Were Manning’s actions legal under the Foreign Corrupt Practices Act

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  1. Were Manning’s actions legal under the Foreign Corrupt Practices Act, and what are the possible penalties for violating the act?

The Foreign Corrupt Practices Act states (1977)  “It shall be unlawful for any issuer…to offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give… “. Manning assumed the duty of an issuer because he attended dinner with the prime minister to discuss the contract. Then, Manning offered to fly the prime minister to New York, which he then promised to pay for all of the prime minister’s expenses. However, according to the Foreign Corrupt Practices Act (1977) a promise or offer is acceptable if the expense was ”reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official… was directly related to the promotion, demonstration, or explanation of products or services”. Manning promised to fly out the prime minister because he wanted to “discuss business further” (UMUC, 2019). Further, Manning used company funds to take the prime minister to luxurious activities and restaurants because he wanted to retain the contract from the prime minister.

Even though Manning did not directly give money to the prime minister, he authorized payment for the prime minster’s two-week stay, which did not involve discussing the contract. Out of the two weeks, business was only conducted for a day. In addition, Manning can be held responsible for bribing the customs officials at Neristan. According to the Foreign Corrupt Practices Act (1977), it is unlawful to influence “any act or decision of such foreign official in his official capacity… omit to do any act in violation of the lawful duty of such official”. Manning influenced the customs officials because Manning gave each custom official $100 to clear the shipment. Custom officials act on behalf of the Neristan government and sometimes require large shipments to be inspected. Manny will likely be held responsible for offering payment to the customs officials in exchange for expediting the company’s shipment.

If Manning violated the Foreign Corrupt Practices Act, he could face imprisonment. Also, the company may have to pay the penalty. The penalty for violating the act is “a fine of up to $2 million per violation. Likewise, an individual may face up to five years in prison and/or a fine of $250,000 per violation of the anti-bribery provision” (Woody, 2018, p. 275).


  1. Were Manning’s actions legal under the UK Bribery Act and what are the possible penalties for violating the act?

Based on the UK Bribery Act (2010), an individual is guilty of bribing an official if “intention is to influence F (government official) in F’s capacity as a foreign public official…intend to obtain or retain business, or an advantage in the conduct of business.”. Manning bribed the prime minister because he stated: “If, after we are done conducting business, you want to see the sites, I can show you around the city, and you can stay on us for a while.” (UMUC, 2019). If the contract were to go through, the prime minister would be given the opportunity to stay for two weeks to explore the city. Then, Manning bribed the customs officials by providing each of them $100. Manning tried to obtain an advantage in the conduct of the shipment because it would take weeks to clear the load. By paying the customs officials, the load was cleared within a day. Based on the UK Bribery Act, Manning violated the law.

Penalties for violating the UK Bribery Act include imprisonment and a fine. If the organization allowed or was aware of the bribery, the company will be held accountable as well. The penalty for the offense that proceeds without a jury is imprisonment for a “term not exceeding 12 months, or to a fine not exceeding the statutory maximum, or to both,”  (UK Bribery Act of 2010). Whereas the penalty for being convicted as an individual can face imprisonment for up to ten years along with a fine. The company can face an unlimited fine depending on the severity of the offense.

  1. Were Manning’s actions ethical, particularly in light of differing cultural norms?

While some cultures conduct “negotiations as a business activity”, some cultures “develop a trusting relationship” before negotiating (Dias, 2012). According to the prime minister, the culture of Neristan values relationships. The prime minister then stated, “It is customary in Neristan for business associates to help each other prosper” (UMUC, 2019). It is possible that Manning wanted to further his relationship with the prime minister by attending a Broadway show and traveling the city together. Spending two weeks in the town would allow Manning to form a relationship with the minister.  However, Manning did act unethically because the restaurants and the hotel the prime minister stayed at was expensive.

On the contrary, Manning did act ethically because he turned down the prime minister’s request for a wire transfer. Any payment used to influence a decision is considered bribery (Jimenez & Pulo, n.d). Overall, it is believed that Manning acted unethically because he bribed the prime minister through high-end restaurants and activities in exchange for the contract.


15 U.S. Code § 78dd–1 – Prohibited foreign trade practices by issuers. (n.d.). Retrieved from https://www.law.cornell.edu/uscode/text/15/78dd-1

Dias, L. P. (2012). Ethical and Cross-Cultural Negotiations. In Beginning Human Relations. Beginning Human Relations. Retrieved from https://2012books.lardbucket.org/books/beginning-human-relations/index.html.

