Biodiversity and Land Quality Essay - 999 Words

Biodiversity and Land Quality Human societys progression through time has resulted in many environment-altering effects, particularly those brought about by industrialization and rapid population growth. The combination of increased numbers of humans and improved technology has created the need for better management of resources and transportation across the globe. This need has produced great leaps in infrastructure, such as roads and dams. However, the introduction of this infrastructure into the natural world has adversely affected the environment. Biodiversity is often drastically altered, resulting in changes in breeding and predation patterns which, in turn, lead to species extinction and degradation of soil and vegetation. The†¦show more content†¦Land-use change has the greatest impact on soil biota, which dictates types of vegetation and the kinds of animals which consume it. Important areas of biodiversity, such as forests and wetlands, are claimed by encroaching dams and roads- in Asia, more t han 5,000 square km of wetlands are lost each year to industrial activities, primarily irrigation and dam construction (Myers 129). Dam construction also has an effect upon areas far away from the physical dam itself. A study on the impacts of damming in North America found that sites remaining structurally intact after nearby dam construction still lost an average of 0.5 to 1.0 % of its species each year for at least 50 years, due to the restriction of necessary flooding). Infrastructure construction decreases the diversity of all soil taxa and makes conditions very unfavorable to biodiversity (Balmford et al. 13). Roads and dams impact wildlife by altering animal behavior and species distribution. Plants and animals are affected by modifications to the chemical environment, interference with the physical environment, and significant noise. Dams in particular emit large amounts of methane and reduce water supplies to wildlife that is downstreamShow MoreRelatedThe Impact of Humans on the Biological Diversity of Natural Ecosystems1525 Words   |  7 Pagesdifferent types of organisms such as plants, animals, and microorganisms that inhabit these areas are known as biological diversity or biodiversity. (USEPA 2010 ) Biological diversity can be affected by many different things, climate change, and area being two specific things. Humans fit into a strange niche of biological diversity. While we have a part of biodiversity and in ecosystems, the human race has spread much farther than any other breed or type of organism except for bacteria. (Diaz 2006)Read MoreNew Transit System for Sunshine Coast1 308 Words   |  5 PagesEnvironment Protection and Biodiversity Conservation Act 1999 (Department of the Environment, 2013). Based on the field work studies completed by local students, as well as the data of secondary sources such as the Griffith Centre for Coastal Management (GCCM), it can be determined that the construction of a light rail line across Currimundi Creek would be detrimental to the already vulnerable health of the area. Furthermore, investigations of the GCCM have highlighted loss of biodiversity, decrease in waterRead MoreThe Study of Biodiversity939 Words   |  4 PagesBiodiversity – the amount of living things; animals, microorganisms and plants. It also includes the genetic information these living things contain, and the ecosystems and biomes they form. 3 ways biodiversity can be studied: - GENETIC DIVERSITY: The amount of different genetic characteristics of the species in their genetic make up. - SPEICIES DIVERSITY: the amount of species in a particular area in the world. - ECOSYSTEM DIVERSITY: the amount of ecosystems in a given region or biome. - PlacesRead MoreBiodiversity Is Important Becauseit Supports The Ecosystem.1509 Words   |  7 PagesBiodiversity is important becauseit supports the ecosystem. Biodiversity supports biological community profitability where every species, regardless of how little, all have an imperative part to play. Examples are a bigger number of plant species implies a more prominent assortment of harvests ,More prominent species differences guarantees characteristic manageability for all living things .Also Sound environments can better withstand and recuperate from an assortment of calamities,thus while weRead MoreThe Importance Of Biodiversity1641 Words   |  7 PagesBiodiversity Loss I. Introduction Biodiversity is the variety of living organisms (Cho, 2011). Currently, an extreme loss of biodiversity is a problem that is being caused by human activities. A major report in 2005 stated that due to human actions, between 10% and 30% of mammal, bird, and amphibian species are threatened with extinction, since then, the problem has only increased (Shah, 2014). The topic of biodiversity is of interest and significant to me, and others, because it provides all humansRead MoreHow Do Minerals Affect Society? Minerals1679 Words   |  7 PagesDuring underground mining processes the land may collapse causing the land above to sink. Again, during mining, the release of gases and dust