Revisiting Cost of Capital in Commercial Banks

CHAPTER 1: INTRODUCTION 2 Background Capital Structure decision remains one of the corporate strategies to corporate managers because it affects firm’s value. This research is conducted within the commercial banks. In many research journals and articles the cost of capital is the expected rate of return of capital in investor’s investment. Weighted average cost of capital is considered as required rate of return in the company. Component of cost of capital are; long-term debt, preferred stock, and common stock. Each must have minimum return.We analyze from previous research articles that the banks should not focus on historical cost but on new cost, because in order to invest and rise, new cost of capital is used to make decisions. Level of interest rates, tax rates are two of the factors that affects cost of capital in the commercial banks. Interest rates apply on debt and equity. It is the most important factor for investors. Cost of debt affects by the level of inter est rates and also the cost of equity. As described in many articles, if interest rates increases the cost of debt increases, which increases the cost of capital.So, the raising of capital delayed till interest rate become favorable. This shows how the interest rate can be a source effective measure of the cost of capital. Similarly, if the tax rates increases, the cost of debt decreases, which decrease the cost of capital as it affects the after tax cost. The cost of capital directly and totally linked with capital structure. Capital structure influence the value of the banks, firm, company potentially by reflects the financing strategy. And capital structure should consider tax strategies.We found from different articles that the most important capital structure decisions are when the expected tax rates goes higher. The basic function of capital structure is to minimize the cost of capital and risk. Interest is tax deductable. The deductibility of interest payments provides influe nce for value. Higher the tax rate, the greater impact of deductibility of interest potentially on the after-tax cost of debt. These are the proved facts that are evaluated in previous researches. According to this research we are trying to find what role these factors play in commercial bank’s capital structure.It is necessary for top management of any business institutions to ascertain the banks or firms relevant cost of capital. From the banks’ perspective, the cost of each source of capital reflects the level of return because it is affected by certain factors like tax rates, interest rates, dividends etc. as the time period changes, the level of return also changes. In its simplest form, the capital structure decision is the selection by firm management of debt-to-equity ratio for the firm. Cost of Capital is perhaps the most fundamental and widely used concepts in financial economies.Managers of banks or corporation and also regulators employ the weighted average cost of capital for investment decisions. The WACC and the tax rates are endogenous to the firm’s debt policy. The interest rates affect the cost of debt as increasing debt increasing interest payments. We also derive the sources of capital structure that which source is better for the commercial banks and how the interest rates, tax rates brings variation in the cost of debt and the dividends and growth rates affects the cost of equity that totally affect the weighted average cost of capital.Our methodology allows us to value the government tax rates and interest rates that affect cost of debt. We specify numerically the affects of the variations in the factor like interest rates, tax rates and dividends, thus providing useful conceptual framework for the tax and interest policy debates that influence cost of capital of debt and equity. Finally we come to analyze that cost of debt increase or decrease by variation in the interest rates and tax rates and that help in the est imation of WACC that show that whenever the WACC decreases, it results in an increase in the profit that is useful for any organization or commercial banks. . Problem statement (Revisiting the cost of capital in the commercial bank) The problem statement of this research proposal includes re-examine the cost of capital in commercial banking sector of Pakistan and also to evaluate the direct and indirect association of the factors that affects weighted average cost of capital and how this variation (increase or decrease) can affect the profit and also the capital structure -debt and equity- of the commercial banks. 2. Research objectives While doing research planning, we analyze that the cost of capital considers the factors affecting decision making.The following object of the research comes into play: ? We will find out the factors which creates the variation (increase or decrease) on cost of capital and their effect on the capital structure decision making. ? To analyze the after effects of these factors on capital structure. ? To examine up to how much extent they are controllable or not from bank’s perspective. 3. Significance The importance of this research paper is that, the relation between the different determinants of the costs of capital creates different impact on the different commercial banks by affecting capital structure of that commercial bank.We know that as the weighted average cost of capital decreases, it increases the profit n the Commercial Banks. Risk associated with cost of capital and capital structure taking needs to b looked at differently in the case of the commercial banking institutes. This research sheds new light on how the cost of capital computed in the case of commercial banks. Also the relationship between the cost of capital and capital structure is investigated. This research has another importance as banking system has a vital role to play in the economic development of a nation. A healthy economy requires a sound banking system.This research states that how banks applies different techniques that enhance their performance and also affect the decision making of the Mangers regarding their capital. In this research, the main finding of the paper suggests that the commercial bank should focus on reducing the cost of capital that maximizes the profit. According to our findings, it is concluded that each banks has its policies of financing. Each bank takes decision of selecting capital structure for minimizing their cost, risk factor differently that occupies good financial position in market.Factors that have impact on cost of capital as well as on capital structure are tax rates, interest rates, dividends payout, risk of default and other like market fluctuation, corporate governance. This research plays a vital role by showing the significant contribution of Commercial Banks while equating debt to equity ratio. It also shows the understanding of the performance of Banks by evaluating weighted average cost of capital. The main findings of the paper suggest that private commercial banks should focus on reducing the cost of capital which can magnify the returns to their stockholders.Finally this research paper would also help the students in academics in understanding the relation between the factors and the cost of capital and also their after affects that create impact on the weighted average cost of capital. 4. Limitation Time constraint of this semester is the issue for this study as we have limited time in this semester as compared to the actual time required for the research. By being in banks we will acquire interviews approximately 15 -30 minutes with questionnaire because of the time given by the Mangers of Finance Division.The information given by the managers is also limited because it difficult for them to provide all necessary information as they are bound by the policies of the commercial bank. 1. 6 Report Structure Chapter 1 represents the introduction of res earch topic its background, problem statement, objectives of research that set, significance of this research and limitations. This chapter gives brief information about the topic pervious information, the scope of research and its benefits, the target of the research. And also provides the basic information that already conducted by different authors researchers.Chapter 2 deals with the literature review and conceptual framework. In this portion you will find the different views of different researchers related to this research topic cost of capital in commercial banks including capital structure importance its link with cost of capital, and factors that affect cost of capital. This portion also gives the direction and relevant information which is very helpful in proceedings the research. Conceptual framework helps in determining the relationships of factors with WACC.Chapter 3 provides the detail of methodology that is adapted to proceedings the research. This portion gives expla nation of research type, method, sample size, instruments that is used in finding and collecting the data. Chapter 4 gives the analysis of data that is collected through the questionnaire, interviews and calculating the WACC of commercial banks that chosen with assumptions, and research findings that proves the hypotheses that is set. Chapter 5 includes the conclusion of research findings and literature review findings.Also gives the recommendations. Finally Appendix attach to our research that contain Questionnaire. CHAPTER 2: LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK 1 Literature Review 2 Capital structure (Khadka 2005) has analyses in his research that the firms meet their operational needs by raising their funds and this can be done through the capital structure that involves the two major sources of debt and equity. There should be an appropriate balance between debt and equity as it has effects on the risk and return of the shareholders of the company.If there are reasonable proportions of debt and equity in the capital structure of the firm, it maximizes the shareholders wealth while minimizing the cost of capital and that could be considered as the optimal capital structure. (John J. Pringle, Jun. , 1974) Since banks are private economic units, it is reasonable to suppose that shareholder interests will influence, if not control, managerial decisions. Capital is an important managerial decision variable and that it plays an important role in the financial management of the individual bank. Groth 1997) said that the selection of capital structure affects the cost of capital. Carefully selection of capital structure is more important. Banks and companies consider more conservative capital structure with sensitivity to cyclical effects of economy. It involves in dividing not in sharing. If payments of dividend are not deductible and if interest is tax deductible on debt then capital structure is important. Barton and Gordon (1987) Financing and capital s tructure choices are among the several key decisions made by firm managers.Yet the study of these questions has been generally neglected by strategy researchers. Several scholars have noted that the issues involved are concerned with fundamental choices ‘which should support and be consistent with the long- term strategy of the firm. Balakrishnan and Fox (1993) said that by selecting suitable financing, a ‘firm's ability to manage its relationship with lenders thus becomes a key source of competitive advantage. Capital is a critical resource for all firms, the supply of which is uncertain. This uncertainty enables the suppliers of finance to exert ontrol over the firm. Stearns (1986) and Mizruchi (1993) estimate the cost of equity capital use a dividend discount model (DDM) methodology and earnings estimates. They find that the cost of equity capital for large U. S publicly traded companies ranged between 10% and 12% during 1979-1995, depending on the assumptions used wi th the DDM approach. Interestingly, Myers and Borucki (1994) obtain the same range of estimates for the cost of equity capital of a limited sample of U. S. utility companies using a DDM-type method.Bruner (1998) and Weaver(2001) surveying large corporation and confirm about WACC methodologies. Both authors find that there is a significant difference exists in estimating the equity capital component of the firm. Some uses CAPM while other uses different methods. 4 Cost of capital Cost of capital is the minimum required rate of return by investors in firm’s securities. It occupies an important role in the theory of financial management and in the investment decision making as it provides criteria for allocation of the capital that what a firm pays for its capital like debt, preferred stock and equity.Cost of Capital is related with the level of risk associate with existing and new assets and investments. (Khadka 2005) Modigliani and Miller (1958) proved that firms cost of capit al is independent of capital structure as it has no effect on the capital structure. The traditional belief of Modigliani and Miller (1963) is that the cost of capital can affect capital structure as in this belief they said that the personal taxes may include that brings variation in the cost of capital and hence affects the capital structure of the company. Khadka 2005) states that there is an empirical relationship between the cost of capital with capital structure, the size of the firm, growth of the firm, dividend payout ratio and liquidity of underdeveloped economy like Nepal but the major focus was the relationship of the leverage with the cost of capital where he conclude that negative beta shows that there is a negative relationship of cost of capital with the leverage as cost of capital decreases with the use of the leverage and this is done by the tax deductibility of the interest charges in the Nepalese firms.Cost of capital is the expected rate of return of capital in i nvestor’s investment. On debt, the amount of interest is paid is called cost of debt. Whereas cost of equity is equivalent to the risk free rate of interest plus risk premium for business risk. (Groth 1997). 