Discussion: alignment and social change

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In this last week, you bring your skills in critically evaluating research to a final discussion of what it means for the components of a research study to be logically connected. As you recall from previous weeks, this connection refers to alignment.

You also consider the social change implications of research. Engendering positive social change is at the core of Walden University’s mission. As future researchers and scholar-practitioners in your fields, you have likely had, and will continue to have, opportunities to apply your Walden learning experiences to making a difference in the lives of others.

This week, you will revisit the interrelationship among research components to determine the criteria for evaluating alignment. You will also consider the relationship between research and social change as you reflect on your newly acquired research knowledge and skills.

In the context of research, alignment and social change will be important topics to return to as you prepare for the next courses in the research sequence and continue your development as a scholar-practitioner.

Consider, for example, what criteria are used in your discipline to evaluate alignment of research components. And in what way will your future research contribute to your identity as scholar-practitioner who is dedicated to positive social change?

For this Discussion, you will consider criteria for evaluating alignment among the various components of a research study. You will also reflect on your role as a positive social change agent through research.

With these thoughts in mind:

By Day 4

Post an explanation of the criteria you could use to evaluate alignment between data collection methods and other research components, such as the problem, purpose, research questions, and design. Then, reflecting on the course content, discuss the extent to which your newly acquired research knowledge and skills can support your role as an agent of positive social change. Be specific and provide an example(s).

Be sure to support your Main Issue Post and Response Post with reference to the week’s Learning Resources and other scholarly evidence in APA Style.

Vogt, W. P., Gardner, D. C., & Haeffele, L. M. (2012). When to use what research design. New York, NY: Guilford Press.

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July 1, 2023

Individual Assignmnet Corporate Finance

Tenyearsago,in 2003,GeorgeReebyfoundeda smallmail-‐order companysellinghigh-‐ qualitysportsequipment.SincethoseearlydaysReebySportshas grownsteadilyand been consistently profitable.

The companyhas issued2millionshares,all of whichareownedbyGeorgeReebyand his five children.Thecompanydoesnot useanydebtin its capitalstructure.Forsomemonths George has beenwonderingwhetherthetimehas cometo takethecompanypublic.This wouldallowhimto cashin on partof his investmentand wouldmakeit easierforthefirmto raise capital should it wish to expand in the future.

But how much are the shares worth? George's first instinct is to look at the firm's balance

sheet, which shows that the book value of the equity is $26.34 million, or $13.17 per share.

A share price of 13.17 would put the stock on a P/E ratio of 6.6. That is quite a bit lower than

the 13.1 P/E ratio of Reeby's larger the rival, Molly Sports.

Georgesuspectsthat bookvalueis not necessarilya goodguideto a share'smarketvalue. Hethinksof his daughterJenny,whoworksin an investmentbank.Shewouldundoubtedly knowwhatthesharesareworth.Hedecidesto phoneheraftershefinishesworkthat evening at 9 o'clock or before she starts the next day at 6.00 a.m.

Beforephoning,Georgejots downsomebasicdata on thecompany'sprofitability.After recoveringfromits earlylosses,thecompanyhas earneda returnthat is higherthan its estimated10%costof capital.Georgeis fairlyconfidentthat thecompanycouldcontinueto growsteadilyforthenextthreeto fiveyears.In fact,hefeelsthat thecompany'sgrowthhas beensomewhatheldbackin thelast fewyearsbythedemandsfromtwoof thechildrenfor the company to make large dividend payments. Perhaps, if the company went public, it

could hold back on dividends and plow more money back into the business.

Therearesomecloudson thehorizon.Competitionis increasingand onlythat morning MollySportsannouncedplans to forma mail-‐order division.Georgeis worriedthat beyond thenextthreeorso yearsit mightbecomedifficultto find worthwhileinvestment opportunities.

GeorgerealizesthatJennywillneedto knowmuchmoreabouttheprospectsforthe businessbeforeshecanputa final figureon thevalueof ReebySports,buthehopesthat

theinformationbelowis sufficientforherto givea preliminaryindicationof thevalueof the

shares.

Column1	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013E
earningsper share,$	-‐0.70	-‐0.23	0.81	1.10	1.30	1.52	1.64	2.00	2.03	2.33	2.68
Dividend,$	0.00	0.00	0.20	0.20	0.30	0.30	0.60	0.60	0.80	0.80	1.00
Bookvalue pershare,$	7.70	7.00	7.61	8.51	9.51	10.73	11.77	13.17	14.40	15.93	17.62
ROE,%	-‐7.14	-‐2.99	11.57	14.45	15.28	15.98	15.28	16.99	15.41	16.21	16.85

a) HelpJennyto forecastdividendpaymentsforReebySportsand to estimatethevalue of thestock.You do notneedto providea singlefigure.Forexample,youmaywishto calculatetwofigures,oneon theassumptionthattheopportunityforfurther profitableinvestmentis reducedin year3and anotheron theassumptionthatitis reducedin year5.You canassumea costof equityof 12%forthecalculation.

(21points)

OnceReebyoperatesas a marketlistedfirm,Georgewillhaveto justifythefirm’scapital structuretowardsshareholders.Hehas heardfromhis daughterthatmostfirmsshould use atleastsomedegreeof debtif thegoalis themaximizationof shareholdervalue.Jenny mentioneda “debttax shield”as thereasonforherclaim.George,on theotherhand is worriedabouttheincreasedriskthatdebtmightbringforequityholders.

b) Brieflyexplaintheleverageeffectand howitis relatedto theexpectedriskfor shareholders.Also,explainthebalancing(ortrade-‐off) theoryof capitalstructure. Whatarethetwoeffectsthatneedto bebalancedand whatdoesthetheoryimplyfor thedebt/equitychoiceof Reeby?(13points)

Georgeis increasinglyconfidentto takethefirmpublic.However,therearestill someissues aroundtheIPOprocessthathehas notyetfiguredout. Hehas writtendownthesequestions and asksforyourhelp:

c) Pleaseexplainwhata „Greenshoeoption“ is and underwhatcircumstancesitis used.

(4points)

d) WithintheIPOprocessunderwritersplayan importantrole.Definetheterms underwriterand syndicateand explaintheirrole/purpose.(4points)

e) In 2003,prosecutorschargedseveralinvestmentbankersforwhatis called“spinning”.

Brieflyexplaintheunderlyingprincipleand rationalizetheuseof spinningby investmentbanks.(8points)