seriously affect soil, water and air. Acid drainage from cyanide and other chemicals used in these industries affect the quality of water plus aquatic life in general (The Environmental Literacy Council, 2008). The resultant landscape after mining encourages erosion of soil thus has a negative impact on wildlife and biodiversity. Soil 1. What is your definitionRead MoreThe Importance of Biodiversity1521 Words   |  7 Pages‘Define Biodiversity and using examples, explain why it is important’ Biodiversity is the variety of life on earth. A fuller definition is given in the Convention on Biological Diversity (CBD) from the 1992 Earth summit: ‘Biodiversity is the variability among living organisms from all sources, including terrestrial, marine, and other aquatic ecosystems and the ecological complexes of which they are part ; this includes diversity within species, between species and of ecosystems’ (Hambler, C., 2004Read MoreImpacts Of Biodiversity Loss On The Planet1281 Words   |  6 Pagesecosystems. One of these noted effects is the drastic rise in the extinction rate of plant and animal species. Anil Markandya, from the Basque center for Climate Change and author of â€Å"The Economic Feedbacks of Loss of Biodiversity and Ecosystems Services† writes, â€Å"The topic of biodiversity loss has been the subject of a vast and growing scientific and economic literature. Species are estimated to be going extinct at rates 100 to 1000 times faster than in geological times.† Markandya goes on to elaborateRead MoreThe Whaling Of Whaling Nations1462 Words   |  6 Pagesoperate within their territories. Overall, the IWC was largely ineffective until the blue whale became endangered in the 1960’s. 2. What is land-degradation neutrality? Land-Degradation Neutrality was defined at COP12 (12th meeting of the Conference of the Parties to the Convention on Biological Diversity) in 2015 as â€Å"A state whereby the amount and quality of land resources, necessary to support ecosystems functions and services and enhance food security, remains stable of increases within specifiedRead MoreThe Biodiversity Of Fiji And Coral Reefs967 Words   |  4 PagesTriangle, which is home to the most marine biodiversity on Earth. Fiji’s spectacular coral reefs are world-renowned for their vibrant colors. While many other coral reef sites globally have degraded, the reefs of Fiji seem to remain vibrant and diverse, making them a high priority for marine conservation in the Pacific Ocean.      Fiji is home to many wetland ecosystems on the mainland that flows into the coastal mangrove wetlands and coral reefs. The land and sea ecosystems relationship are dependent

The Effects Of Mass Media On Society - 861 Words

Where do we get our information in society? How do we know what is true information from false information? Mass media, including T.V, Radio stations, newspaper has taken over the minds of people in society. According to Glen Smith and Kathleen Searles, Most assumption are being based off of what they see and hear on the television, social networks and on the radio because its mainly one side stories or one bashing of individuals. People do not take the time to go in-depth about the situation being inaccurately displayed at times. Sociologist is beginning to realize the effect of mass media has on society especially the younger generation. REVIEW OF LITERATURE Patrick Daley explained from a sociology point of view that Ferrarotti’s believe society has lost the essence to communicate with each other face to face; our expressive world is no longer there. Ferrarotti’s argued, â€Å" We are losing our ability to produce meaning, to the massive out pouring of images from television. Television also annihilates history; Frerrarotti maintains, by giving us an unremitting stream of disconnected and episodic event.† This goes to show that media definitely has control of our minds. They showcase what they want the people to see and have judgment on. Even fashion or the way they portray women and men, has become a money-making business because of the way media has made it into a need and not a want. People now believe that they have to be slim to be beautiful or have the latest designerShow MoreRelatedMass Media And Its Effects On Society1633 Words   |  7 Pagesbeen ideas and mass media in which we have access to, there is sm all changes in which The United States as a whole has been affected. There have been many discussions on how social media has played a part on American culture as we are becoming more reliant on computers and technology as well as we have in communicating. Social media and mass media has an affect modern society as technology has grown, so will its effects on people. Mass media and social media are, one social media is where anyoneRead MoreThe Effects Of Mass Media On The Society1145 Words   |  5 Pagesthe causes of aggressive behavior, crime, and violence in the society. The potential of the mass media for social mobilization, education, and attitude change has been recognized and has been exploited in different parts of the world with varying degrees of success. But the effect that