5 Factors that affects cost of capital Groth (1997) further said that risk is one of the factors that affect the cost of capital which determines the expected risk of cash flow in the asset side of the bank. Business risk is that when bank and companies cash flow are not able to meet its operating expenses.Risk is linked to economic changes. And it would be at risk to business risk when change in economy occurs and when financing is done by totally with equity. Cost of equity influenced by business risk. Equity holder’s risk has not accepted by the creditors and preferred stock holder if present. If increase in business risk occurs then it decreases the financial risk and the optimal D/E ratio, and increases the cash flow uncertainty of asset side. Financial risk i s that when bank and companies cash flow are not able to meet its financial obligations. If firm finances through debt, then it has financial risk.Tax rates and interest rates are also factors. Interest payment expected deductibility give opportunity for value. If the tax deductibility is realized by the company then stockholders get the expected benefit of the tax deduction. Jorgenson and Landau (1993) or Bond and Devereux (2003) analyses that the government’s choice of the corporate tax rate is an important factor with respect to the investment decision made by shareholders and it is well known that the existence of corporate taxes distort this investment decision away from the social optimum . John J. Pringle, Jun. (1974) said that the traditional function of risk-bearing, capital is important in adjusting the maturity structure of liabilities. Risk is a function of uncertainty regarding future events, e. g. , earnings, losses on loans and securities, fluctuations in depos its, conditions in the financial markets, etc. Cost of equity increases if the financial risk become high. The cost of equity and debt increases with the increase in debt. The deduction of tax and its benefit is an expected benefit, to allow deduction of interest; the pre-tax EBIT income must be large.On after tax cost of debt, there is the greater the impact of interest deductibility, if the tax rate s higher. John R. Graham, (2003) analyze that the appropriate cost of capital in the presence of personal taxes does not depend directly on either the dividend payout rate or the tax on dividends. Equity shares have a market value lower than the difference between the reproduction cost of a firm's assets and the market value of its debt obligations. Because of this capitalization, it need not be true that an economy without risk or uncertainty would have no equity financing.Groth (1997) said that asymmetry of effects is that the expected return to stockholder will goes up, if in place of some equity; some debt is used. The good or bad leveraging effects are asymmetry if interest is tax deductable. The inability to realize the interest deduction result in an asymmetry effect on expected return to stockholder. Weighted average cost of capital become low with the cost of capital high, if the debt capital increase in proportion. Cost of equity increases with the cost of debt.If the cost of components high the weighted average cost of capital increases and reason is that shareholder prefer to use of debt when expected value of tax benefit is attractive as compared to the added financial risk associated with the debt. The Demanded rate of increase in cost of debt and equity, effects on value of the expected increase in tax benefit of using more debt. Interest rate affects the cost of debt. It involves the risk components that have the probability of default on the debt. Meziane (2006) in his article said that a company pays interest which is treated as an expense for t ax purpose and therefore it is tax deductable.Company will be bankrupt, if default on payment of interest to bank present by company. Equity financing cannot create a tax advantage because dividends are paid after interest and tax. Interest is paid on debt before tax deduction, whereas, dividend is paid after tax benefit. So, the cost of equity is high then cost of debt. Debt financing becomes attractive when tax is deductable from interest. Banks use cost of capital for decisions, a weighted average interest on debt. Bank should select D/E ratio for which the cost of capital fluctuate with the degree of debt finance is minimized.The D/E ratio is considered as one of the way of financing. (Alan J. Auerbach, aug. 1979). William F. Coffin and Sean Collin (2006) said that in the mid of 1990, a trend towards higher B/S debt in which low cost interest rate, lending level reduced by commercial banks and increase payback period for borrowers, a stable banking system. Cost of capital become low that could lower by the management in down market through viewing current corporate governance themes, taking action on giving management training with respect to capital market issues of today and advanced planning to identify the potential investors. Cost of capital and Corporate Governance Ramly and Rashid said corporate governance is also the factor that affects the cost of capital. CG directly affects the cost of equity, And indirectly with beta. This means poor performance of manager created through weak rights, thus increase cost of capital. Strong (weak) shareholders right associated with increase (decrease) cost of equity capital. CG generate liquidity problem in which investor high the sell price and decrease the buy price which can high the transaction cost and also affects the COEC.Thus, the CG creates strong mechanism on COEC and provides positive shareholder value for firm. It has also reducing effects on cost of capital. Banks and other financial institutes have negative influence on CG. Hennart, (1994) Both classes of suppliers (debt holders and equity holders) have governance abilities. The level of governance ability varies between the two and the optimal selection of the type of financing depends on the nature of resources of the firm. Seth, (1990) financing choices have the potential to affect performance by changing the level of governance costs. Importance and difficulties of WACC Denis Boudreaux (1995) in his article uses the buildup model for the cost of equity capital by estimating cost of equity capital for capital budgeting analyses. He said that whenever there is a need to determine the value of the firm, the cost of capital must be estimated. He said that the cost of debt of closely held firm is much higher that the publicly traded organization because of the loans or debt borrowed by the closely held firms including the commercial banks.He further said that the public traded firms have the low risk whereas a huge risk factor is involved in the closely held businesses. Experts have recognized that the exploitation of debt and equity can enhance the corporate value in 1940s. Later in the years, five concept developed on this area(1) early gearing leverage model; (2) the model of Modigliani and Miller (MM); (3) Capital Asset Pricing Model(CAPM); (4) Arbitrage Price Theory (APT); and (5) Gordon Model Shubbar and Alzafiri, (2008). Unless a firm can gain in excess of its cost of capital, it will not add value to its investor’s wealth.Company’s cost of capital is expressed by the weighted average of the cost of individual sources of capital employed. Bruner et. al. , (1998). For a firm using common stock (equity) and bond (debt) financing, with re and rd as the cost of equity capital and the cost of debt capital, the WACC is expressed the following equation: WACC = r = wd rd (1 ? t) + we re Where, wd (weight (proportion) of debt) = (value of debt/value of debt and value of equity), we (weight (pr oportion) of equity) = (value of equity/value of debt and value of equity), wd + we = 1, and t = tax rate on corporate income.The component costs, re and rd, as well as the weights are based on market values: re is frequently calculated as the risk free rate plus a risk premium, based on the capital asset pricing model, and rd reflects the market rates on the firm’s outstanding debt and on the rd of similar firms. The standard treatment includes (1? t) in the WACC calculation to reflect the deductibility of interest payments in the calculation of the corporate tax on the firm’s income statement: the interest cost of debt, by this procedure, is reduced.Also, to avoid double counting the tax â€Å"advantage† of debt, the interest payments are not calculated in the prospective cash flows. This is the textbook treatment in calculating a firm’s cost of capital. (Miller2006) Evaluating a firm’s weighted average cost of capital has its importance to the m anagers who estimate investments projects for capital budgeting purposes or to the investor whose desire is to assess the overall riskiness and expected return from a company’s activities for valuation purposes. (Miller 2006).Fama and French (1997, 1999) analyse that few difficulties arise because there is some uncertainty in evaluating a firm’s (or banks) cost of capital. This uncertainty is a sort of risk faced by the firm when projecting a project’s cash flow. Bruner, Eades, Harris, and Higgins, (1998) also analyze that there is wide variation in estimating WAAC by different methods. This is due to the manager’s differences in firms cost’s of equity capital that helps in investment decision making. 8 Conceptual Framework DV= DEPENDENT VARIABLE IV= INDEPENDENT VARIABLE MV=MODERATE VARIABLE 9 Conceptual HypothesisHo: WACC increases with increase in interest rates and decreases with decrease in interest rates. H1: WACC increases with decrease in ta x rates and decreases with increase in interest rates. H3: Cost of debt increases with increases in interest rate and decreases with decrease in interest rates. H4: Cost of debt increases with decrease in tax rates and decreases with increase in interest rates. CHAPTER 3: RESEARCH METHODOLOGY 10 Type of Research Research can be defined as the search for knowledge, or as any systematic investigation, with an open mind and facts, usually using a scientific method.Our research is empirical research, which tests the feasibility of a solution using empirical evidence. This research comprises of both the qualitative and quantitative research method for the data analysis. Firstly we search for the secondary data in order to know and understand the analysis of the previous researcher that how they work and create different perspective for the Weighted Average Cost of Capital than we include the researches of the previous researcher in the literature review of this research in order to creat e relation and direction between the previous researches with our research. 1 Sampling Technique Sampling Technique used in our research is Random Sampling in which we chosen from a population for investigation. In this method we chose from managers in the Commercial Banks and estimates obtained from the random sample in order to solve our queries related to WACC. 12 Sample Size The Sample Size is comprises of 5 Commercial Banks of Karachi. More than the given sample size is not possible because of the time of this semester and also the little difficulty in finding the appointments with the Mangers of Finance Departments. 3 Instruments Questionnaire includes 12 question given to the Managers of the Commercial Banks in order to analyses the perception of the manager that how each individual differs in their perception for the factors that affects the weighted average cost of capital. Most of them include five point likert scales. Other than questionnaire, the balance sheet of 2009 of each bank is used to estimate the WACC for the year and evaluate how the factors like tax rates, interest rates affect WACC. 14 Data CollectionThis research has been carried out to evaluate the correlation between the factors of cost of capital like tax rates, interest rates and the WACC that how these factors affect the WACC in the commercial banks. The selected five banks include: Allied Bank Limited (ABL), Habib Bank Limite(HBL), Muslim Commercial Bank(MCB), Alfalah Bank and Soneri Bank Limited. Descriptive Data Analysis is taken place in order to estimate WACC. This study employs after-tax cost of debt and equity in order to estimate WACC for selected banks. The procedure of calculating after-tax cost of debt and cost of equity has been stated here.The cost of debt measures the cost of borrowing funds of the firm. In calculating the after-tax cost of debt of each bank for the year 2009 by the following formula: After-tax cost of debt = pre-tax cost of debt (1 – tax rate) The cost of equity evaluated through the given formula: Cost of equity = Gordon growth model =(Do (1 + g))/ (market price per share)] + g) Finally the Weighted Average Cost of Capital calculated by WACC = (Weighted average cost of debt) + (weighted average cost of equity) CHAPTER 4: DATA ANALYSIS 15 QUESTIONNAIRE ANALYSIS Banks normally prefer financing through debt plus equity. 