Jimenez, G. C., & Pulos, E. (2016). Good corporation, bad corporation: Corporate social responsibility in the global economy. Geneseo, NY: Open SUNY Textbooks, Milne Library (IITG PI), State University of New York at Geneseo.

UK Bribery Act of 2010. C. 23 §6 (2010).

UMUC. (2019). Global Shippers, Inc. Retrieved from https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/course-resource-list/global-shippers-inc.html?ou=345131

Woody, K. (2018). ““Declinations With Disgorgement” In FCPA Enforcement. University of Michigan Journal of Law Reform, 269-311. Retrieved from http://web.b.ebscohost.com.ezproxy.umuc.edu/ehost/pdfviewer/pdfviewer?vid=4&sid=bf1b2351-c005-4f41-adf5-ac90958a9d68@sessionmgr102



Were Manning’s actions legal under the Foreign Corrupt Practices Act, and what are the possible penalties for violating the act?

Under the Foreign Corrupt Practices Act (FCPA), Manning’s actions were illegal when it came to the travel, entertainment and other value given to the Neristan prime minister. Although Manning did not give the prime minister then $100,000, he requested in his account, he made up for it by paying for an extravagant dinner of $3,500, luxurious penthouse in New York, first-class flight Los Angeles, Broadway entertainment and the paid two weeks stay. Manning knew that his actions would incentivize the prime minister to “award” Gold Shippers, Inc. the contract based on the travel and the entertainment which may have exceeded the $100,000 payment. It is clear that small gifts and token of appreciation are acceptable when negotiating with other government officials or business people, but Manning exceed that exception by spending large amounts of money to ensure a contract was granted when otherwise it would not have happened. The Department of Justice (DOJ) and the Securities Exchange Commission (SEC), view the larger or more extravagant the gift, the more likely it was given with an improper purpose (U.S. Department of Justice, Criminal Division, and U.S. Securities and Exchange Commission, Enforcement Division, 2012).

Possible individual penalties for violating the FCPA, may include criminal penalties up to $250,000 in fines per violation and up to 5 years in prison. Civil penalties up to $16,000 per violations. Companies may also be held liable with criminal penalties have fines up to $2 million per violation and civil penalties up to $16,000. It is important to note that employers cannot pay the fine for their employees or agents (n.d.).

Were Manning’s actions legal under the UK Bribery Act and what are the possible penalties for violating the act?

Under the UK Bribery Act, “facilitation payments are not permitted and are considered illegal bribes (n.d.).” Furthermore, the UK Bribery Act prohibits private-to-private bribery, or from private persons as well as public officials (n.d.).

The penalties under the UK Bribery Act may result in longer prison sentences for individuals (10 years) and there are no caps on fines, therefore allowing both individuals and companies to face unlimited fines for violating its provisions (n.d.).

Were Manning’s actions ethical, particularly in light of differing cultural norms?

According to Global Business Ethics (n.d.), “Paying bribes is relatively common in many countries…” but it is not common or accepted in the United States. Manning’s actions were unethical because he knows that under FCPA he is not allowed to give other governmental officials extravagant gifts that may give rise to investigations. Furthermore, under the FCPA, Manning was allowed to offer “grease payments” in order to “”to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official” (FCPA, 15 U.S.C. 78dd-2).” However, this is not accepted by the UK Bribery Act, so it can also be considered unethical behavior that may result in Manning and the company to be penalize with extensive fines.

In conclusion, Manning’s actions were unethical because even though some gift giving is expected in countries like Japan, it is established that these gifts cannot be extravagant nor go over preset limits.


Foreign Corrupt Practices Act of 1977, Pub. L. 95-213, 91 Stat. 1494, codified as amended at 15 U.S.C. §§78dd-1 et seq. Retrieved from: https://www.gpo.gov/fdsys/pkg/STATUTE-91/pdf/STATUTE-91-Pg1494.pdf

Global Business Ethics. (n.d.). Retrieved from https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-resourcelist1/global-business-ethics.html?ou=345131

U.S. Department of Justice, Criminal Division, and U.S. Securities and Exchange Commission, Enforcement Division. (2012). A resource guide to the FCPA U.S. Foreign Corrupt Practices Act, Retrieved from: https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf



First, slipping $ 100 to the customs officials was illegal. Under the Act, no issuer from any entity whose shares are publicly traded on the US exchange or any director, employee or agents may corruptly pay, offer or authorize anything to a foreign official to secure an improper advantage (Randall, L. H). Since Manning was not acting on behalf of the company by offering the bribe, he may receive fine up to $100,000 or an imprisonment for up to five years. The above provisions are meant to make companies plan and sustain accounting systems which tightly control and accurately record all dispositions of business assets.