the mass media will produce at given situation still remains a subject of debate even today. Summing up what is known about the effect of the mass media, Berelson (1948:172) in Mcquail (2000:457)submitted â€Å"that someRead MoreThe Effects Of Mass Media On Society1335 Words   |  6 Pages Mass media has inched its way into almost every facet of our daily lives. No one feels this intrusion more so than women. The market is geared towards them as the biggest consumer in our society. As a woman I am aware of this fact, but not only am I a woman, I am a woman who works in the advertising business. I have a unique perspective on both sides of the spectrum. How does all this focus effect us? How does this attention effect the way we perceive ourselves? Is it harmful? Can it be helpfulRead MoreThe Mass Media And Its Effects On Society1582 Words   |  7 Pagessecret of the overwhelming influence the mass media has over society. It has a great power and reaches large audiences. By presenting certain sorts of messages and facts skillfully, the media can manipulate people’s attitude and opinions without them even knowing. Business’ use of this constant exposure to their advantage and often invest and rely on commercials as a means to sell their products. Bec ause so many different people rely on the mass media, the companies need a platform that is universalRead MoreThe Effects Of Mass Media On Society Essay916 Words   |  4 Pagesâ€Å"spike your best friend’s eggnog when they’re not looking† perpetuates the rape culture which plagues much of society. Advertisements ultimately are designed to target and entice buyers by playing into the status quo (GW p. 412). However, mass media has been very effective in directly calling out advertisements such as Bloomingdale’s. It is comforting to know that the widespread use of mass media is useful in this way. This advertisement clearly perpetuates rape culture, especially the use of drugs suchRead MoreMass Media And Its Effect On Society1165 Words   |  5 PagesMass Media are organizations in our society. The medium industries provide information and entertainment, but mass media also can affect political, social, and cultural institutions. Mediums such as radio, newspapers, and television all reflect and affect American society. However, the main one that I am going to discuss is Radio. Radio is more effective in mass media as compared to the other mediums. The way radio was back then is way different from what it is in society today, it has changed overRead MoreMass Media And Its Effect On Society852 Words   |  4 PagesPeople are being depression and reflecting action in real life due to effective of mass media. Media has a power that can everyone has the same right and opportunity to access the information and enjoy their life. Teenagers are the most effective group of people because they can access and explode new technologies, creatives, curious, and proactive. Therefore, they are putting themselves in danger by performing challenge pictures or extreme dangerous things to be famous. People always attractiveRead MoreThe Effects Of Mass Media On Our Society1471 Words   |  6 Pagesalert system activates an urgent bulletin to galvani ze the community for assistance and safety. Today, mass media has undergone a significant change in terms of how they reach out to the public. During the early 19th century, the dominant form of media was the printing press through newspapers, magazines, and books. Eventually, the late 19th century throughout the 20th century, broadcast media provided easier access for entertainment, political issues, and current events gathering families aroundRead MoreEssay on Effects of Mass Media on Society1650 Words   |  7 PagesIn contemporary society, people are strongly influenced by mass media. Although traditional television watching and newspaper reading are no longer as popular as before, people spend more time in front of computers listening to music and radios, reading news and information, interacting with other people in social network and watching television programmes and films. The developing technology of mobile phone allows people to do almost everything they can do with the computer. Nowaday, people areRead MoreThe Effects Of Mass Media And Communication On The Society1674 Words   |  7 PagesMedia Message Introduction Behavioral sciences play a central role in figuring out the likely effect of mass media and communication in the society. Different theories and approaches are used to figure this out. This study refers to the Uses and Gratifications, and Cultivation theories to consider the effect of the media article below on individuals. The uses and gratification theory argues that consumers of a given media uses this media to satisfy and fulfill specific desires and needs. On the

Delegation in Contemporary Democracies

