revenues. This leads to a difference in cash flows between the companies. Value for shareholders is created when the company generates cash flows at rates of return higher than the cost of capital. When this condition is fulfilled a faster growth rate will create even more value. If the return on capital equals the cost of capital it doesnÃ¢â¬â¢t matter how fast the company grow, no value will be created. The conclusion is that managersÃ¢â¬â¢ main focus should be on improving cash flows because that is what creates value for shareholders. Ã¢â¬Å"Any action that doesnÃ¢â¬â¢t increase cash flows doesnÃ¢â¬â¢t create value.Ã¢â¬ 7 In this thesis we are going to use the Discounted Cash Flow (DCF) valuation in order to calculate the value of a company. DCF is built upon the concept that money has a time value. This means that the longer in the future one will receive a fixed amount of money the less it is worth. The reason is that if one receives the fixed amount immediately one can invest it and earn interest. In the DCF valuation the first step is to estimate all future cash flows. The second step is that the cash flows have to be adjusted for the time value. Since the purpose is to find out how much the company is worth today, one has to discount the cash flow to its present value. The discount rate will reflect the riskiness of the estimated cash flows. The riskier the estimation is the higher discount rate should be used. 2.2 Discounted Dividend Model The first method we are going to examine is the Discounted Dividend Model (DDM). The DDM uses earnings per share, discounted by the Cost of Equity to arrive at a value per share. The general version of the DDM8 looks like this; Where; E(DPSt)= Estimated dividend per share at time t ke = the Cost of Equity t = time in years To this general composition there exist several extensions. Some of these extensions are going to be examined below. 2.2.1 One-stage/ Gordon Growth Model An extension to the formula above is the Gordon Growth Model: Ã ¢IÃ ¬Ã ¯Ã ¥ JÃ ¦ ÃÅ¸Ã ®JIÃ « The principle is to take the expected dividend for the next year and discount it with the cost of equity minus the growth rate in dividends. An obvious restriction for the model is that the growth rate can never exceed the cost of capital, since the stock price in that case becomes negative9. Due to the simplicity with a constant growth rate it is far from possible to apply this model on every firm. The model is best suited for firms growing at a rate equal to, or lowers than, the nominal growth in the economy and which have well established dividend payout policies that they intend to continue into the future10. Since this model only contains one single growth rate, it is called one-stage model. The assumption is that the firm continues to grow at the same rate to infinity. However, it is not likely that a firm can maintain a high growth forever. Sooner or later the growth rate will decrease and a more stable and lower growth rate will emerge. This limitation takes us to the next model, the Two-Stage model, which is an extension to the One-stage model.
Tuesday, January 21, 2020
The Particular Features Of The Employment System In Japan One of the unique and well known features of the Japanese employment system is permanent employment for workers. Japanese corporations responses to recessionary periods provide an opportunity to sort out the myths from the realities of the Japanese permanent employment system. During recessions Japanese companies forced to reduce their costs achieve reductions in several ways. First, they reduce the number of women and temporary workers they employ. During the recession that followed the 1973 oil shocks female employment dropped by eleven percent; more then five times the drop in male employment. It was easy to reduce female employment because women even if they hold permanent positions are thought of as transitory workers who will leave the workforce when they get married. Female and temporary workers are a safety valve for Japanese companies that allow them to reduce costs in the short-term without firing permanent male workers. The second way Japanese companies reduce costs is by giving early retirement to senior workers at the company. Many of these workers forced into early retirement then take up farming as is the custom in Japan for retires. Getting rid of senior workers is one the most effective tools companies have of reducing costs because these workers have more seniority and thus make more money then the average worker. Japanese companies also are able to cut costs during recessions by reducing or eliminating bonuses paid to workers, cutting down on hiring of new workers, eliminating the farming out of work to subcontractors, transferring workers internally with in the company to subsidiaries, and reducing profit margins to levels that many American companies would find intolerable. Japanese companies response to recessions shows the benefits and disadvantages of their employment system. Some of the benefits are that loyalty and labor relations are very good. This is due to the fact that for non- temporary male workers not yet near retirement age companies make a great effort to continue the permanent employment system even during recessions. Most young male workers once entering a company stay with it for their entire life and for them Japans permanent employment system serves them well. These workers come to view their company as almost a benevolent parent; the company leads them through fitness drills, training camps, and retreats. A workers identity is shaped not by their individual title but by the company they belong to.