Secondly, under the UK Bribery Act, everything Manning did was illegal. The Act states that the offense of bribing other people comprises the presentation, making promises or handing over fiscal or other benefits with the intent of inducing or rewarding inopportune conducts (Rose, C). The $100 to the customs officials was a bride, and the extended trip was a promise that would lead to an advantage. According to this Act, therefore, Manning knew or believed the Nerista’s Prime Minister’s acceptance of the gifts would amount to improper conduct. Under this, Manning is subject to a maximum of 10 years’ imprisonment or even an unlimited fine. This Act sought after placing a burden of proof on companies to show they have adequate procedures in place that would prevent bribery (Morgenthau, H. J). It is the absence of this procedure that Manning’s acts became unethical.

Even though some of Manning’s actions were generous, there was a hidden intention, which makes everything he did unethical. Even considering the difference in cultural norms, corruption is illegal and unacceptable in almost all countries (Bowie, N. E). Gaining an advantage by his hospitality offer and bribing the official was unethical, and morally, he was supposed to express social responsibility to carry out business without engaging in such actions which would influence actions.

Bowie, N. E. (2017). Business ethics: A Kantian perspective. Cambridge University Press.

Doh, J. P., Rodriguez, P., Uhlenbruck, K., Collins, J., & Eden, L. (2003). Coping with corruption in foreign markets. Academy of Management Perspectives, 17(3), 114-127.

Morgenthau, H. J. (2017). Positivism, functionalism, and international law. In The Nature of International Law (pp. 159-184). Routledge.

Randall, L. H. (1997). Multilateralization of the Foreign Corrupt Practices Act. Minn. J. Global Trade, 6, 657.

Rose, C. (2012). The UK Bribery Act 2010 and accompanying guidance: Belated implementation of the OECD Anti-Bribery Convention. International & Comparative Law Quarterly, 61(2), 485-499.

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Where Manning’s actions legal under the Foreign Corrupt Practices Act, and what are the possible penalties for violating the act?

According to Goodwin (2019), a company or business can adjust its business practices to that county its operating in to the culture practices expect for gift giving of anything in monetarily to government officials to gain advantage of a contract which Manning did illegally.  Manning violated the Foreign Corrupt Practices Act, which is enforced by the US Government.  Though Manning did not provide direct payment to the prime minister of Neristan, Manning paid for the expensive meal that could be viewed by the Department of Justice as an extravagant meal, paid for a trip to New York, and a trip to Los Angels (Global Shippers, Inc., 2019) all of which is categorized by the Foreign Corrupt Practices Act (FCPA)(2019) as illegal by influencing the prime minister to award this contract.

Manning and Global Shippers could be “subject not only to substantial fines, but also to jail time” (Goodwin, 2019).   Both Manning and Global Shippers are at risk and accountable for this action because Manning utilized the corporate accounts.  These accounts are to be in accordance to the accounting provisions and follow the anti bribery provisions of the FCPA Foreign corrupt practices act, (2019).

Foreign Corrupt Practices Act. (2019). Learning resource. University of Maryland University College.  https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-resourcelist1/foreign-corrupt-practicesact.html?ou=345131

Global Shippers, Inc. (2019). Course Resource. University of Maryland University College. https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/course-resource-list/global-shippers-inc.html?ou=345131

Goodwin R. (2019). Learning Resource. University of Maryland University College. https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/course-resource-list/introduction-to-crossculturalawareness.html?ou=345131

Were Manning’s actions legal under the UK Bribery Act and what are the possible penalties for violating the act?

Manning’s actions of paying the customs personnel were legal under the UK Bribery Act.  When reviewing what are facilitating or expediting payments (2019), Manning did not ask to overlook documents but simply expedite the inspection to facilitate the delivery, all of which are legal in accordance to the UK Bribery Act and facilitating or expediting payments (2019).   However, his bribery of the prime minister where prohibited in accordance to Global Bribery (2019) because he is a public official in the country of Neristan.  Additionally the UK prohibits private-to-private bribery’s, which Manning facilitated with dinner and the trips to the US.

Penalties for violation of the UK bribery act for both Manning and Global Shippers are extensive.  Both may be held for civil and criminal penalties.  According to Global Bribery (2019),

“up to $250,000 in fines per violation and up to 5 years in prison and civil penalties of up to $16,000 per violation. For companies, the criminal penalties may include a fine up to $2 million per violation and civil penalties up to $16,000 per violation. Moreover, employers are not permitted to pay the fines of their employees or agents” (Global Bribery, 2019).