Question: Describe about the Delegation in Contemporary Democracies. Answer: Aim, objectives and feasibility of the dissertation Delegation is an important skill that should be possessed by a manager. Most of the time in Small and Medium Organizations (SMEs), managers fail to utilize this skill to acquire relevant organizational benefits. Usually, responsibilities and complexities related to management increases with the expansion of an organization. A manager should delegate effectively to get maximum benefits for an organization. As mentioned previously, responsibilities and duties of a manager increase with time. So, a manager should learn how to delegate effectively to focus on important tasks and thereafter should transfer the less important tasks to the subordinates. However, the less important tasks also requires good amount of time and effort from the workforce. There is an old saying, ''if you want something done right, do it yourself''. This concept does not match with the current cultures of SMES. It should be kept in mind that, an effective delegation increases the organizational productivity; therefore success of a manager depends on efficient delegation. At the second half of the 20th century, the advancement in transportation and technologies grew rapidly. That is why the SMEs should give more concern on the concept of delegation to save time to foster development. The exercise of delegation does not only offer advantages for the organization in form of premium productivity but also helps the management to produce proper report. It is because proper exercise of delegation supports a manager to focus on the most important project. On the other hand, the annual volume of productivity is the indicator of whether a manager is suitable for the given position or not. However, the role of delegation regarding the direct report is, it assists the management to motivate the employees through helping them to develop their existing skills and to learn new skills. Also, it is the way through which management helps employees to understand their strength and weakness. On the contrary, negligence upon the practice of delegation could bring negative effects. Without an apt sense on delegation, a management becomes disorganized and ends up in giving priority to the less important tasks. A managers inability to maintain delegation injures the quality of organizational productivity and reduces the chances to meet the deadline. The right way to gain a delegated management is through monitoring managements activity and by giving potential responsibilities to identify whether he is doing as per the expectation or not. There are many types of research and articles, which have discussed the relationship between an effective delegation and success of the SMEs in general. The focus of this particular research will be to determine whether there is a strong relationship between effective delegations and the development process of employee skills for saving time and increase organizational productivity or not. The aim of the research is to identify and analyze one of the main factors of the failures of SMES, which is managements inability to delegate. The research will consider the following questions: What is the relationship between effective delegation and the success of SMEs? How delegation contributes to the success of SMEs? How delegation helps to save time and develop new skills for the employee? Why do managers in SMEs often fail to follow and apply delegation in the daily tasks? By the end of the study, the researcher hopes to draw a conclusion to show the importance of the relationship among effective delegation and developed employee skills. Moreover, the study intends to identify the best possible ways to apply delegation in the daily tasks of SMES. Furthermore, I hope that the Furthermore, I hope that the research study can focus on identifying the reason for which most of the managers in SMES fails to maintain this aspect appropriately. Literature review Delegation is one of the essential skills for the manager to reduce workload. Delegation indicates the accountability to allocate certain tasks to the responsible one (Heller, 1998; Mentor, 2008). Many of the previous studies and academic articles have agreed that the main purpose of delegation is to increase manager's time and decrease workload. The resources include, Heller, 1998, How to delegate; Mentor, 2008, Delegating work; and Fleming, The role of effective delegation in professional and organizational success. However, there are other studies those have examined the purpose of delegation in details. Most of the articles have agreed that the delegation is one of the essential skills for the manager to save the operation time and to help initiating the development process for the employees. Implementing effective delegation has positive results for the manager along with for the employees. (Fleming; and Mentor, 2008); they discuss the benefits of effective delegation in details . However, (Heller, 1998; and Stanley); they have not mentioned the advantages of effective delegation in their articles. Both Fleming and Mentor agreed that the fundamental benefits of effective delegation belong to the manager to ''Improve the level of trust and communication between manager and employee, and achieve goals that required cooperative group effort''. Further, Fleming adds some