1% of the commercial banks use both (debt and equity) as their sources of finance while remaining 29% of the banks prefer debt for their investment. Only exploitation of equity is not preferred by any banks because through debt finances, the banks gain and improves profit. [pic] Equity sources liable bank to pay dividend, 71% of the banks says that the dividend payment increases the cost of capital while the other 14% said that it decrease the cost of capital and the remaining said that dividend payment has no such impact on the cost of capital. [pic] 5% of the commercial banks said that by using tax shield , cost of capital decreases as it decreases cost of debt and also impact interest rates. While 14% said that it has no such impact like some of Islamic bank like Meezan Bank. [pic] 71% of the sample size agreed that the Cost of capital has positive impact on the capital structure by using both sources of finance while 15% disagree and other 14% are highly disagree. That means most of the commercial banks are in the favor of Ho that the using both sources improves the profit of the commercial bank. [pic] 7% agrees and 28% strongly agrees that the risk factor of the default increases as there is an increases liabilities when bank finance through debt while only 10% of the sample size disagree to this fact but still they have profit by increasing their liabilities. [pic] Approximately 86% of the commercial banks agree from the fact that the fluctuation in the interest rate affects Cost of Capital and also the Capital Structure of their banks while other says that there is no as such im pact of the interest rates but from secondary data we analyze that interest rate is the factor that affects the cost of capital and the capital structure. pic] 71% of the managers agrees that as low dividend payout affects the reputation of their bank, similarly high dividend payout and dividend growth also affect the capital structure decision whereas 29% of the managers said that high dividend has no such impact on the cost of capital and on investment decision. [pic] 100% of the sample size agrees that cost of capital highly impact the investment decision in the commercial bank that also affects capital structure decision making and increases the profit if the weighted average cost of capital is low. [pic] 5% of the sample size agrees that the cost of capital has a huge impact on the level of risk because the maximization of the profit in the commercial bank is truly based on cost of capital and its other factors. [pic] 57% of the sample size agree that the taxes bring variation in the cost of capital in commercial bank while the other denied that taxes has no such affects on cost of capital but many researches has proved that taxes highly affects the cost of capital. [pic] 100% of the managers agree that weighted average cost of capital reduces as there is reduction in the net financial debt.It can be explained by the fact that if the cost of debt remains same but there is variation in the weightage of the debt. The lower weightage reduces the WACC of the commercial bank. [pic] While the method used for the cost of equity varies in different banks. 15% uses the CAPM, 42% uses the Gordon Growth Model whereas the remaining percentage uses both the CPM and Gordon Growth Model method when they finances through the equity. [pic] 16 DESCRIPTIVE ANALYSIS 17 Allied Bank Limited WACC = (Weighted average cost of dbt) + (weighted average cost of equity)WACC = (interest (1-tax)) + (Do (1 + g))/ (market price per share)] + g) COST OF EQUITY: |YEAR |2005 |2006 |2007 |20 08 |2009 | |DIVIDEND/SHARE |2. 5 |2. 5 |3 |3. 5 |4 | |GROWTH |0% |0% |20% |16. 66% |(14. 28%) | Average growth=4. 476% Cost of equity = Gordon growth model =(Do (1 + g))/ (market price per share)] + g) Cost of equity =4(1+0. 4476)/59. 11+0. 04476 = 11. 54% | |g |Growth Rate |4. 476% | | |Do |Last Dividend |4 | | |MP |Market Price |59. 11 | | | | | | COST OF DEBT: Interest Rate = 9. 619% Tax rate = 32. 4% Weighted average cost of debt after tax = 0. 09619(1-0. 324)Weighted average cost of debt after tax =6. 503 % WEIGHTED AVERAGE COST OF CAPITAL: | |AMOUNT |%AGE COMPONENT |COST |WACC | | |Thousand |(a) |(b) |(a*b) | | |(000) | | | | |DEBT |39,457,216 |0. 0055 |0. 650 |0. 00036 | |EQUITY |7,110,007,580 |0. 9945 |0. 1154 |0. 11476 | |TOTAL |7,149,464,796 | | |0. 11512 or 11. 51% | ANALYSIS In order to prove our research hypotheses, we find different relation between the interest rates, cost of debt and WACC; we assume different variation in the interest rates as it is the independent v ariable that affects the WACC hich is the dependent variable. In 2009, the interest rate of ABL was 9. 619%, we assume two different rates in which one is greater than 2009 rate i. e. 15% and other is less than 2009 interest rate i. e. 7. 00%. As the interest rates increases, it also increases the cost of debt that results in the increase in the weighted average cost of capital. Hence, hypotheses Ho and H3 of our research has proved by this analysis because as the interest rate decreases to 7. 00%, the cost of debt also declines which result in decreases in the WACC and vice versa. INTEREST |COD |WACC | |7. 00% |4. 73% |11. 50% | |9. 62% |6. 50% |11. 51% | |15. 00% |10. 14% |11. 52% | pic] For the relation between the taxes rates, cost of debt and WACC. We find different variations among them. Tax rates are the independent variable so they create different affects on WACC as it is dependent variable. In 2009, ABL has the tax rate of 32. 40%. Similarly we assume one tax rate greater than 32. 4% and another is less than 32. 4% in order to prove our hypothesis. From the following analysis, we come to know that as the tax rates increases, it decreases the cost of debt that results in the decrease in the weighted average cost of capital.Hence, hypotheses H1 and H4 of our research have proved by this analysis. |TAX RATES |COD |WACC | |30% |6. 73% |11. 84% | |32. 40% |6. 50% |11. 51% | |35% |6. 25% |11. 50% | [pic] 8 Habib Bank Limited (HBL) WACC = (Weighted average cost of debt) + (weighted average cost of equity) WACC = (interest (1-tax)) + (Do (1 + g))/ (market price per share)] + g) COST OF EQUITY: |YEAR |2005 |2006 |2007 |2008 |2009 | |DIVIDEND/SHARE |1. 5 |1. 48 |1. 48 |3. 01 |0. 30 | |GROWTH |0 |-1. 333% |0 |103. 378% |-90. 033% | Average growth=2. 4024%Cost of equity = Gordon growth model =(Do (1 + g))/ (market price per share)] + g) Cost of equity = 0. 03 (1+0. 024)/40. 9+0. 024 = 2. 475% | |g |Growth Rate |2. 4024% | | |Do |Last Dividend |0. 03 | | |MP |Ma rket Price |40. 90 | | | | | | COST OF DEBT: Interest Rate = (LIBOR+1. 75) = 18. 65% Tax rate = 37. 2% Cost of debt after tax = 18. 65 (1 – 0. 3732) Cost of debt after tax = 11. 69% WEIGHTED AVERAGE COST OF CAPITAL: | |AMOUNT |%AGE COMPONENT |COST |WACC | | |Thousand |(a) |(b) |(a*b) | | |(000) | | | | |DEBT |33,536,837 |0. 786 |0. 169 |0. 0912 | |EQUITY |9,108,000 |0. 214 |0. 0246 |0. 0053 | |TOTAL |42644837 | | |0. 0965 or 9. 65% | ANALYSIS We find different relation between the interest rates, cost of debt and WACC in order to prove our research hypothesis. We assume different variation in the interest rates as it is the independent variable that affects the WACC which is the dependent variable.In 2009, the interest rate of HBL was 18. 65%, we assume two different rates in which one is greater than 2009 rate i. e. 20% and other is less than 2009 interest rate i. e. 12. 00%. As the interest rates increases, it also increases the cost of debt that results in the increase in the weighted average cost of capital, this can easily proved by given table and you can also find this relation through the given graph. Hence, hypotheses Ho and H3 of our research has proved by this analysis because as the interest rate decreases to 12%, the cost of debt also declines to from 11. 69% to 7. 2% and which result in decreases in the WACC from 9. 65% to 6. 44% and vice versa. |INTEREST |COD |WACC | |12% |7. 52% |6. 44% | |18. 65% |11. 69% |9. 65% | |20% |12. 536% |10. 38% | pic] Tax rates are the independent variable so they create different affects on WACC as it is dependent variable. In 2009, HBL has the tax rate of 32. 40% that having COD 6. 503% and a WACC of 11. 51%. Similarly we assume one tax rate greater than 32. 4% and another is less than 32. 4% in order to prove our hypothesis. From the following analysis, we come to know that as the tax rates increases, it decreases the cost of debt that results in the decrease in the weighted average cost of capital. Henc e, hypotheses H1 and H4 of our research have proved by this analysis. Tax rates |COD |WACC | |30% |6. 73% |11. 84% | |32. 4% |6. 503% |11. 51% | |35% |6. 25% |11. 50% | [pic] 19 Muslim Commercial Bank (MCB)WACC = (Weighted average cost of debt) + (weighted average cost of equity) WACC = (interest (1-tax)) + (Do (1 + g))/ (market price per share)] + g) COST OF EQUITY: |YEAR |2005 |2006 |2007 |2008 |2009 | |DIVIDEND/SHARE |4. 5 |5. 1 |5. 6 |6 |6. 8 | |GROWTH |0 |13. 33% |9. 8% |7. 14% |13. 33% | Average growth=8. 72%Cost of equity = Gordon growth model = (Do (1 + g))/ (market price per share)] + g) Cost of equity=6. 8(1+0. 0872)/189. 79+0. 0872 =12. 62% | |g |Growth Rate |8. 72% | | |Do |Last Dividend |6. 8 | | |MP |Market Price |189. 79 | | | | | | COST OF DEBT: Interest Rate = 12. 75% Tax rate = 33. 07% Cost of debt after tax = 12. 275 (1 – 0. 3307) Cost of debt after tax = 8. 216% WEIGHTED AVERAGE COST OF CAPITAL: | |AMOUNT |%AGE COMPONENT |COST |WACC | | |Thousand (000) |(a ) |(b) |(a*b) | |DEBT |44,662,088 |0. 0221 |0. 0822 |0. 0018 | |EQUITY |1,972,537,950 |0. 778 |0. 1262 |0. 1234 | |TOTAL |2,017,200,038 | | |0. 1252 or 12. 52% | ANALYSIS From many different previous researches, we find different relation between the interest rates, cost of debt and WACC. We assume different variation in the interest rates as it is the independent variable that affects the WACC which is the dependent variable. In 2009, the interest rate of MCB was 12. 28%, we assume two different rates in which one is greater than 2009 rate i. . 11. 6% and other is less than 2009 interest rate i. e. 14. 90% in order to find the after affects of these changes. Remaining other things constant, as the interest rates increases, it also increases the cost of debt that results in the increase in the weighted average cost of capital, this can easily proved by given table and you can also find this relation through the given graph. Hence, hypotheses Ho and H3 of our research has proved by t his analysis because as the interest rate decreases to 11. 6%, the cost of debt also declines to from 8. 22% to 7. 6% and which result in decreases in the WACC from 12. 52% to 12. 51% and vice versa. |INTERSET RATES |COD |WACC | |11. 60% |7. 76% |12. 51% | |12. 28% |8. 22% |12. 52% | |14. 90% |9. 97% |12. 6% | [pic] For the relation between the tax rates, cost of debt and WACC. We find different variations among them. Tax rates are the independent variable so they create different affects on WACC as it is dependent variable. In 2009, MCB has the tax rate of 33. 07%. Similarly we assume one tax rate greater than 33. 07% and another is less than 33. 07% in order to prove our hypothesis. From the following analysis, we come to know that as the tax rates increases, it decreases the cost of debt that results in the decrease in the weighted average cost of capital.Hence, hypotheses H1 and H4 of our research have proved by this analysis. |TAX RATES |COD |WACC | |30% |8. 59% |12. 53% | |33. 07% |8. 22% |12. 52% | |40% |7. 36% |12. 50% | pic] 20 Al-falah Bank Limited WACC = (Weighted average cost of debt) + (weighted average cost of equity) WACC = (interest (1-tax)) + (Do (1 + g))/ (market price per share)] + g) COST OF EQUITY: |YEAR |2005 |2006 |2007 |2008 |2009 | |DIVIDEND/SHARE |0. 5 |1. 25 |1 |2. 25 |2. 25 | |GROWTH |0 |150% |-20% |125% |0 | Average growth=51%Cost of equity = Gordon growth model =(Do (1 + g))/ (market price per share)] + g) Cost of equity = 2. 25(1+0. 51)/26. 13+0. 51 = 64% | |g |Growth Rate |51% | | |Do |Last Dividend |2. 25 | | |MP |Market Price |26. 13 | | | | | | COST OF DEBT: Weighted average Interest Rate = 6. 406%.Tax rate = 34. 84% Cost of debt after tax = 0. 06406 (1 – 0. 3484) Cost of debt after tax = 4. 174% WEIGHTED AVERAGE COST OF CAPITAL: | |AMOUNT |%AGE COMPONENT |COST |WACC | | |Thousand (000) |(a) |(b) |(a*b) | |DEBT |18,687,600 |0. 00138 |0. 0417 |0. 000057 | |EQUITY |13,491,562,500 |0. 986 |0. 64 |0. 639104 | |TOTAL |13,5 10,250,100 | | |0. 639 or 63. 9% | ANALYSIS Many different researches have concluded that different variation in the interest rates as it is the independent variable that affects the WACC which is the dependent variable. In 2009, the interest rate of Alfalah Bank was 6. 404%, we assume two different rates in which one is greater than 2009 rate i. e. 8. 6% and other is less than 2009 interest rate i. . 4. 6% in order to find the after affects of these changes. Remaining other things constant, as the interest rates increases, it also increases the cost of debt that results in the increase in the weighted average cost of capital, this can easily proved by given table and you can also find this relation through the given graph. Hence, hypotheses Ho and H3 of our research has proved by this analysis because as the interest rate decreases to 4. 6%, the cost of debt also declines to from 4. 