Manning has placed both himself and Global Shippers at serious risk in accordance to the UK guidelines. And it would be recommended that Global Shippers and Manning get legal counsel, soonest.

Global Bribery. (2019). Learning Resource.  University of Maryland University College. https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-resourcelist1/global-bribery.html?ou=345131

What are Facilitating or Expediting Payments. (2019). Learning Resources. University of Maryland University College. https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-resourcelist1/what-are-facilitatingorexpeditingpayments.html?ou=345131

Were Manning’s actions ethical, particularly in light of the differing cultural norms?

Manning’s and ultimately Global Shippers actions were not ethical and will be under scrutiny by the Department of Justice.  According to Gifts, Travel, Entertainment, and other things of value (2019), the meal will be considered extravagant in that it was the most expensive wine on the menu and not needed.  The travel to New York paid by the corporation was ethically okay, however, the most expensive penthouse is ethically wrong and a seven-day trip to Los Angles paid by the corporation is extremely excessive with the presence of Manning, an employee.

Manning was not engaging in cultural norms with the prime minister.  The review of County Cultural Differences (2019), Manning had no intentions of the workplaces values, attitudes and beliefs of the culture in the country of Neristan but to only secure the $20 Million revenue deal, which is ethically wrong.

Country Cultural Differences. (2019). Leaning Topic. University of Maryland University College. https://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-topic-list/country-culturaldifferences.html?ou=345131

Gifts, Travel, Entertainment, and Other Things of Value. (2019). Learning Resource. University of Maryland University Collegehttps://leocontent.umuc.edu/content/umuc/tgs/mba/mba630/2191/learning-resourcelist1/gifts-travel-entertainmentandotherthingsofvalue.html?ou=345131





Grand View Grocers Corporation, headquartered in Clewiston, Florida,

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University of Phoenix Material


Training Needs Assessment Exercise



Instructions: Read the Grand View Grocers Corporation case.


Grand View Grocers Corporation, headquartered in Clewiston, Florida, is among the nation’s top grocery chain companies, with over $34 billion in revenue. It operates and owns approximately 1,500 grocery stores in 10 states and will be expanding operatons to Washington, D.C. in the near future.


Grand View Grocer’s Corporation’s operating strategy distinguishes it from other grocery chain companies. Each grocery store has a Training and Development Methods manager that allows decisions to be made locally, close to the client. This also makes Grand View Grocer Corporation’s service more responsive, reliable, and empathetic to its customers.


Recently, Grand View Grocers Corporation has identified a that there is an increase in the annual turnover rate for cashiers nationwide.  The increase was found in newly hired cashiers, so it was determined that on-the-job training was ineffective.


Under the direction of the store manager, cashiers perform a variety of tasks, including:


  • Receive payment by cash, check, credit cards, vouchers, or automatic debits.
  • Issue receipts, refunds, credits, or change due to customers.
  • Count money in cash drawers at the beginning of shifts to ensure that amounts are correct and that there is adequate change.
  • Greet customers entering establishments.
  • Maintain clean and orderly checkout areas.
  • Establish or identify prices of goods, services or admission, and tabulate bills using calculators, cash registers, or optical price scanners.
  • Issue cashier’s checks, money orders, mailing stamps, and redeem food stamps and coupons.
  • Resolve customer complaints.
  • Answer customers’ questions, and provide information on procedures or policies.
  • Cash checks for customers.
  • Weigh items sold by weight in order to determine prices.
  • Calculate total payments received during a time period, and reconcile this with total sales.
  • Compute and record totals of transactions.
  • Sell lotto tickets and other items to customers.
  • Keep periodic balance sheets of amounts and numbers of transactions.
  • Bag, box, wrap, or gift-wrap merchandise, when needed.
  • Sort, count, and wrap currency and coins.
  • Process returns and exchanges.
  • Request information or assistance using paging systems.
  • Stock shelves, and mark prices on shelves and items, when needed.
  • Compile and maintain non-monetary reports and records.


Essential cashier functions include the following:

  • Perform for or Working Directly with the Public — Performing for people or dealing directly with the public. This includes serving customers in restaurants and stores, and receiving clients or guests.
  • Establish and Maintain Interpersonal Relationships — Developing constructive and cooperative working relationships with others, and maintaining them over time.
  • Get Information — Observing, receiving, and otherwise obtaining information from all relevant sources.
  • Identify Objects, Actions, and Events — Identifying information by categorizing, estimating, recognizing differences or similarities, and detecting changes in circumstances or events.
  • Process Information — Compiling, coding, categorizing, calculating, tabulating, auditing, or verifying information or data.