additional benefits related to the manager such as ''allowing the manager to focus on the tasks that needed his specific expertise; increasing the manager's discretionary time'' (Fleming, The role of effective delegation in professional and organisational success). Mentor said that an employee would gain same benefits as the manager. In contrast, Fleming stated that the employee could have extra benefits from effective delegation beside the previous ones such as '' improving employee interest; building confidence and trusts; providing control over activates and decisions; and providing growth opportunities'' (Fleming, The role of effective delegation in professional and organizational success). However, the organization will acquire benefits from effective delegation by saving money through ensuring that tasks are assigned to the right people at the right level. It will increase overall productivity and efficiency of the employees by making the best use of organizational resources. The authors (for instances Mentor, 2008; Fleming; Stanley; and other) have not discussed the results of avoiding effective delegation. Heller in 1998 mentions that the cost of avoiding delegation such as spending many hours to complete low priority tasks can give birth to a disorganized environment. Further, the authors of the reviewed literature do not cover and discuss two main points, which are how the delegation contributes to save time and develop new skills for employees. The second points that is not covered and addressed were the reason behind most of the managements failure to follow and apply delegation in the daily tasks. Therefore, the previous two points are identified as the gap literature. The authors of delegation articles (Mentor, 2008; Heller, 1998; and other) have focused on the concepts of delegation; the purpose of delegation; delegation guidelines; monitoring process; and improvement skills. Nevertheless, Iancn (2012), has added a new topic to the delegation, which is the contemporary implication on delegation. Furthermore, Braun and Gilardi (2006), in their book The Delegation in Contemporary Democracies have discussed in part one that the standard chain of delegation is similar with the discussion made by the previous authors. In part two, they have focused on their topic and have discussed the importance of delegation in regulatory agencies in western Europe. In general, the literature review is linked with some topics, such as concepts of delegation; benefits of delegation; guideline of effective delegation; and many other topics. In contrast, the main differences between these articles are found in the different way of discussing aspects on delegating tasks as every author has different experiences and different approaches. Research methodology and methods The case study will make in-depth analysis of the influence of delegation for saving organization time and developing employee skills. Additionally, the research will compare finding of a local case study done by the international studies. It is identified that there are limited researches those have done limited investigation and analysis of local SMES. Most of the studies on the topic has been done for newspaper purpose or academic purposes. According to the data of the General Authority for Small and Medium Enterprises, there are about 18600 establishments at the end of 2015. In Oman, the SMEs shaped 90% of a commercial establishment. It is divided into micro-enterprises, small and medium enterprise. Micro enterprises consist of four employees with the annual revenue of 25,000 OMR. The second type is small enterprises, which are comprised of five to nine employees with annual revenue of 250,000 OMR. The last type is the medium-enterprises. The medium-enterprises consist of ten to ninety-nine employees and its annual revenue is generally between 250,000 OMR to 1 million OMR. The quantitative research method is the suitable research method for collecting and analyzing the data. The study will evaluate the primary data collected, which are collected from the original sources; surveys and interviews. A large number of samples regarding the study will be selected carefully to address the research questions. According to the General Authorities of SMEs, there are about 18600 establishments. Therefore, due to the high number of SMEs in Oman, the systematic sampling is the suitable method for selecting the number of SMEs. Number of SMEs = 18600 Sample size = 375 Required sample = 18600 / 375 = 50. Then, the random number will be selected between 1 and 50. (Chosen 25). Hence, the selected random number will be; 25, 75, 125, 175, 225, 275, 325, and 375. The total number of SMEs to survey will be eight. In contrast, as the number of employees in each establishment will be between 10 to 100 employees, the stratified sampling method is found to be the best for choosing the number of employees to participate in the survey. It will be easy to get answers easily as the number of employees is short. In contrast, the medium enterprises do not exceed 100 employees; therefore the number of staffs who should be