174% to 2. 997% and which result in decreases in the WACC from 63. 914% to 63. 0% and vice versa. |I NTEREST RATES |COD |WACC | |4. 6% |2. 997% |63. 90% | |6. 406%. |4. 174% |63. 914% | |8. 6% |5. 604% |63. 918% | [pic] For the relation between the taxes rates, cost of debt and WACC.We find different variations among them. Tax rates are the independent variable so they create different affects on WACC as it is dependent variable. In 2009, Alfalah has the tax rate of 34. 84%. Similarly we assume one tax rate greater than 34. 84% and another is less than 34. 84% in order to prove our hypothesis. From the following analysis, we come to know that as the tax rates increases, it decreases the cost of debt that results in the decrease in the weighted average cost of capital. Hence, hypotheses H1 and H4 of our research have proved by this analysis as they are negatively correlated. TAX RATES |COD |WACC | |25% |4. 805% |63. 917% | |34. 84%. |4. 174% |63. 9% | |40% |3. 844% |63. 915% | [pic] 21 Soneri Bank Limited ANALYSISSoneri Banks has following interest rates and tax rates, which affe ct WACC in the same manner as it affects other commercial Banks. In 2009, it has interest rate of 12. 63% that has the cost of debt 8. 54% and the WACC is of 0. 37%. Variation in the interest rates brings following changes and hence proves our research. |INTEREST RATES |COD |WACC | |11. 60% |7. 84% |0. 35% | |12. 3% |8. 54% |0. 37% | |14. 60% |9. 87% |0. 43% | [pic] Tax rates posses the same affect. As tax rates increases, it has negative relation with the COD and WACC that proves the hypothesis H1 and H4 of our research as in 2009, the tax rate was 32. 34%, when it decrease, the COD increases which also increases WACC and again inversely proportional when Tax rate increase. TAX RATES |COD |WACC | |25% |9. 47% |0. 41% | |32. 34% |8. 54% |0. 37% | |40% |7. 57% |0. 33% | [pic] CHAPTER 5: CONCLUSION AND RECOMMENDATION 1. ConclusionAccording to past related researches, there should be a suitable balance between debt and equity as it has effects on the risk and return of the sharehold ers of the bank. If there are reasonable proportions of debt and equity in the capital structure, it maximizes the shareholders wealth while minimizing the cost of capital and that could be considered as the optimal capital structure. Factors like Interest payment expected deductibility give prospect for value. If the tax deductibility is realized by the bank then stockholders get the expected benefit of the tax deduction.If firm finances through debt, then it has financial risk. And if through equity, then it has business risk. The cost of capital can affect capital structure that the taxes bring variation in the cost of capital and hence affect the capital structure of the banks. Cost of equity increases if the financial risk become high. The cost of equity and debt increases with the increase in debt. On after tax cost of debt, there is the greater the impact of interest deductibility, if the tax rate s higher. Weighted average cost of capital become low with the cost of capital high, if the debt capital increase in proportion.Cost of equity increases with the cost of debt. If the cost of components high the weighted average cost of capital increases and reason is that shareholder prefer to use of debt when expected value of tax benefit is attractive as compared to the added financial risk associated with the debt. The Demanded rate of increase in cost of debt and equity, effects on value of the expected increase in tax benefit of using more debt. Interest rate affects the cost of debt. It involves the risk components that have the probability of default on the debt.In this research, the main finding of the paper suggests that the commercial bank should focus on reducing the cost of capital that maximizes the profit. According to our findings, it is concluded that each banks has its policies of financing. Each bank takes decision of selecting capital structure for minimizing their cost, risk factor differently that occupies good financial position in market . Factors that have impact on cost of capital as well as on capital structure are tax rates, interest rates, dividends payout, risk of default and other like market fluctuation, corporate governance.These factors differently affect the cost of capital and capital structure of each commercial bank. Some banks agree that tax brings variation in the capital structure as the use of taxes decreases the cost of debt but some banks strongly disagree, like Islamic bank Meezan and Alfalah,. These Islamic banks have no such interest rate risk. Tax impacts on cost of capital increases cost of capital agrees by majority of commercial banks, and disagrees by some commercial banks. Dividend impacts on cost of capital increases cost of capital agrees by some banks, and disagrees by some banks.Interest rate brings effects on increase in cost of capital as the interest rate increases the cost of debt also increases but some banks strongly disagreed. Other factors like market fluctuation also influen ce interest rate to increase. And sometimes sudden increase in interest rates influence market. Due to this, all factors differently impact on cost of capital variation (increase and decrease) and capital structure decision making. We have estimated Weighted Average Cost of Capital (WACC) of commercial banks in order to find the effects of cost of capital and their factors on profit and capital structure decision making.We analyze from computing WACC with different assumptions that; †¢ The interest rates increases (decreases), it also increases (decreases) the cost of debt that results in the increase (decreases) in the weighted average cost of capital. Hence, hypotheses Ho and H3 is verify. †¢ The tax rates increases (decreases), it decreases (increases) the cost of debt that results in the decrease (increases) in the weighted average cost of capital. Hence, hypotheses H1 and H4 is verify. The cost of capital improves the profit and capital structure decision making in wh ich other factors also takes part to maximize the profit in the commercial banks. . Recommendations Cost of capital plays a central role in valuation, portfolio selection, and capital budgeting. Therefore, measuring and validating the cost of capital has been the subject of much research. †¢ For reducing cost of capital of bank, we recommend that proportion of debt plus equity financing is better although debt increases risk of default as most of the commercial banks prefer debt financing. Because, debt financing provides tax benefit under suitable market conditions and reduces WACC. †¢ Through equity financing banks give dividend which increases their reputation in market.In short, payment of dividend gives market position. And it is also important because in terms of financial ratios, equity financing shows bank more strong as compared to debt or liabilities. †¢ Adopt an optimal capital structure to improve shareholder value. Capital structure is part of a bank†™s package of financial policies, which include dividend policy and amount of debt and equity claims issued which improves share holder wealth and reduces WACC. Conventional thinking in the area of finance has also assumed that a certain amount of debt in the capital structure is a good thing. Interest rates are high in Pakistan.The following reforms looked-for from the Government of Pakistan (GOP): †¢ Allow and encourage consideration of financial institutions to reduce disintegration in the financial sector. †¢ Strengthen legal and judicial reform laws to allow financial institutions to foreclose on guarantee to reduce risk in the case of unpaid loans without going through lengthy court proceedings. CHAPTER 7: AREA OF FURTHER STUDIES After performing this research we have concluded that the researches on the Weighted Average Cost of Capital in Banks are less or there is no proper research that has taken place for the Commercial Banks.There should be more researches on the factor that are affecting WACC in the commercial banks as its proper estimation maximizes profit. It is found with the help of weightage there is a huge impact on the cost of capital that may be a source of further studies for the commercial bank because proper weightage of debt and equity can improves or enhances the profit of commercial banks. The WACC affects the profit or Capital Structure decision making that has direct affect on the reputation of the commercial banks. CHAPTER 8: REFERENCES †¢ Nadeem A.Sheikh and Zongjun Wang, June 2010, International Journal of Innovation, Management and Technology, Vol. 1, No. 2, Financing Behavior of Textile Firms in Pakistan, pg 130-135 †¢ Khadka, H Bahadur,2006. Leverage and the Cost of Capital. The Journal of Nepalese Business Studies,Vol. III, No1: 85-91 †¢ Modigliani, F. and Miller, M. H. 1963. Corporate Income Taxes and the Cost of Capital: A Correction. American Economic Review: 433-443. †¢ Shubber, K. and Alza firi, E. (2008). â€Å"Cost of capital of Islamic banking institutions: an empirical study of a special case†, International Journal of Islamic and Middle Eastern Finance and Management, Vol. No. 1, pp. 10-19 †¢ Bruner, R. F. , Eades, K. M. , Harris, R. S. , Higgins, R. C. (1998). â€Å"Best practices in estimating the cost of capital: survey and synthesis†, Financial Practice and Education, Spring/Summer, pp. 13-28. †¢ Miller, R. A. (2006). â€Å"The weighted average cost of capital is not quite right†, The Quarterly Review of Economics and Finance, 49 (2009) 128–138 †¢ Jorgenson, Dale W. and Ralph Landau (1993). Tax Reform and the Cost of Capital – An International Comparison. Washington, D. C. : Brookings Institution. †¢ Fama, E. F. , and K.French, 1997, Industry costs of equity, Journal of Financial Economics 43, 153-193. †¢ Fama, E. F. , and K. French, 1999, The corporate cost of capital and the return on corporate inv estment, Journal of Finance 54, 1939-1967. †¢ John J. Pringle, the Capital Decision in Commercial Banks, the Journal of Finance, Vol. 29, No. 3 (Jun. , 1974), pp. 779-795 †¢ Richard Lambert*, Christian Leuz, Robert E. Verrecchia â€Å"Accounting Information, Disclosure, and the Cost of Capital† September 2005, Revised, August 2006 †¢ Barton, S. L. and P. J. Gordon (1987). ‘Corporate strategy: Useful perspective for the study of capital structure? Academy of Management Review, 12, pp. 67-75 †¢ Balakrishnan, S. and I. Fox (1993). ‘Asset specificity, firm heterogeneity, and capital structure', Strategic Management Journal, 14(1), pp. 3-16. †¢ A. Seth (1990). ‘The impact of LBOs on strategic direction', California Management Review, 32(1), pp. 30-43. †¢ Groth John C. , â€Å"Capital structure: Perspectives. † Management Decision 35:7 (1997): 552–561. †¢ John C. Groth, Professor, Texas A University, USA â€Å"Capi tal Structure: Implications†, 1997. †¢ Ross, Stephen A. , Randolph W. Westerfield, and Jeffrey Jaffe. Corporate Finance. 9th ed.Boston, MA: McGraw-Hill, 2010. †¢ Alan J. Auerbach, Wealth Maximization and the Cost of Capital, the Quarterly Journal of Economics, Vol. 93, No. 3 (Aug. , 1979), pp. 433 †¢ John R. Graham, â€Å"Taxes and Corporate Finance: A Review†, the Review of Financial Studies, Vol. 16, No. 4 (Winter, 2003), pp. 1075-1129 †¢ Meziane Lasfer, Professor, Cass Business School, UK â€Å"Optimizing the Capital Structure: Finding the Right Balance between Debt and Equity†. †¢ William F. Coffin and Sean Collin, 2006, Techniques to lower the cost of capital in today’s volatile markets, CCG Investor Relations. Ali Murtaza, manager financial reporting and analysis, finance division, BANK ALFALAH LIMITED. †¢ Amir Ahmed, risk manager, Asst. vice president, Risk Management Unit, MEEZAN BANK. †¢ Aniel Victor, Asst. manag er, Riak management, UBL FUNDS MANAGERS. †¢ Syed Ali Shabar, Branch Manager, MCB BANK LIMITED. †¢ Raza Abbas, Asst. vice president, Portfolio Management, HABIB BANK LIMITED. †¢ Aamir Maysorewala, customer service manager, ALLIED BANK LIMITED. †¢ Riazullah Khan, Assistant Vice President & Manager, SONERI BANK. APPENDIX A Questionnaire NAME_________________________DESIGNATION_________________ BANK__________________________ BRANCH_______________________ 1. Debt and equity are the sources of finance, through which source your bank finances their investment? a) Debt b) Equity c) Both 2. What is the impact of dividend payment on cost of capital as using equity is source of finance that will liable bank to pay dividend? a) Increase cost of capital b) Decrease cost of capital c) No impact on cost of capital 3. Tax shield also has an important factor in cost of capital, how tax impact on cost of capital? a) Increase cost of capital b) Decrease cost of capital ) No impact on cost of capital 4. Cost of capital has positive impact by using both sources of finance. [pic] 5. When bank finance through debt, it increase liabilities that also increase the risk factor of default. [pic] 6. Fluctuation in the interest rate affects Cost of Capital and also the Capital Structure of your banks. [pic] 7. As low dividend payout will affect the reputation of your bank, is high dividend payout and dividend growth affect the capital structure decision? [pic] 8. Cost of capital occupies an important role in the financial management and in investment decision making in commercial banks. [pic] . Cost of capital affects the level of risk in commercial bank. [pic] 10. Taxes bring variation in the capital structure of commercial banks. [pic] 11. Reducti

