Precis & Commentary Essay Example | Topics and Well Written Essays - 1000 words

Precis & Commentary - Essay Example Then he explains by saying that having less secrecy will make it harder for criminals to plot harmful deeds. Later on, he gives examples of groups of people who have been better off once theyve revealed their secrets to society- naming homosexuals and HIV-AIDS sufferers. His view is contrasted to another which claims that "more information, rather than less, is our best protection against misjudgment" (Rosen, 2000, as cited in Austin, 2006). To conclude his article, the author compares the right for secrecy with Santa Claus and unicorns, claiming that it is unreal. He admits, however, that everyone needs their solitude and space, but claims that ignoring both the benefits of not having secrecy as well as the potential risks involved would be the wrong thing to do; that accepting our being flawed and being united by our common information will save us. He says that the term "privacy" has many different interpretations to other people and groups of people, as the media has a very different notion of it than the common citizen. He quotes people who have said that some masquerade as reformers, while actually taking care of their own interests and that patriotism is used by scoundrels to further their own agendas (2008, p.13). Regardless of his opinion, even presidents have been known to be against secrecy, claiming that "the very word secrecy in a free and open society is repugnant" (Kennedy, as cited in Blumner, 2005). In spite of this, Ackland may have a point. It is well known that the federal government of the United States "has a massive amount of secrets", which is estimated in the millions each year ("Government Secrecy", 2005). And there is no shortage of opponents of this secrecy: "we live in an open society where secrecy should be banished from the workings of the government" (Hamilton, 2006). The reason for that is that "we enjoy a free and open

CAPM ana Capital Budgeting Essay Example | Topics and Well Written Essays - 750 words

CAPM ana Capital Budgeting - Essay Example The estimation of the cost of capital in turn is based upon the CAPM. However, not only does recent discourses in academic literature challenge the validity of the CAPM model, there is lack of consensus regarding the adequate measure of the market risk premium, a central input required for computing the cost of capital using the CAPM. However, in spite of these short comings, the CAPM has survived as the predominant quantitative model in its class for over 40 years since its inception. It is precisely this paradox the paper in concern addresses. In particular, Jagannathan and Meler (2002) offer an explanation to the following question: in spite of the various short comings of the CAPM model in computing the cost of capital, why do majority of managers report using the model to make critical decisions? The answer they offer is that in the real world, computing the exact cost of capital may not be crucial for optimal decisions. Hence, although the CAPM may not provide the exact value o f cost of capital, but it still remains useful for managers. Assuming rationed organizational and managerial capital which implies that not all projects with positive NPVs can be invested in, the paper shows that utilizing a hurdle rate greater than the cost of capital and the typical NPV computations, the value of waiting for an option can be accounted for. Therefore, the exact value of cost of capital no longer remains an imperative for optimal decisions. The idea that discounting values are set much higher than the cost of capital has significant support in financial literature. Stein (2001) for instance shows that aspects like agency costs arising out of asymmetric informational situations among share owners and managers leads to setting of discount rates that are much higher than the actual cost of capital. Empirical literature also lends further support to the claim by establishing the existence of a large number of hurdle rates that are set higher than the cost of capital (Po terba and Summers, 1995). Truong, Partington and Peat (2008) have also established that there are a number of hurdle rates used in the capital budgeting procedure in Australia. The critiques of using CAPM in capital budgeting fundamentally stem from two particular difficulties. First, the time horizon of the basic model is limited to a single period. But in reality, investment appraisals of firms typically involve decision making over multiple periods. Thus, this raises the question of applicability of the CAPM in investment appraisal in the real world. Secondly, computing discount rates specific to particular projects can prove difficult owing to for instance, difficulties arising in identification of appropriate proxy betas as proxy companies usually undertake multiple activities simultaneously. Disentangling the beta specific to a project may prove near impossible because these require certain information that may be extremely difficult to obtain. (Head, 2008) Additionally, it ha s been shown that although the NPV criterion can be utilized to make accept/reject decisions, these are valid and optimal only if the discount rate is not computed using the CAPM (Magni, 2009). In light of the discussion above what emerges essentially is that the CAPM generates estimates of cost of capital