involved in the survey is 80 employees. In this case, the supposed number of participants will be: Number of employees = 100 employees Sample size = 80 participant. The distribution will be (1% senior manager, 94% middle and leader management; other 5%). Senior Management = 80 * 1% = 1 Middle and leader management = 80 * 94% = 95 Other = 80 * 5% = four. Further, the null hypothesis (H0) said that there is no relationship among effective delegation, time management and the process of developing employee skills. However, the alternative hypothesis (H1) has stated that there is a relationship among all the stated aspects. The dependent variables (DV) are time management and the development of employee skills while the independent variable (IV) is effective delegation. These variables will be measured through two main methods, which are ratio variable and interval variable. There are two main methods to collect data; questionnaires and interview. The first method of collecting data, through questionnaire will be used here. The question in the questionnaire is generally designed in a way to help people in understanding the topic. The questionnaire will be formed by open-ended, multiple choice and close questions. Additionally, the questionnaire will be distributed through email and web-based tools such as the survey monkey. Moreover, it will be easy to analyze the results through SPSS statistic software. The second type of method that will be used in the research is the face-to-face process of asking questions. This kind is faster than the online procedure and it can be done at home, workplace, and even in the streets. The aim of this questionnaire is to identify the reaction and response of the participants. The second data collection method will be interview. The questions in the interview will be opened and closed questions like the questionnaire. There will be two main techniques to analyze the quantitative data. The first technique will be descriptive statistic and the second will be inferential statistic. As mentioned previously, there are two hypotheses (H0, H1) those will be analyzed through SPSS statistic software. In addition, the researcher will use a t-test to test the differences between (IV) and (DV). The associations between the quantitative variables will be examined with the help of Pearson's correlation. On the other hand, the linear regression will test the productivity of effective delegation. The researcher is well aware of the ethics and regulations followed by the SMES. The researcher has kept in mind those aspects while collecting the data and asking questions through questionnaire and interview. To obtain the confidential data, I have to take permission from an authorized person of an organization. Finally, I will contact the DA to be cautious more about the regulations and ethics of the University of Liverpool. References: Braun D., and Gilardi F.,(2006), ''Delegation in contemporary democracies'', [online]. Available from: https://www.tandfebooks.com.liverpool.idm.oclc.org/isbn/9780203306512#? (accessed: 19 November 2016). Collis, J. Hussey, R. (2013)Business Research: A Practical Guide for Undergraduate and Postgraduate Students. 4th ed. London: Palgrave-MacMillan. Dye, D., (2016)''Leadership Excellence Essentials''., 33 (3), p18-18. 1p. Fleming, Robert S. Business Renaissance Quarterly. Fall2009, Vol. 4 Issue 3, p153-161. 9p., Database: Business Source Complete. Heller R., (1998),'how to delegate', Harvard Business School Press, pp. 4-15. Lancu B., (2012), ''Legislative Delegation: The Erosion of Normative Limits in Modern Constitutionalism'',Springer Heidelberg New York Dordrecht London, pp.207-280 Lueck R. Mclntosh P. (2009), 'The busy manager's guide to delegation', American Management Association, pp. 1-9 Pfeffer J., (2007),'What were they thinking?', Harvard Business School Press, pp.1-40. Mentor P., (2008), 'Delegating work', Harvard Business School Press, pp. 1-14 Stanley, T.L. Supervision. Apr2012, Vol. 73 Issue 4, p7-10. 4p. 'Development of small and medium enterprises ... strategic direction rather than progress', (2013), [online]. Available from: https://shabiba.com/article/23567/%20economy%20/%20-(accessed: 10 November 2016). 'Effective Delegation' [online], Available from: https://www.google.com/url?sa=trct=jq=esrc=ssource=webcd=7cad=rjauact=8ved=0ahUKEwjq8ce4gI_PAhXKPhQKHaACDicQFghAMAYurl=http%3A%2F%2Fwww.kansas4-h.org%2Fresources%2F4-h-library%2F4-h-clubs%2Fstrengthening-clubs-1%2Fdocs%2Feffective-delegation.pdfusg=AFQjCNFSrUQepXAIrBqdItC3vpffMvDMnQsig2=N9zy5LjmvQv9qXnnNHzM5wbvm=bv.132479545,d.d24 (accessed: 06 November 2016). 'SMEs in Oman' (2015), [online]. Available from: https://www.smeadvisorarabia.com/ (accessed: 12 November 2016). 'SMEs in Oman' [online], Available from: https://omandaily.om/?p=309691 (accessed: 13 November 2016). 'Successful Delegation' [online], available from: www.free-management-ebooks.com/dldebk-pdf/fme-successful-delegation.pdf (accessed: 18 October 2016). 'The importance of delegation' [online]: available from : web.ewu.edu/groups/studentlife/Delegation.pdf (accessed: 18 October 2016).