Economic Recovery Post-Depression: The New Deal

Roosevelt's New Deal The Great Depression started in the United states but spread into a worldwide economic down-turn. The stock market crash of 1929 caused Billions of dollars to be lost along with thousands of investors. It was the â€Å"deepest and longest-lasting economic downturn in the history of the Western industrialized world up to that time†(Stock Market Crash). Some say that this was a starting cause of the Great Depression. Over 20,000 banks failed. On average â€Å"one out of four†(Living New Deal) of Americans were out of work by 1933. If people aren't working families go hungry.Some had it harder in the Dust Bowl. In Colorado, Kansas, Oklahoma, New Mexico, and Texas kids wore dusk masks and farmers watched their crops blow away. Years of drought and poor farming technique created these problems and the dust that blew in to homes. In 1933 Franklin D. Roosevelt after his election put in place reforms for economic recovery, job creation, and civic uplift to reverse the effects of the Dust Bowl and the Great Depression called the New Deal. The New Deal offered economic recovery through the Securities and Exchange Commission(SEC) and several other programs.These programs aided the bankrupt local and state governments and â€Å"injected a huge amount of federal spending to bolster aggregate incomes and demand†(Living New Deal) . This program helped refinance mortgages so people could stay in their homes. The SEC provided emergency relief to families to help support them when many Americans couldn't support themselves. The agricultural and industry prices where stabilized. The National Industrial Recovery Act (NRA) introduced codes for fair competition and guaranteed labor rights. On the other hand the Agricultural Adjustment Act (AAA) provided funding to farmers to supplement their crop production.President Roosevelt's New Deal created new jobs through the â€Å"ground work† (Kelber) created by the American Federation of Lab or (AFL) . Through the instability of the economy â€Å"one out of four†(Living New Deal) Americans were unemployed and because â€Å"private industry was in a state of collapse†(Kelber) the government took charge fixing things with the â€Å"greatest and most successful job-creating effort in American history†(Kelber). Without work many went hungry and it affected their families as mothers and fathers watched their children starve.Agencies provided millions with jobs and saved families. They also recognized the right for workers to create ad have unions. The Public Works Administration (PWA) build thousand of highways, bridges, hospitals, schools, theaters, libraries, city halls,homes post, offices ,airports, and parks many are still in use; putting hundreds of thousands of people to work. The Works Progress Administration (WPA) gave millions of unskilled workers jobs building Gymnasiums, brailling books, or even stuffing rare birds. Many criticized these proje cts but they put in place necessary facilities.The Civilian Conservation Corps (CCC) every city across the country touching the lives of people and changed the public atmosphere. The men and women who worked in these corps believed they were setting the foundation for a greater society. They planted trees, built public parks, drained swamps to fight malaria, restocked rivers with fish, worked on flood control projects, and worked to conserve the environment. Their work â€Å"dramatically changed the future†(CCC Legacy). Roosevelt's reforms saved a nation and gave it a glimmer of hope that the future would be brighter when the present was bleak.Securities and Exchange Commission(SEC), Federal Deposit Insurance Corporation(FDIC), National Labor Relations Board(NLRB), and Social Security Administration are still in use today. Though their present feels like it has always been there it is hard to believe they are only eighty years old. Through their existence America was able to over come the great depression. It's hard to imagine what our country would be like with out them. Works Cited â€Å"Franklin D. Roosevelt – American Heritage Center, Inc. † Franklin D. Roosevelt – American Heritage Center, Inc. Franklin D. Roosevelt American Heritage Center, Inc. 2006. Web. 23 Feb. 2013. Kelber, Harry. â€Å"How the New Deal Created Millions of Jobs To Lift the American People from Depression. †Ã‚  How the New Deal Created Millions of Jobs To Lift the American People from Depression. N. p. , n. d. Web. 24 Feb. 2013. â€Å"Living New Deal. † Living New Deal. University of California, 2012. Web. 23 Feb. 2013. Nelson, Cary. â€Å"The Great Depression. † The Great Depression. N. p. , n. d. Web. 23 Feb. 2013. â€Å"Stock Market Crash of 1929. † History. com. A&E Television Networks, n. d. Web. 23 Feb. 2013. â€Å"Welcome to CCC Legacy. †Ã‚  Ccclegacy. Ralph and Mary Halbert, n. d. Web. 24 Feb. 2013.