Describe in 350- to 525- words the training method or combination of training methods that you would recommend for training.





Justify in 350- to 525- words your choice of method(s).




Essay about how technology is shaping and/or re-defining a particular field of interest. 

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Using all the work we have done through the course of this module, WD1 represents our first writing of a draft of our essay about how technology is shaping and/or re-defining a particular field of interest.

For this draft you should aim to have an introduction that sets both the social and intellectual context of your focused topic and that ends with a ‘working’ central claim; as well as at least two analysis paragraphs, that each begin with distinct subclaims. Be sure to utilize any and all of our worksheets and resources in our “Course Documents” module to help clarify these structures, but also know that the goal of any draft is to better understand these structures by writing with and through them. Note that this WD1 draft is due by 11:59pm on Tuesday 2/12.


  • This workshop draft must be a 600 (min.) – 900 (max.) words in length, not including the Works Cited (if included).
  • At the top of this workshop draft (just below the header, but above your title), include three workshop notes for the workshop process (see details below).
  • Be sure to review the Paper Format Guidelines so that you understand how to properly format your essay.
  • Central Claim and Subclaims should be based on a how specific technology or technologies is shaping or re-defining a particular field of interest.
  • Each Subclaim should have an element about the technology or technologies and a distinct analytical point that strives to analyze the different effects technology is having on that field of interest.
  • Include a brief quote (no more than two sentences) from at least one outside source and be sure to utilize a MLA in-text citation and Works Cited for that source (or any sources used).

Workshop Notes
As is implied by the name of this draft, it’s primary purpose is to engage in workshop with our peers. We will be working in small groups of 3-4 peers to help each other workshop the structures and ideas of our essays. As with the drafting itself, the workshop process is not one where we find the “right answers” for our papers; rather, it’s an opportunity for us to practice “critical reading” of writing so that we can all continue to better understand these structures of introductions, central claim, subclaims, analysis, etc.

In that spirit, after you have drafted your WD1, at the top of your essay, just below the header and before the title (example below), please type your responses to these questions as a way to allow us provide better feedback and conversation in the workshop of your draft. While you should try to use the concepts of subclaims and central claim (etc.) as they apply, do respond here in a way that’s most comfortable for you:

  1. Challenges/Struggles: What aspect(s) of writing this draft was the most challenging? Please be specific with certain aspects of the essay (i.e. central claim, subclaims, analysis, introduction, conclusion) and/or refer to specific paragraphs that were impacted by this challenge. Describe what you struggled with briefly?
  2. Effective: What aspect(s) of this draft do you feel are working well or off to a decent start? Again, be specific: central claim, subclaims, development, organization, or analysis and/or refer to specific paragraphs.
  3. Revision: What’s your plan for revision of this draft? Briefly explain what are you going to focus in upon and what will you do to revise.

Develop a Complete Disaster Recovery Plan to be submitted to the executive board of your company.

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Develop a Complete Disaster Recovery Plan to be submitted to the executive board of your company.

Also, create a PowerPoint Presentation for the same Disaster Recovery Plan with no less than 10 slides.

Book name : Wells, April; Walker, Timothy; Walker, Charlyne; Abarca, David. Disaster Recovery Principles and Practices. (2007). Pearson Prentice Hall. ISBN: 978-0-13-171127-3.

Required (Must read before you start work ):-

  1.  Only MS Word (.doc, .docx) and Adobe Acrobat (PDF) formats are acceptable.
  2. Please note that this is a formal writing, all references (peer-reviewed) mostly must be cited appropriately within the text.
  3. Clearly avoid plagiarism.
  4. The paper should have a minimum of 10 pages, 1.5 spacing and Times New Roman font.
  5. A minimum of 5 peer review references must be provided.
  6. Reference style is APA.
  7. Also, create a PowerPoint Presentation for the same Disaster Recovery Plan with no less than 10 slides.
  8. Zero  Plagiarism Please

MT140-5: Discuss the purpose of corporate social responsibility and ethics.

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This assignment consists of reading the following scenario and composing a paper regarding the purpose of ethics and corporate social responsibility.

This Assignment will be used to assess the following Course Outcomes:

MT140-5: Discuss the purpose of corporate social responsibility and ethics.

GEL-1.2: Demonstrate college-level communication through the composition of original materials in Standard English.

GEL-7.2: Apply ethical reasoning to ethical issues within the field of study.