Pioneer petroleum free essay sample

Pioneer Petroleum was founded in 1924, through a merger within industrial, pipeline transportation, and refining fields. PP has evolved over the last 60 years into a company that now also works with agricultural chemicals, plastics, and real estate development concentrating in gas, oil, petrochemicals, and coal. In 1990, PP improved their coker and sulfur recovery facility to make their refining process more efficient and in turn has become one of the lowest cost refiners on the West Coast. Due to the refining process PP’s gasolines are among the most cleanest-burning in the industry. PP’s is also the producer of one-third of the world’s supply of methyl tertiary butyl ether (MTBE), which is a chemical used to make cleaner burning gasolines. They also produce one third of the world’s supply of MTBE. Major Issues The major issue that PP is facing right now is that the management board of PP is trying to decide whether to use a single cutoff rate or a system of multiple cutoff rates to determine the minimum acceptable rate of return on new capital investments. We will write a custom essay sample on Pioneer petroleum or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page As of right now PP is using one single company-wide cutoff rate that is based on their overall weighted cost of capital. The current single rate system that PP is using has increased their overall risk by causing them to choose investment decisions in divisions with higher risk because they exceed the cutoff hurdle, while not investing in lower risk areas because they do not exceed the hurdle rate. In addition PP has not been calculating their weighted cost of capital correctly. This has caused them to invest in riskier areas rather than those with greater chance of having a positive net present value. PP needs to reevaluate which method to use as well as how to correctly compute WACC. Analysis As stated before PP has been weighing two alternatives options to calculate the minimum acceptable rate of return on their capital investments. As of right now PP’s approach is to accept all proposed investments with a positive net present value, after being discounted at the appropriate rate. The issue with this is that this approach has been reliant on a single company-wide cutoff rate based on PP’s overall WACC that has continuously been calculated incorrectly for each investment decision. PP has been calculating their WACC by three steps: (1) the expected proportions of future funds sources were estimated; (2) costs were assigned to each of the future funds sources; and (3) a WACC was calculated by multiplying the estimated proportions of future funds sources by the estimated future after-tax cost percent. Due to the fact that PP has calculated their WACC this way it has led to their adopted rule that funded debt should represent approximately 50% of total capital. In addition it has led to the cost of equity being 10% with current earnings yield on stock equaling the cost of both new equity and retained earnings for PP. Alternative Options PP has two alternative options to choose from when considering acceptable rates of return on future investments. 1. Single company-wide rate. 2. Multiple cutoff rates based on each economic sector within the company. The multiple rate system will also use WACC approach for each operating sector within the company to determine the individual’s rates for each economic sector within PP. This should allow them to see differences in divisions. Determining Pioneer Petroleum’s Cost of Capital PP has been finding their equity while determining the WACC of capital by using the CAPM formula but has been finding the incorrect equity value. PP has correctly found the cost of debt, but has failed to find the correct cost of equity because they have set their equity’s weight to 10%. In order to determine WACC PP needs to correctly calculate equity, debt, and also the weighted averages of both. Cost of bond after-tax cost Debt KD=Y(1-tax rate), where Y=12% and tax rate=34% (p. 66) KD=12%(1-34%) KD=7. 92% Cost of common equity Ki=Rf+(Rm–Rf)Bi, where Rf=7. 8%, Rm=16. 25% and Bi=0. 8 (p. 68-69) Ki=7. 8%+(16. 25%-7. 8%)0. 8 Ki=14. 56% Weighted average cost of capital Kw=KD(WtD)+Ki(Wti), where WtD=50% and Wti=50% (p. 66) Kw=7. 92%(50%)+14. 56%(50%) Kw=11. 3% Analysis of Alternatives In recalculating PP’s WACC correctly their actual average cost of capital came out to be 11. 3% as opposed to the 9% that PP has calculated. This shows that PP underestimated their WACC by 2. 3% due to the fact that they set equity at 10%. If PP chooses to continue to use their single cutoff rate based on the company’s overall WACC, they will now have a cutoff of 11. 