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Reflection on Technology in Education Essay Example | Topics and Well Written Essays - 2250 words

Reflection on Technology in Education - Essay Example But what if the facilitator of the class does not have the ability and skills of using these technological equipments Of course there will be a problem and it may affect the teaching sessions as it goes on. The knowledge and skills of the educator regarding the subject matter is much appreciated but most probably if he is going to use equipments in teaching, assurance that he can facilitate everything that happens inside the classroom. Skills upon using such tools are very important. There will be a big failure in teaching without the knowledge of using it. Schools of Education for Teachers include in their curriculums the disciplines that serve as the training ground so that their would-be-teachers will have a stand on their own in the future as they use these tools for teaching. There is the Educational Technology which is 3 units, where soon to be teachers are taught of how to use these equipments and also the proper ways of using them practically and of course on the main event of teaching. They undergo trainings and evaluation if they follow the instructions and can well manage their selves alone. There are so many product of the new technology that has been improvised for learning purposes, and also it awakens the student's attention because of this visual material shown for example in the PowerPoint presentation through the use of computer or by the picture projected on the over head projector on screen. Some schools are providing their students their own computer to be use when inside the classroom. Universities provides their own internet access centers for their pupils to have an instant access on the web for educational explorations only and some internet libraries. The modern technology is very significant, especially in terms of providing current information and serves as the medium for communication. It is therefore necessary to integrate information and communication technology into general school education as a whole in order to ensure an all round education of up-to-date standard, especially in grade 3 and 4 for 13 to 14 year old pupils. The basic aspects of information and communication technology must be incorporated in all areas of 3rd and 4th grade curriculum (Stockhammer, 1992). The strength of technology is often quick implemented into solutions. The author feels that there should not be unscrupulous use of technology. The quality of use of the computer tools is decided by which aspects are emphasized, and what pedagogical relevance they have. Sensible use of technology for tasks related to grade level and computer need to be used as tool to enhance a particular subject. Multi-disciplinary possibility of technology application includes writing, documenting, calculating, constructing and visualizing work. The pedagogical principle of learning can be followed by the practical use of hardware and software in schools, which will help create a favorable climate for reflections on one's practical experiences and relating it to theoretical foundations thereof (Stockhammer, 1992). The digital generation gap have the teacher struggle with the basics, while kids growing up in a tech savvy world can learn application with ease. This digital generation gap calls for on the job training of teachers in technology. The present obstacle to implementation of

Impact of Unions on Human Resources Management Research Paper

Impact of Unions on Human Resources Management - Research Paper Example The approach taken by this paper focuses on the context of both the employees and the employer, in order to understand how basing on these two, unions influence the human resources management of an organization. Overall, this paper will show that unions have both negative and positive impact on human resources management of an organization. Literature Review Labor Laws, Unions, and Human Resources Management Labor laws are essential in guiding the relationship between the employers, the employees, and the unions. Therefore, through them, there arise various expectations, which influence the management of a unionized organization in various ways. Neuser and Barker (2010) wrote an article, which explores the state of labor laws in the United States. In their article titled â€Å"What Every Employer Should Know about the Law of Union Organizing,† Neuser and Barker explore the various labor laws in the United States, and interpret them to show how these influence employers, and wh at is wrong or right for employers to do when faced with unionization. Nonetheless, a major aspect of employers’ actions, which the labor laws guide, is the counter-campaign. Neuser and Barker (6) argue that, â€Å"An employer is permitted, and is almost always well advised, to conduct an employee informational campaign when confronted with a union organizing campaign.† However, the manner through which this is done determines whether the labor laws are violated or adhered to by the employer. The counter-campaign by the employer results in changes in the human resources and management practices in a company. However, an employer conducts a counter-campaign, in accordance with the Section 8(a) of the Act, as well as various opinions by the judicial and the board. Therefore, in a bid to prevent employees from unionizing, employers might adopt additional human resources practices, or improve on the existing human resources practices, in order to promote employee job satis faction. For instance, they might increase employee salaries, promote some employees to higher position, and generally improve on the working conditions of employees. Nonetheless, all these changes and new adoptions in HR practices will have been brought about by unionization. However, Neuser and Barker emphasize that this counter-campaign should not infringe on any labor law (26). Unionizing, Job Satisfaction, and Human Resources Management Various researches have been conducted to explore the effect of unionizing on employee job satisfaction. In their study, Bryson, Cappellari, and Lucifora (2010) explored the effect of unionizing on employee job satisfaction in Britain. Results show that there are no significant differences in the level of job satisfaction between union and nonunion employees. However, for those union employees that lacked collective bargaining, the level of job satisfaction was found to be lower. Nonetheless, collective bargaining is an important determinant of job satisfaction for union workers. In another study, Artz (2010) investigated how union experience influences employee job satisfaction. Results showed that job satisfaction was only higher among the employers, who were in unions for the first time, thus low experience in unions. However, the more an employee gained increased experience in uni

Policy formation Essay Example | Topics and Well Written Essays - 750 words

Policy formation - Essay Example Allied health comprises healthcare professionals including doctors, pharmacists, nurses, therapists, nutritionists, counselors and dieticians comprise (Hamburg, 2015). There is necessity  for effective policy creation and implementation that would enhance proper healthcare in the nation. Allied health are vital to the nation’s well-being and provided the fact that majority of persons working within the healthcare parameters are not sufficiently educated and trained, there is an urgent need for creating policies that would ensure only well trained and qualified personnel work as healthcare service providers (Lizarondo, Grimmer & Kumar, 2014). Ailments such as lifestyle diseases emanate from causations that are avoidable when allied health professionals held with high consideration in terms of education, training and employment (Hamburg, 2015). For instance, carcinogens and mutagens introduced to food products due to the negligence of manufacturers cause cancer. Some manufacturers use dangerous (carcinogenic and mutagenic) substance in the production of food in a bid to enhance productivity and revenue for that matter. Policies advocating for the reduction of health personnel illiteracy can help in this measure, especially nutritionists and dieticians are well trained and allowed to access ever food product before they are distributed in the consumer market. The same applies to drugs. An accurate case scenario occurred when the painkiller, Vioxx, was released in the market. The drug had an adverse chemical composition that resulted in massive deaths of American citizens and many others around the globe, a disaster that wo uld be avoidable if proper policies were in place to oversee healthcare professionals’ competency. In the formulation of the policy, it should be observed as government responsibility to establish relevant infrastructure for education, training, professional assessment of the trained and for the

Petition for a Grade course Essay Example | Topics and Well Written Essays - 500 words

Petition for a Grade course - Essay Example I not only enrolled in the class, which entails paying the fee and working to complete the course, but I also put a lot of hard work in it, which resulted in me getting an A grade. I registered in the class because my professor, Dr. Dekmejain, led me to believe that the course was a grade course. When I received the transcript, much to my surprise, the class was listed as a Credit/Non Credit Course. By this time I had completed my research, and not only that, I was hoping to get a Cumulative GPA of 3.0 with the grade that I achieved in this class. Now, as it stands, not only is my GPA going to suffer, because the class is a Credit/Non Credit course, instead of a grade course, but because of the GPA being lower than 3.0 (it stands at 2.9 now), I cannot get the job that I was hoping to get, because I will not receive the MBA diploma I was hoping to, with a GPA of 2.9. I am desperately in need of this course to get a job, as without a GPA of 3.0 I will not be able to land the job that I so desperately need. My situation is made more serious by the fact that I have a parent to support who is completely reliant on me financially and for whom I am the only â€Å"bread winner†. I would reiterate here that I would be grateful if you consider my situation with sympathy and keeping all the facts in mind (how I was misled to believe that it was a grade class, how I did well in the class and received an A, how I was relying on this course to boost my Cumulative GPA to a 3.0 to receive the diploma, how I will not be able to get a job without this diploma, and, finally, how I have financial obligations towards my parent for which I need to land this job), covert the class from a Credit/Non Credit Course to a Grade Course. I will be extremely grateful to you if you do grant my request. Once again, it is a very serious matter to me and I would be extremely thankful if you did all that you can to help me solve this

Review Questions Essay Example for Free

Review Questions Essay Answer the following questions: 1) What is the difference between a task dependency and a task constraint? When it comes to the differences between a task dependency and task constraint, it depends on the time. A task dependency joins two tasks by saying that one task begins relative to a different task. A constraint just puts the correlation directly to a time rather than base it off the time another task is done. 2) Give a real-world situation when you might used the following task constraints: a) Start No Earlier Than – An example could be with government related projects. Many of these projects take years to complete and have to require a specific amount of the year’s budget to be used for the project. You could put a constraint on a project so that the government won’t go over budget and just start tasks the next year. b) Start No Later Than – A project’s resources can be requisitioned ahead of time, and then can be paid for and picked up later from the company who are selling the resources. These people might require the money by a certain date. This can assure that setting a start no later then constraint pays the resources before the hold on the materials is lifted. c) Finish No Later Than – This can happen if there is a set date for a project to finish it would be wise to set up milestone tasks with finish no later than constraints as to increase the importance of keeping on time. A Christmas party would be a good example, because you it has no room to finish late. d) Finish No Earlier Than – This can happen if a company wants to roll over a project to have it be part of a second year’s budget, and putting this constraint on it can do that. e) Must Finish On – This can happen if there is a set date for something like gathering materials that cannot be changed. This would be a good example of when to add this constraint to that task. f) Must Start On – This can happen when wanting to set up a project that involved a rigorous time constraints like when planning a wedding where it is important to make sure that the beginning stages must have enough time to make sure that everything wasn’t taken taken. g) As Late As Possible – There can be a situation where an employee is paid hourly, but that person works better under pressure so it would be beneficial to start his tasks as late as possible. With this constraint, you can get the most work done for the least amount of money. 3) What is the importance of a baseline? The project baseline is an original overview of the project in terms of schedule, cost, and scope. The main importance of the project baseline is that it can be used to see how much, throughout the project, we are deviating from the original schedule, cost, and scope. 4) What is an interim plan? An interim plan is known as a set of current project data that a user saves after the project begins. A user can then compare the interim plan against the baseline to assess the progress of the project. Turn in this sheet with your MS Project file to the Week 6 iLab Dropbox.