You are owner and executive level manager of a food and beverage shop which has eight locations. Each location is situated on very small parcels of land. This original strategy has contributed to somewhat lower operating expenses for the business and you view this as a competitive advantage. One of your shop locations was recently visited by a government health inspector. Based on new local health codes, new laws have been issued requiring trash dumpsters be a minimum distance of 30 feet (9.144 meters) from the rear entrance of the building. New land-use laws require that all out buildings be at least 6 feet (1.8288 meters) from the property lines. The enclosure that houses the trash dumpster is 5 feet (1.524 meters) from the property lines, which is in violation of those laws. The government inspector has told your location manager that he would be willing to approve this if your business provides the food for his department’s holiday party. The location manager has conveyed this information to you. The integrity of a business organization and its leaders is a universally accepted component of business ethics. In his article “Rethinking Integrity” Stratford Sherman outlines


article Rethinking Integrity Stratford Sherman outlines eight ways in which business leaders can manage a business organization with integrity. After reading and reflecting on the scenario above, visit the Library and read pages 39–45 of the following article: Sherman, S. (2003). Rethinking Integrity. Leader to Leader, (28), 39–45. To access this article:
1. In the content area of your course and in the navigation, click on the Academic Tools module. There you will find a link to the Library. 2. Look for the heading Required Reading on the Library home page. 3. Click the article link.
With Sherman’s eight steps as your guide, and supported by your other assigned chapter readings, write a paper of at least 2 full double-spaced pages. Describe the steps necessary for you to assess and take action demonstrating ethics and corporate social responsibility in this situation. What, if anything, does the nature of the holiday party have to do with your decision and actions in this matter? How will your decisions and actions influence the ethics environment of the shop in particular and the corporate social responsibility of your business in general? Click the following to view your article: Unit 8 – Sherman, S. (2003). Rethinking integrity. Leader to Leader, (28), 39–45. Critical Elements for this Assignment: Write your original response in Standard English, paying special attention to grammar, style, and mechanics. Respond to each part of the Assessment in a thorough

The Characteristics and Valuation of Preferred Stock

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The Characteristics and Valuation of Preferred Stock

Many consider preferred stock to be a hybrid security with characteristics of both common stock and bonds. Preferred stock is similar to common stock in that it has no fixed repayment date, and the firm is not obligated to pay dividends. Preferred stock is similar to bonds in that the periodic payment amount is fixed. Preferred stock is normally issued by established, publicly traded firms to raise capital without diluting the current investors’ common stock ownership. Because of the flexibility of terms, preferred stock is also frequently used in the initial private financing of startup companies.

Preferred Stock Characteristics

The following is a list of the significant characteristics of preferred stock as compared to the other two securities, common stock and bonds.

  • Preferred stock does not provide the preferred stockholder a claim to ownership or voting rights in the firm.
  • Preferred stock does entitle the stockholder to priority over the common stockholders in claims on the firm’s assets in the event of bankruptcy.
  • Preferred stockholders receive periodic dividends instead of interest, however, unlike with bond interest, failure to pay the dividends is not a cause for bankruptcy.
  • Multiple classes of preferred stock can be issued with each class having different characteristics.
  • Preferred stock normally carries a cumulative feature that requires that all past unpaid preferred stock dividends must be paid in full before any common stock dividends can be issued.
  • Preferred stock may contain other varied protective and incentive provisions that are designed to protect the investor’s investment.
  • Preferred stock may contain a provision that allows it to be converted to a predetermined number of shares of common stock (convertible preferred).
  • Most preferred stocks are perpetuities (nonmaturing), however, retirement features are frequently included. Two common retirement features are:
    • callable provision, which allows preferred stock to be called at the issuer’s request and retired, like a bond
    • sinking fund provision, which requires the firm periodically to repurchase and retire a set amount of the preferred stock
  • Preferred Stock Valuation
  • According to the general valuation theory, the value of preferred stock is equal to the sum of all the cash flows generated from the investment, discounted by the investor’s required rate of return. Because the only cash flow generated from preferred stock is the dividend payment, the value of a preferred stock equals the present value of all the future preferred stock dividends. Because a preferred stock is normally nonmaturing, and the dividends are expected to be paid in equal amounts each year in perpetuity, the value of the preferred stock can be determined simply by dividing the annual dividend by the required rate of return:
  • Vps = annual dividend/required rate of return
  • Vps = D/kps
  • where:
  • Vps = value of the preferred stock
    D    = annual dividend
    kps  = required rate of return





A Method of Calculating the Required Rate of Return

Every investor has his or her own unique risk-return utility function. Therefore, for any given investment, different investors will perceive different estimates of the risks involved and have different requirements for what constitutes an acceptable or required rate of return. The required rate of return is the minimum rate of return necessary to compensate an investor for accepting the degree of risk that he or she personally associates with the purchase and ownership of an asset or security.