Monday, January 13, 2020
In the play of Ã¢â¬Å"OthelloÃ¢â¬ , Shakespeare skillfully uses the opposition of light and darkness to express the ironic conflict of race and OthelloÃ¢â¬â¢s internal conflict propelled by his sense of otherness and jealousy. By doing so, Shakespeare challenges the audienceÃ¢â¬â¢s traditional associations of light and darkness. He also allows us to see the how internal conflict could lead to oneÃ¢â¬â¢s complete destruction. Shakespeare uses the opposition of light and darkness to express the racial conflict in Ã¢â¬Å"OthelloÃ¢â¬ . Literally, light and darkness can be represented as white and black. The time period during which the play is set has an Elizabethan audience who made general associations with these two colours. White was generally associated with fairness and nobility; whereas black was usually assigned to negative connotations such as evil and corruption. However in this play, Iago and Othello are portrayed inversely against this traditional generalization. Othello has a black physical appearance but inside, heÃ¢â¬â¢s a fair and noble hero at the beginning of the play. This is supported when the Duke of Venice comforts Brabantio about the marriage of Othello and Desdemona by saying that Ã¢â¬Å"Your son-in-law is far more fair than blackÃ¢â¬ . In contrast of Othello, Iago is a white man in the Venetian society with an absolute black soul. He plots against Othello throughout the play for his own benefits and to satisfy his professional jealousy. In his revenge plan, Iago remarks that Othello Ã¢â¬Å"will as tenderly be led by thÃ¢â¬â¢nose/ As asses areÃ¢â¬ . IagoÃ¢â¬â¢s duplicity is also proved by his confession to Roderigo. He states he belongs to the kind of people who Ã¢â¬Å"trimmed in forms and visages of duty. Keep yet their hearts attending on themselvesÃ¢â¬ . Through the traditional associations around light and darkness as well as black and white, Shakespeare shows us the ironic contrast between Othello and Iago, while the black-skinned Othello is pure and the white- skinned Iago is corrupt, a Machiavellian, a personality type, someone who was not true to their word, and itÃ¢â¬â¢s the one that the Elizabethan audience feared. In this manner, Shakespeare challenged the general ideas of the Elizabethan society which ranked black people racially to be lower. Shakespeare also allows us to consider the representation of appearance versus reality. What we see with our own eyes is not always the truth, so itÃ¢â¬â¢s not necessary for anyone to have racial bias. Shakespeare also employs the opposition of light and darkness to express OthelloÃ¢â¬â¢s internal conflict. Figuratively, light can be associated with love and honesty, whilst darkness can be used to represent suspicion and jealousy. Throughout the play, Othello always views himself honourable, as the light, and so is his love for Desdemona, which is also associated with light. However, after Iago has manipulated him into believing Desdemona is unfaithful, he starts to suspect his wifeÃ¢â¬â¢s fidelity, Ã¢â¬Å"I think my wife be honest, and think she is notÃ¢â¬ . His solution to his internal conflict is to kill Desdemona. But the metaphor Ã¢â¬Å"put out the light, and then put out the lightÃ¢â¬ suggests that he still doubts whether his wife is truly unfaithful or not, as he refers to Desdemona as the light. Ultimately, he regrets his commitment of killing Desdemona by referring to her as a Ã¢â¬Å"pearlÃ¢â¬ and himself Ã¢â¬Å"the base JudeanÃ¢â¬ who throws it away. Yet in his final speech, Othello presents to the audience his insistence that he is Ã¢â¬Å"not easily jealousÃ¢â¬ . This brings us, the audience, to see the tragedy of the play, the power that Iago wielded, and the great loss of love. Through the use of the opposition of light and darkness, Shakespeare expresses how Othello has kept switching his belief and judgment from rightness to falseness. The fact that Othello is a black man being in a white world is vital. His sense of feeling himself as Ã¢â¬Å"otherÃ¢â¬ exacerbates his insecurity. This dark side of OthelloÃ¢â¬â¢s character as a result causes him to lose self-control and commit a series of irrational actions. We witness his shift away from his original lightness. Shakespeare therefore shows us that the Moor has become internally darkened through his internal conflict in terms of feeling jealous and his sense of otherness. In conclusion, Shakespeare uses the opposition of light and darkness to show us the racial conflict in the Elizabethan society and the internal conflict of Othello. He inverts Iago, a white man, as evil, and Othello, a black good man who does wrong because of Iago. Shakespeare therefore challenges the Elizabethan audienceÃ¢â¬â¢s traditional associations of black and white. Ã¢â¬Å"OthelloÃ¢â¬ is the play that allows us to connect with OthelloÃ¢â¬â¢s action. We are shown how people can complete an absolute destruction when they are caught by their internal conflict, just as the noble Othello has been darkened by his sense of insecurity and jealousy.
Sunday, January 5, 2020
Introduction As human beings, we all have our own values, beliefs, and attitudes. These things develop over the course of our lifetime and at any point can change based on an experience that we may have. Our family, friends, community and the experiences we have had all contribute to our sense of who we are and how we view the world. Values, Beliefs, and a Little About Me Over the course of my life my values have changed based on circumstance. Currently if I had to list out my top five values in descending order they would be: religion, family, education, country, and culture. I value religion first and foremost because of my beliefs system that has been instilled in me since I was a child. If you place God first in your life, then everything else will work itself out, is something my Grandfather has always told me. Family is something that doesn t necessarily come first, but is a very high value to me. I identify as being a very caring father and husband, the protector, and head of my household. My family has always been supportive of my decisions. They have influenced me to always give my best at everything and to persevere when I fail. Education is the new value that has began to take a precedence in my life. Education is the bridge to success that I am striving to succeed at. Without education I cannot properly attend to my family s needs. The ti me demand of education also puts it very high on my values list because it warrants the majority of my attention.Show MoreRelatedPersonal values, belief and attitudes3993 Words Ã |Ã 16 PagesPersonal values, belief and attitudes As human beings, we all have our own values, beliefs and attitudes that we have developed throughout the course of our lives. Our family, friends, community and the experiences we have had all contribute to our sense of who we are and how we view the world. 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