Child Development Observation Essay Example for Free

Child Development Observation Essay The setting of where I observed the baby was at my house in the family room. The family room can be pictured as a square. The door to enter the house is in one corner of the family room. To the left of the door there is a mirror on the wall and next to the mirror there is a single person couch. The color of the couch is brown. That sits in the corner adjacent to the corner where the door is. Then, there are the sliding doors to enter the patio and in the corner adjacent to the couch there is a big, black television. Next to the television, my baby’s pink Winnie the Pooh play yard. Next to that is her small pink and brown, vibrating bouncer. Then there’s the last corner of the room which opens to the bedrooms. This is the room where the observation took place. The baby I observed is my nephew, Gabriel. He is four months and three weeks old. He will turn five months on the 22nd of this month. He was wearing a blue jean overall with a brown onesie that has little puppies. He also had some soft tennis shoes on. They are white with a navy blue stripe on each side each shoe. He barely has any hair and he has no teeth. In twenty minutes, Gabriel was very active. I started observing as soon as he woke up from a nap. He began by stretching both of his legs straight out and his left arm stretched straight up towards his head and his right arm stretched up towards the sky. My boyfriend then picked him up and started talking to him. Gabriel started laughing and kicking his feet back and forth, starting with his right foot and continued by alternating each kick with the opposite foot. He stopped laughing and shoved both of his hands in his mouth. He made himself gag. He was then tickled again and started laughing. Again he began kicking his legs, left then right. He grabbed his face with his left hand. He started to get hungry. While his bottle was being prepared, he began sucking on his left hand and he began to make sucking noises. As my boyfriend got the bottle close to Gabriel’s face, his eyes popped open and he opened his mouth. While he ate, he moved his right hand over his face and made sucking and snorting noises. He was also just looking around while eating. He was about a quarter done with his bottle, when he stopped eating and started pushing. Both of his hands clasped together and he made a noise which let us know that he was pushing. All of a sudden, I heard him pass gas but it wasn’t just gas. The gas came with a little surprise. He kept his fists closed and kept pushing. He was pooping. Once he was done, he gave a big smile and started kicking his legs again. He also began sucking on his hands. My boyfriend laid him on the floor on top of his blue, fuzzy blanket. Gabriel began making cooing noises. As my boyfriend began taking off Gabriel’s clothes, he continued kicking and making cooing noises. As his diaper was coming undone, Gabriel started laughing. My boyfriend got a hold of his legs and took off his diaper. Gabriel just began sucking on his hands again. Gabriel’s mom saw him and took his hands out of his mouth. She gave him a pacifier. He began rubbing his eyes with both hands. He then began to cry. My boyfriend put his clothes back on and continued feeding him. Gabriel was lying with his feet dangling off of my boyfriend’s leg. His right arm was around my boyfriend’s back and his left arm was on his stomach. He was making a sucking sound and was opening and closing his eyes. Gabriel jumped when he heard a loud noise. He opened his eyes and his left arm went straight up into the air. He was calmed down and closed his eyes again. His left arm dangled to his side. He stayed like that until he finished eating. He was stood up straight and burped. He fell asleep and he was laid in my daughter’s play yard with his arms to the side and his legs spread apart.