It is generally accepted that two factors determine the required rate of return for the investor:

  1. the risk-free rate of interest, which recognizes only the time value of money
  2. the risk premium, which considers the perceived riskiness (variability of returns) of the asset, based on the specific investor’s attitude toward risk associated with that investment

The first factor, the risk-free rate of interest is relatively easy to estimate. For example, U.S. Treasury T-bills are often used as the risk-free standard. The financial community has had some difficulty, however, in determining a reliable method of measuring the risk premium. One approach that has had reasonable success is called the capital asset pricing model (CAPM). This method combines the concepts of risk-free rate, systematic risk, and market risk into the following formula:

The required rate of return = risk-free rate + (beta)  (market-risk rate – risk-free rate)




j = required rate of return for security j
krf = risk-free rate of return
km = expected rate of return for the market
ßj = systematic risk

Here is a linear construct designating the risk-return tradeoff existing in the market where risk is defined in terms of Beta.

Although the CAPM is a useful analytical tool, it has two significant limitations.

  1. It relies totally on a security’s sensitivity to the market (Beta) for measuring risk.
  2. It is difficult to test empirically.





Expected Rate of Return

The expected financial returns, to be received from an investment in a capital project or financial security come directly from the cash flows the investment generates. So far, we have treated these cash flows as a certainty. In reality, they are subject to different outcomes, are generally quite uncertain, and require a quantitative method if they are to be properly analyzed. Fortunately, we can use some very basic probability and statistics theory to quantify this uncertainty and develop the concept of an expected return, which is useful for most financial decision making.

Let’s examine how we can incorporate the reality of uncertainty into financial cash-flow analysis. Conventionally, we measure the expected cash flow, , of an investment as follows. We begin by factoring every individual cash flow, Xi, by the probability of its occurrence, P (Xi):

= X1P(X1) + X2P(X2) + X3P(X3) + X4P(X4) + — + XnP(Xn)

Combining terms and using the summation concept, we can create the following generic formula:

The expected cash flow =


n = the number of possible cash-flow outcomes
Xi = the ith possible cash flow
P(Xi) = the probability that the ith cash flow will occur
= the expected rate of return

In finance, we are normally interested in one of two values, (1) the expected cash flow, , or (2) the expected rate of return, . Having calculated the formula for expected cash flow above, it is now one small step to compute a formula for the expected rate of return, . By definition,  is the weighted average of all the possible returns (ki,), each return weighted by the probability that each individual return will occur P(ki).

= k1P(k1) + k2P(k2) + k3P(k3) + k4P(k4) + — + knP(kn)

or:    The expected rate of return


n = the number of possible cash-flow outcomes
ki = the ith possible rate of return
P(ki) = the probability that the ith cash flow will occur
= the expected rate of return

Having defined and computed the expected cash flows and the expected rate of return, let’s now examine the risk involved in obtaining the expected outcomes.

The Riskiness of Cash Flow

Financial risk is the possible variation in actual cash flows about the expected cash flow. This variability of outcomes, or financial risk, is measured by the standard deviation (),



= the standard deviation
n = the number of possible cash-flow outcomes
ki = the ith possible cash flow
P(ki) = the probability that the ith cash flow will occur
= the expected rate of return

Statistically, financial risk is measured by the standard deviation about the expected cash flow (how much each possible cash-flow outcome varies from the expected cash-flow outcome).

Total financial variability, or risk, can be divided into two types, unsystematic risk and systematic risk.

  1. Unsystematic (diversifiable or company-unique) riskis the variability of cash flows that are unique to an individual security (e.g. the individual company’s inherent risks because of its business actions, its competitors’ actions, and so on).
  2. Systematic risk (nondiversifiable or market) riskis the risk related to overall market movements, which is independent of the risk of an individual company.

Generally speaking, the market rewards diversification, which is the purchase of a set, or portfolio, of unrelated securities. With this diversification, the investor can lower the overall risk without sacrificing expected return or can increase overall expected return without having to assume more risk. Therefore, the financial market does not usually offer a higher return for unsystematic risk because by properly diversifying his or her investments, the investor can essentially eliminate any unsystematic security risk.