3%. Again, the problem with using the single rate method is that it does not allow use to see, or account for the differences in each division of PP. Another problem with the single cutoff rate is that due to the increased rate PP will invest their funds in higher return projects which will result in higher risk. This risk is a result of only the high-risk divisions being able to exceed the single rate hurdles using the single rate cutoff method. If PP chooses to go with the multiple cutoff rate approach it allows them to create cutoff rates that reflect the risk-profit characteristics of the individual economic sectors in which PP’s subsidiaries operate. In order to do this you need to determine the equity, debt, and WACC of each firm for each sector as opposed to the single cutoff rate. The discount rate will also vary for each project due to the use of different divisions and sectors. A multiple cutoff rate may actually exceed PP’s overall average costs because of the vertically integrated parts involved. In using the multiple cutoff rate approach PP can have cutoff rates that are better tailored to the economic sectors that will allow lower risk divisions to exceed their cutoff rate. This decreases risk for PP by essentially allowing them to diversify their portfolio, or the ‘Portfolio effect’. CONCLUSION Suggested Course of Action The multiple hurdle rates for each division based on the corresponding risk for each division is the suggested course of action for PP. The problem that PP has with using the current single company-wide cutoff rate is that it limits PP to projects that exceed that rate which tend to be more risky. The single rat method ignores differences in each division as well as the different risks of those divisions. This led to a misallocation of funds for each division and also did not allow PP to participate in low risk projects that could have been profitable and made PP more risk averse. Using the multiple cutoff rate approach will diminish the imbalance of divisions over investing in cutoff rates that are too low and divisions under investing in cutoff rates that are too high. In using the multiple cutoff rate approach PP will be able to make better investment decisions based on the NPV of potential investments for each division due to the fact that each division will have their own hurdle rate. Pioneer Petroleum free essay sample Second, PPC has been using a single company-wide rate for their multi-divisional company. In either instance the company is not maximizing wealth. Statement of Facts and Assumptions: PPC has been calculating their after tax cost of debt using the coupon rate of 12% instead of the actual interest rate which is 8%. Taking the 8% interest rate into account, PPC’s actual cost of capital would be calculated as: [. 08(1-. 34)]= 5. 28%. PPC has simply been using 10% (their equity growth rate) as their cost, but must instead either use the CAPM model to calculate their cost of equity, or the Dividend-growth model. If they use the CAPM model, which is the most accurate, their cost of equity will be: . 078+. 8(. 1625-. 078)=14. 56%. Or they can use the Dividend-growth model and their cost of equity would be: (2. 7/63)+. 1=14. 29%. Both are acceptable but, because the Dividend-growth model is subjective, and the coupon rate (that PPC was originally using is a sunk cost, they should use the market rate). We will write a custom essay sample on Pioneer Petroleum or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Thus using the market rate to calculate CAPM you use the Beta and market risk premium which are both based on the market rate and more accurate. Finally, their company WACC of 9% that they have calculated is incorrect and given the above calculations, their WACC using CAPM would be: [5. 28(. 5)+14. 6(. 5)]=9. 94% and their WACC using Dividend-growth would be: [5. 28(. 5)+14. 3(. 5)]=9. 79%. Either way, it is significantly larger than the 9% they had calculated. It should also be stated that PPC would benefit by using the target rate because they are planning longer term into their future. Analysis: Using a single cut-off rate for the entire company has increased the overall risk of their company. The use of an acceptable range based on a company-wide average cost of capital inappropriately leads the company to invest in divisions with high risk that should possibly have a higher required rate of return or to not invest in low risk divisions that would be profitable, merely because they do not exceed the company rate. Thus, using a WACC for each division will more accurately allow the corporation to decide which projects to accept and deny based on the specific risk factors of the section instead of the risk of the entire company which has been skewed because of diversification. Based on my calculations, the company wide WACC and cut off rate that should be used is 9. 94% based on CAPM or 9. 8% based on Dividend-growth, and any projects that are below that percentage should not be accepted for the company as a whole. Recommendations: Overall, I would recommend that PPC recalculate their WACC per each specific division and establish multiple cutoff rates instead of calculating a company wide WACC cutoff rate. This will benefit them the most in accepting and denying projects that will meet the appropriate cutoff rate that each division is susceptible to based off the specific risk each division must overcome. When recalculating their WACC, it would benefit them most to use the CAPM model to determine their cost of equity, but using the Dividend-growth model is also acceptable. To determine the cost of debt, they must remember to use the actual interest rate instead of the coupon rate to determine the after tax cost accurately.