The Tower Bridge Report

The Tower Bridge Report This report will be divided into 5 sections. In the first section I will be describing the function of the company and the product it provides for its customers. The second section will provide an overview of the economics of the business and competition. The third section will describe the management structure at the company. The fourth section will provide both the PEST and SWOT analysis. Finally I will reflect on my time as a tourist guide, describe the job role and give my impressions of the company. Describing the company and what it offers Tower Bridge is a municipal enterprise owned, funded and managed by the City of London Corporation who are the local Government body responsible for the financial square mile. The City of London is therefore responsible for all commercial and operational matters relating to Tower Bridge. Funding of the enterprise comes from a long standing trust. London Tower Bridge is located in the heart of London and is very close to Londons transport infrastructure and world famous historical sites such as; the Tower of London and HMS Belfast. It is a well known bridge that has become an iconic figure of London, spanning the River Thames, and is within walking distance of Londons other famous attractions such as the Globe Theatre and Tate Modern. Originally built in 1894 to ease traffic congestion on London Bridge and designed to allow access to large ships to the pool of London, it was subjected to a major conversion to become a tourist centre in the 1980s. Tower Bride is therefore both a monument to Londons past and a successful tourist attraction. The main offering is the Tower Bridge Exhibition which allows visitors to enter inside the Bridge allowing access to the High Level walkways with uninterrupted views across the city. This provides a unique selling point with which to market itself and provides a memorable and emotional experi ence for visitors. The tour also allows visitors to see the Victorian engine rooms from which the bridge used to be powered by. The company also offers corporate entertainment packages and a popular gift shop for visitors. Entry prices are at an affordable rate and for viewing pleasure, the Exhibition comes equipped with interactive screens, sliding window panels for better picture quality and excellent graphics on their giant screens. One of the most important features of Tower Bridge is its bascule mechanism system, which rises around 1000 times a year and is still in function to this present day. Bridge openings are very popular with the public and are part of its attraction and allure to tourists. This particular bridge is the only bridge in the world of its type that opens and closes. Market and competitors Another historical attraction within the same vicinity as Tower Bridge is the Tower of London, which often competes with Tower Bridge as people tend to mix up the two because the structures are quite similar and this may sometimes lead to confusion. Moreover, the Tower of London was famous in Britain and around the world during World War 2 as an iconic landmark. Inevitably overshadowing Tower Bridge. Nonetheless the Tower Bridge is central to Londons historical heritage as a major commercial port. London has many other attractions including: the London eye, which can have up to 10,000 visitors every day and even the London Bridge Experience which opened in 2008. The Tower Bridge Exhibition has grown steadily since opening in 1984, with last year being its most successful in terms of financial surplus and numbers of visitors. With a small marketing team and budgets, Tower Bridge Exhibition relies heavily on organisations such as Visit Britain/London to document trends in visitors. Tow er Bridge Exhibition targets throughout the year a very broad area including both the European and domestic markets. Within the domestic markets educational groups are also targeted but equal importance is placed on family groups. Advertising normally occurs through specialised magazines, in particular publications like the Times Educational Supplement or via websites such as www.vistislondon.co.uk where costs are generally lower then other mass media options. Trade shows are attended such as World Travel Market where the exhibition is promoted to a range of tour and group organisers and databases are created for direct mail campaigns. Tower Bridge Exhibition has a unique relationship with its competitors, although in direct competition with one another, attractions within London work together along with Visit London to bring people to the area. Tower Bridge Exhibition has a list of distributors which in return for a discounted ticket rate sell tickets globally, however they also pr omote competitors. Other key stakeholders of Tower Bridge Exhibition are Local and National Government and the EU who and impose rules and regulations. The local community and response services, the Tower Bridge charitable trust, all visitors, the media, internal trade unions and employees are also key stakeholders. The cost of visiting the exhibition is  £7.00 per adult and  £3.00 per child (5-15) under fives go free, with a concession ticket costing  £5.00 and disabled guests getting in for free. Group discounts are available for 10 people or more and a promotion with Network rail allows 2 for 1 entry. Ad hoc promotions are run throughout the year targeting specific groups, for example the exhibitions 25th anniversary was celebrated by letting local residents in for 25p. Job role As a Customer Care Guide at the Tower Bridge Exhibition I had a fair amount of duties, roles and responsibilities which was based on the nucleus of customers and their safety along with their well being which meant constantly putting there needs and requirements first at all times. Furthermore, that meant me providing exceptional customer service and care at all times and making sure that the customers visit was as enjoyable and pleasant as humanly possible. With that in mind I would have to posses a certain degree of knowledge regarding the bridge and the local vicinity. I would also be required to have a competent level of expertise relating to the bridges history, construction and design most notably for when I am positioned inside the bridge and doing a position that entails doing speeches regularly. For positions like these I must convey clear and precise information to the customers so that they are made aware of the process inside the bridge. In addition, I would also need to be fully aware of all the processes of the bridge if say there was a fire or an evacuation I would have to be mindful of the correct drills and steps that needed to be taken in order for a safe and secure evacuation to be achieved for all customers especially the disabled, elderly and those in a wheelchair. My duties included maintaining a high level of security for both the visitors and the exhibition items as well as always being on hand and available to interact and engage with visitors should they need or require any assistance or help from me at any stage during there visit. Moreover, if they had a query or wanted further information about the or the area. Management Structure A business structure is very important and every organization has its own structure. A company such Tower Bridge organizational structure is a hierarchical with a concept of subordination of entities that collaborate and contribute to serve one common aim. Most of the staff in Tower Bridge are all in the front office dealing the member of public and tourist, some have more interaction such as the Ticket Office and Customer Care Guides. The mangers Tower Bridge uses a functional structure which has the advantage of being easy to understand. The chain of command requires that an employee can report to one or more managers, but one manger such as Andy Nicholson, typically has more authority over the employee than their other manager(s). In Tower Bridge there are three mangers: one exhibition manager and two assistant managers. Having this structure means having layers of management that control the company by maintaining a high level of authority, with the power to make decisions concerning business activities. Employees such as customer care guide have limited authority to carry something out without prior approval. This organizational structure tends to focus on top-down management, whereby executives at the top communicate by telling middle managers, who then tell first level mangers, who then tell the staff what to do and how to do it. A limited number of employees report to a manager, who then reports to the next management level, and so on up to the Bridge Master or Tower Bridge Director. The managers needs to be responsible for motivating the staffs and ensuring that any formal systems and practices that are in place are not undermined in anyway. In theory the managers at Tower Bridge are responsible for the business performance, as well as maintaining high standards of service and health and safety. A functional structure of Tower Bridge can be illustrated by the following diagram: The Managers are responsible for arranging shifts for their staff, creating promotional events and discount offers, deal with customer complaints, motivating staff, ensuring that staffs have the right uniforms, greeting customers and organising table reservations. PEST Analysis Political Political factors that may affect the ability of Tower Bridge to operate include government and City of London polices. In fact it seems unlikely that these will impact adversely on the attraction in the immediate future given its high profile and historic status. Cuts in public expenditure may lead to higher admission prices and less staff running the exhibition. As the government recent decision to cut funding to Visit Britain by 18% has big consequences for all London Attractions most specifically the smaller attractions such as Tower Bridge Exhibition who relay heavily on its services. Flight and bed taxes could deter visitors away from the city. Terrorism threats threaten the entire London tourism industry. Technology With more people using the internet, Tower Bridge Exhibitions will have to review its current website, as currently ticket purchases are too complicated. Advancements in ICT have meant that statistical data on tourist trends is now simpler to collect and more easily accessible through websites such as Visit Britain. Tower Bridge still has old and new technology some of the original hydraulic machinery is still remain as exhibition in the engine room nowadays they use electro-hydraulic drive that open the bridge up. Economic The main external forces (macro environment factors) that affect Tower Bridge Exhibition are economic and social factors. London is perceived to be an expensive place to visit, so the exhibition will need to provide better value for money. This is possible as at currently utilises only one third of available space. It will need to consider joint promotions with other attractions. Changes in interest rates at home cause fluctuations in disposable income meaning leisure activities are often put on hold, exchange rates and the strong pound against the dollar has seen a smaller spend per person from the important American market. Social Tower Bridge Exhibition relies heavily on family groups, so a decline in traditional family set ups will require Tower Bridge to re-think its family tickets prices. Over the recent years are has been a changes in holiday patterns with people now preferring city breaks and long weekends. Terrorist attacks also cause fluctuations in the market with people looking for safer destinations. SWOT Analysis Strength The business philosophy is not just about making money but emphasizes on educating and informing the public (particularly young people). On the towers walkways, there is a great view of London similar to the Millennium Wheel but not as detailed or exciting. Furthermore, on a positive note, this particular zone is free of congestion charge, which allows people to freely enjoy their journey over the bridge. Although the bridge is funded by the City of London council, it also makes a reasonable income by hiring the venue in the evenings for special occasions. Weakness Although it is an indoor attraction with a large view of London, a visit to Tower Bridge depends on the weather because the best sights are not always available due to the fact of the unpredictable British climate, for instance, on a rainy or overcast day, the views from the bridge can be very poor and distorted which could result in unhappy customers. What is more, London is an all-year-round destination so major attractions are not seasonal. Due to the fact Britain has such unpredictable weather, people usually carry sunglasses and umbrella because they never know what the weather can be like. This could have a bad effect and lead to a bad experience when coming to visit Tower Bridge on an unpleasant day. Firstly, the entrance to Tower Bridge Walkways is confusing for tourists who are unfamiliar with the area as there are no clear signs pointing in the right direction. Also, the journey to Tower Bridge is quite complicated if you have no knowledge of its whereabouts and may get los t. In addition, it is not pedestrian friendly as there tends to be lots of traffic and congestion upon entering the bridge. Secondly, in my opinion their main website is unappealing which doesnt help to attract or interest people into visiting Tower Bridge. This apparent weakness and flaw could have a bad impact on tourists who have never been to London, as the websites layout and structure does not represent or give Tower Bridge an acceptable status (more life and colour in the graphics required to attract online interest). On the other hand, their website has easy access to different links that also caters to childrens needs such as fun packs for childrens discovery which is fun as well as being educational at the same time. Furthermore, to add to criticism the historical building needs substantial refurbishment to help increase the volume of visitors. Although people are aware that it is a bridge, some people are afraid of heights and may feel unsafe or in danger. Moreover, altho ugh the lengths of the walkways are reasonably lengthy, it is quite narrow and may have an affect on those who are claustrophobic. Security measures are paramount for one of the worlds most famous tourist attraction. When entering the Tower there is a single stage of security that visitors must pass through. Once their body has been examined and their belongings are check they are allowed to enter the walkway but it doesnt mean the security level is up to standards. Reportedly, there have been cases where people have entered the building then proceeding through the security check in order to commit suicide. Fortunately, this has not changed peoples views to visit the attraction because any potential suicide incidents have been prevented. In reality, when the bridge does have a scheduled lift this results in a hold up of traffic. It is found that An estimated 38,000 vehicles use the bridge each day, pushing it to capacity during peak hours. This results in many delays for many people , who may decide to take an alternative route to avoid the traffic queues. Likewise, Extra traffic is expected to increase impact damage to the extremities which flex under traffic loads. This could mean that traffic queues are causing damage to the structure of the bridge, which may have a long term affect on the bridge. What is more, it is said that these measures are expected to increase congestion either side if the bridge, adding to delays caused when it opens for shipping. Last year Tower Bridge lifted 925 times. In my opinion, was this necessary? Opportunities Global advertisement could possibly result in an increase in the volume of visitors as many foreigners are unaware of a bridge that opens and this may be an attractive feature to witness in person. Perhaps due to the recession peoples lifestyles are changing, rather than individuals coming to the Tower Bridge they could engage in some promotion and coupons like the two for the price of one, children of the age of under 12 go in for free etc. Other attractions could work together with Tower Bridge rather than competing with them. They could cater for more languages by enhanced displays for overseas visitors such as Europeans and Asians. Provision of tour guides could be encouraged. Even though it is a self-guided exhibition they could offer a guided tour within the ticket price would encourage more visitors and may enhance the quality of the experience. Additionally, they should provide reasonable adjustment to facilitate for people who have disabilities. Due to the fact of the econom ic crisis the value of the pound has decreased. This is good news for the overseas visitors because of the currency exchange rates. In years to come the growth of tourism will increase despite the recession; London will generate tourist revenue from the 2012 Olympic games to be held in this city. This will boost and soar the volume of visitors in the capital. Threat The biggest threat to Tower Bridge is any potential terrorist attack perhaps of more concern is that there is no security check when going through the bridge and anyone is allowed to walk along the bridge. On the other hand, Tower Bridge is surrounded by a high level of competition with other tourist attractions equally famous like the Tower of London. In spite of the fact that other attractions complement each other it is possible that Tower Bridge will lose out due to the fact that it is less appealing. The economic downturn could have an impact on peoples lifestyles and their finances. Another way of viewing this is that the recession has changed our way of life. Culturally and socially people may prefer doing simple things like taking a walk in the park, instead of expensive vacations. After all a large proportion of overseas visitors come to visit the Tower Bridge. As a result this recession could have an significant effect resulting in a decrease of the number of visitors. In c onclusion, it could be said that the current service could continue unchanged. The inherent advantages of location, history and unique appearance will service the attraction well in the future. However, improvements could also be considered namely a more attractive website, cater for different languages, refurbishment of the walkways. The main threats for the future are: economic downturn and limited attractiveness to a young audience. Reflection Working in Tower Bridge has taught me a number of things about how tourist attractions operate in the market and what factors lead to an attractions success. Even though my time at the Tower Bridge consisted of 400 hours work experience I still had to go through the same procedures as I would if I were applying for a permanent job. I was interviewed by Andy Nicholson who gave me a fair amount of information regarding the history of bridge and what they offer to the public. Even through the interview lasted over 3 hours it was very insightful and useful to me. I gained a lot of knowledge about Tower Bridge and its surroundings. When I started work it was the beginning of the Easter holidays. I didnt get any training at first except on how to use a radio. I was thrown in at the deep end for the first three days as I didnt know much but I guess that is the best way to learn. After a few days I was formally introduced to other members of staff and my official training started. The assist ant manager gave me the correct uniform as there are different ones to wear for different positions. I was given a full guided tour and met all the security staff, the maintenance department and human resources. I was shown all the emergency exits as well as all the other exits and where to meet if we had to be evacuated. I was given a radio with my own personal identification which was uniform 13 which enabled me to communicate with other members of staff via the radio. After that I undertook three days of shadowing a full time tour guide and I was also given a big pack of information about Tower Bridge. I learnt 4 different speeches plus aborts and general information of the history of London. A big plus point for me was that I was given the chance to get to know the surroundings and I spent a couple of days visiting other tourist attractions such as the Tower of London, St Pauls Cathedral and the Tate Modern gallery. I thought this was very helpful to me. After 1 week of shadowing and intensive reading I was finally ready to work on my own. My first position was to operate the north lift which takes the customers to the high level walkways and to give them instructions on what to do when they got up there. I did this a few times before trying out the other roles and positions. In total there are 8 positions, 1-3 are working in the lifts and the towers and the customer service areas. The only negative point about this aspect of the job is that it can become very repetitious. Position 4 and 5 involve working in the gift shop next to the Victorian Engine Room. I was lucky to have this experience and to be till trained. Working in the shop has a lot of responsibilities, not only dealing with money and providing customer service, throughout the day youre on your own and this can be quite stressful. There are many duties working at the shop in the morning before opening up, you are required to do a number of duties: making sure that there are enough products on the shelf and that these are neatly presented, knowing whats not available and whats low on stock so it can be ordered in, cash up the money for the till etc. Working in the gift shop can be pleasant but the only difficult issue that I faced was dealing with several customers at the same time. The gift shop is quite a small and confined area and it is where customers exit from the Exhibition. In some cases an unsatisfied customer will use his time in the gift shop to vent his frustrations and whoever i s currently occupying the shop position is usually the one that is on the other end of the brunt of the customers fury. In addition to this, in most if not all the cases of a customer who was not completely happy with there visit and experience and demand a refund or if a technical malfunction occurs to any of the penny press machines then it is at the gift shop where all of the would be resolved. Positions 6, 7 and 8 are what the company refers to as footfall enticement. These duties are intensive and consist of you dealing with customers at the front of the ticket office who are visiting the Tower Bridge Exhibition or are just walking pass as well as giving out general information about the bridge. I think the footfall position is a crucial role as it represents the Tower Bridge image and they are the first staff and port of contact to interact with the customers before they enter the exhibition. Throughout my work placement I have undertaken a fair amount of footfall and my view upon it is that it can be quite enjoyable. The only downside is that the footfall is an all year position which I think is unfortunate because Tower Bridge is on the river it can very windy and during autumn and winter it can be very cold. I did a few footfalls in April and even so it was extremely cold for me to endure and for someone to do this position you have to be mentally and physically stron g. I dont think people should have to work 8 hours outside in such cold conditions most notably during winter times and I think they should use the footfall personnel to go onto the walkways to give talks about the bridge and have one at the gift shop for assistance as the shop can get very busy and hectic at times. After 200 hours I was given the opportunity to work at the Monument. My job role was to give out leaflets to those who completed the 311 steps and give brief talks about this famous landmark. I had a lot fun working there because it was a more intimate setting than the bridge so you got to talk and engage more with your work colleagues. It also meant that you could immerse yourself more in depth with the visitors and ask them more about their visit to the capital and how long they were intending on staying and where they were originally from. There is so much history written into the Monument which is intertwined with the Great Fire of London so for me to work there and to be a part of it was a good experience which contributed to my enjoyment there. In terms of organization and structure there is much to change and develop. What surprised me is that staffs do not really work together and in some ways work in isolation from each other which seems inefficient and ineffective. There tends to be a gap and divide between the permanent staff who have been employed there for many years and the temporary staff such as myself. Conclusion Overall working at Tower Bridge has been a good learning experience for me. Like any other job there will always be positives and negatives but in some ways the work has provided some unique insights. I think Tower Bridge and the Monument are very successful tourist attractions for the reasons stated previously and there is no reason why it should not continue to prosper in the future with the right investment and a culture of continuous improvement. Many people who work at Tower Bridge have provided years of dedicated service for a prolonged period of time. Tour guides, ticket office, managers, security and maintenance people have worked their for a long time. A large proportion of them are 40 plus in age which is a change for me because it is the first time I have come across a situation like that. I think I have picked up some of their characteristics and learnt a lot from their experiences of being at Tower Bridge. On the whole I had a great experience and I would highly recommen d it to other students who are interested in the tourist industry or those people who like history. Out of all the places I have worked in previously I can honestly say that this was the most interesting job and role that I have ever experienced. The majority of the staff I built and formed a relationship with not only as work colleagues but as friends outside working hours.