Systematic risk, however, cannot be diversified away and thereby becomes the determining factor in quantifying financial risk. Therefore, we will concentrate on developing a quantitative method for measuring systematic, or market, risk. This method, called the characteristic line, is a two-dimensional plot of the returns of an individual stock versus the average returns of some aggregate market standard such as the S&P 500 index over a given period of time. The holding period return for each period, kt, is calculated for both the stock and the S&P 500 using the following formula:

kt = (pt/pt-1) – 1

where P equals the stock price for the respective periods t and t–1.

The individual stock values are traditionally plotted on the X-axis, and the S&P 500 equivalent values are plotted on the Y-axis. For example at time t, a specific stock with a kt of 10% and an S&P 500 with a Pt of 5% would result in a Pt plot of (10, 5). A statistically calculated line of best fit drawn through these points at various times is called the characteristic line. The slope of this line, which has come to be called beta (ß), is a measure of a stock’s systematic or market risk. Remember that beta (ß) is calculated as the ratio of the rise, or change in y value, of the line relative to the run, or change, in x value.

This presentation demonstrates the graphical construction of a typical characteristic line.

Now let’s interpret exactly what the beta represents in measuring financial risk. If a security’s beta equals one (ß = 1), a 10% increase (or decrease) in the S&P 500 market returns will produce a corresponding 10% increase (or decrease) in that individual security’s returns. In this case, the stock is perfectly correlated with the market and therefore possesses no incremental risk benefit or penalty relative to the S&P 500 market.

If a security’s beta is greater than one, then a 10% increase (or decrease) in the S&P 500 market returns will produce a greater than 10% increase (or decrease) in that individual security’s returns. In this case, the individual stock is considered riskier than the average S&P 500 stock. The converse is also true, and a security having a lower beta is considered less risky than the S&P 500 market. In general, the lower the beta value, the less risky the stock.



Chapter 7 Section 1, 2,3,4,5,6,

Chapter 8

Chapter 9








TAX 665 Final Project Part I Milestone Three Guidelines and Rubric

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TAX 665 Final Project Part I Milestone Three Guidelines and Rubric

How might charitable giving impact the income, gift, or estate tax outcome for your client? Is there an optimal strategy? Recommend a charitable donation for income, gift, or estate tax planning purposes. Which deduction (income, gift, or estate) do you recommend, and why? How does life insurance impact your estate planning strategy for the client? Consider who must pay the premiums and where the cash will come from to pay premiums. Recommend an ethical compliance strategy based on the client’s comments about a valuation discount on the family limited partnership that is consistent with Internal Revenue Service (IRS) Circular 230 and the American Institute of Certified Public Accountants (AICPA) Code of Conduct. Also submit a table summarizing the estate, gift, and income tax consequences of your overall proposed estate plan over the next 24 months and how much of your client’s cash the strategy will consume.

Specifically, the following critical elements must be addressed:

I. Life Insurance, Annuity, and Charitable Giving Strategies

A. Evaluate life insurance products, annuities, and charitable giving for possible estate tax advantages in the taxable estate or in the children’s estate, while finding use of the cash flow from the sale and the real estate business. Recommend a charitable donation for income, gift, or estate tax planning purposes.

B. Recommend an ethical compliance strategy based on the client’s comments about a valuation discount on the family limited partnership that is consistent with Internal Revenue Service (IRS) Circular 230 and the American Institute of Certified Public Accountants (AICPA) Code of Conduct. Consider the client’s cash constraints, economic impact over time, IRS Circular 230, and the AICPA Code of Conduct.

C. Develop an additional ethical compliance strategy that addresses the client’s estate tax and the interest and penalty that will accrue if he does not make timely payments of tax. Acknowledge appropriate tax case law and statutes. Consider quantifying penalties and interest.

II. Tables and Calculations: Excel Documentation

A. Analyze the personal income tax consequences and value over the next 24 months as a result of the overall proposed tax strategy. Consider justifying the strategy in comparison to an alternative transaction.

Long-term customer loyalty and relationships

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From the list below, choose a subject you would like to research. This will be the topic of your thread:

  • Long-term customer loyalty and relationships
  • Global marketing
  • The importance of marketing research
  • Defending the practice of social media marketing


  • Title your thread according to your topic. Have a title page, and attach a Microsoft Word document with your thread, in addition to the normal discussion board.
  • In at least 600 words, discuss your topic by addressing the following items:
    • Explain the concept of the marketing management topic selected for your paper.
    • Examine at least 1 practical application/example for your topic.
    • Formulate a question about your topic that your classmates will respond to.
    • Have a separate heading for each of these 3 sections.
    • You must use at least 3 scholarly sources.