The Capital Assets Price Model (CAPM), is a model for pricing an individual security or a portfolio. Its basic function is to describe the relationship between risk and expected return, which is often used to estimate a cost of equity (Wikipedia, 2009). It serves as a model for determining the discount rate which is used in calculating net present value. The CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free security plus a risk premium. The formula is: R = Rf + *(E(Rm)-Rf)

Rf = Risk free rate of return, usually U.S. treasury bonds ( ) β = Beta for a company
E(Rm) = Expected return of the market (commercial airlines market) E(Rm)-Rf = Sometimes referred to as the risk premium The beta and risk-free rate should be selected as required according to the Boeing 7E7 case study. For the CAPM the risk free rate of return for a given period is taken to be the return on government bonds over the period. The risk free rate of return at the time of this case was 4.56% (Bruner, p. 239, 2007). At the time of the case, four main estimatesof equity market risk premiums (EMRP) were: 6.4% = Geometric mean over T-bills

4.7% = Geometric mean over T-bonds
8.4% = Arithmetic mean over T-bills
6.4% = Arithmetic mean over T-bonds
For the purpose of analysis we will use 6.4% EMRP, thus (E(Rm)-Rf) = 6.4 %.() The cost of equity is determined by the company’s levered Beta (). This is calculated according to the ‘Hamada equation’: βl = βu (1+(1-T)(D/E))

βl = company’s levered Beta
βu = company’s unlevered beta (It is a beta assuming the firm is completely equity financed, which reflects pure business risk)

T = effective marginal tax rate
D/E = market-value debt/equity ratios
Exhibit 10 provided seven different betas that can be used for the capital assets price model and discount rate calculation....

...Strategy Formulation
Objectives:
Define strategy formulation
Define the word strategy and formula and its purpose
Understand the SWOT analysis and its relation to strategy formulation
Learn the step by step strategy formulation
Appreciate the importance of strategy formulation
Define strategy formulation
Strategy formulation:
As defined by Andrew M. Pettigrew of...

...address major issues facing the organization.
3. Identify specific approaches or strategies that must be implemented to reach each goal The strategies are often what change the most as the organization eventually conducts more
robust strategic planning, particularly by more closely examining the external and internal
environments of the organization.
4. Identify specific action plans to implement each strategy - These are the specific...

...place they operate in. The goal of IT as such should be directed toward the alignment of IT strategy with an organization's overall business strategy (Mulcay, 2001). It is argued though that the inability to successfully derive value from IT investment is, for the most part due to a lack of alignment between IT and business strategies.
Johnson and Scholes cited by Riley (2012) define strategy as follows "Strategy is the...

...The two broad turnaround strategies that may be followed by Public and Private companies are Strategic and Operating. Strategic turnarounds can be branched into activities that comprises of a change in business strategy for competing in the same business and those that involve for entering a new business or businesses. Operating strategies does not involve altering the business level strategies and usually focuses on increasing...

...STRATEGY FORMULATION
Basic strategic planning is comprised of several components that build upon the previous piece of the plan, and operates much like a flow chart. However, prior to embarking on this process, it is important to consider the players involved. There must be a commitment from the highest office in the organizational hierarchy. Without buy-in from the head of a company, it is unlikely that other members will be supportive in the planning and eventual...

...Article review :What is Strategy?(Michael E. Porter)
We know , Operational effectiveness means performing the activities required for producing a product or delivering a service better—that is, faster, or with fewer inputs and defects—than rivals. Companies can reap enormous advantages from operational effectiveness (as illustrated by the example of Japanese firms). But from a competitive standpoint, the problem with operational effectiveness is that best practices are...

...The root of the problem is the failure to distinguish between operational effectiveness and strategy
Operational effectiveness and strategy are both essential to superior performance, which, after all, is the primary goal of any enterprise. But they work in very different ways.
A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do...

...
McDonalds Strategy
McDonalds Strategy
According to the McDonalds 2010 annual report, the company continues to remain in a good position for success because McDonalds applies the “plan to win” strategy (McDonalds, 2010-2014). The concept behind the “plan to win” strategy is not for McDonalds to be the biggest fast food chain but for the company to be the best fast food chain (McDonalds, 2010-2014). The plan to win...

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