Stem Cells The Superhero Cells - Free Essay Example

Sample details Pages: 7 Words: 2090 Downloads: 10 Date added: 2019/06/26 Category Biology Essay Level High school Tags: Stem Cell Essay Did you like this example? Wouldnt it be great if we are able to manipulate cells for our own welfare? Stem cells can help victims who are diabetic, paralyzed, and even burn victims. Stem cells are helpful for victims who have had third degree burns. It can help make insulin for people that are diabetic, and assist patients that are paralyzed to be granted the probability of moving their arms or even walking. Don’t waste time! Our writers will create an original "Stem Cells: The Superhero Cells" essay for you Create order This is why, for my paper, I would like to talk about stem cells. Stem cells are mainly based in bone marrow and other sections of the body. These cells are tremendously good at dividing and becoming a particular cell, be it hair, skin, or muscle cells. Stems cells are the foundation of our existence. They are one of the first few cells that are produced in the blastocyst. These cells help create an embryo from inside to outside starting from the heart, liver, lungs, and other major organs in our body. This is why stem cells were first known as embryonic stem cells, because that is where they were first seen. As long as stem cells can conform into any cell, we can create and manipulate them to the benefit of patients everywhere. Ultimately, this is why stem cells are monumental for the future of healthcare around the globe. Stem cells, are cells that are skilled in modifying themselves into organs around them. They do this by separating and creating daughter cells which in turn produces more daughter cells. They are the lone cells in the body with this ability. Stem cells are the Adams and Eves of the bodies cells. However, unlike Adam and Eve, the stem cells are still evident in our bodies. The rate might be slightly smaller compared to when a human was only an embryo. Stem cells are first seen in the establishment of embryos. In this embryonic stage, stem cells are called pluripotent stem cells. Pluripotent stem cells have the same function as adult stem cells. The only difference among the two is that the pluripotent stem cell is able to evolve into any cell to create a human baby and an adult stem cell has a narrow scope. Adult stem cells are finite, but can be exploited to make other cells, such as tissue for skin or B-cells that manufacture insulin for diabetic patients. Thanks to the improvement in science, we are now able to utilize stem cells and actualize perfect settings in which a stem cell can reproduce into unique cells. A family is fast asleep in their home, when all of a sudden, a fire starts right next to their house. The father is the first one to notice and he was able to save his wife and their children, but ended up with very severe burns. An estimated 486,000 burn injuries require medical treatment each year, and nearly 40,000 lead to hospitalization, according to the American Burn Association. (Scutti, S. 2016, December 07). Burns are categorized in 3 degrees. First-degree burns only affects the first layer of skin (epidermis), Second-degree burns affect the first and second layer of the skin (epidermis and dermis), and Third-degree burns affect all of the layers of the skin (epidermis, dermis and hypodermis). Medicine has come a long way for burn victims. Thomas Bold, CEO and co-creator of the SkinGun has used stem cells to help burn victims. How did he do it? We dont do anything with the cells. We just isolate them from the surrounding tissue, put them in a syringe within a water-based so lution, and we spray them. said Thomas Bold. ( as cited in Scutti, S. 2016, December 07). These skin cells are sprayed onto the burned skin of the patient.They can be expected to recuperate in less then a month. The reason why this is plausible is because stem cells are excellent at separating and duplicating. You might ask if stems cell are really good at multiplying why dont we just let the skin grow back on its own? This would be because since the skin has been burned so severely the stem cells in that portion of the body are destroyed and cant naturally come back to life. What would form is scar tissue which is not ideal, because it acts as super glue and has no purpose other than keeping two portions together. All of the veins, pigmentation of skin, and tractability of limbs would be lost in the formation of scar tissue. A good example would be if you were to break a TV in half. If you super glue the two broken halves of the TV, the TV wont start working again. That is because all of the wires that were together were never fixed in a way that would allow passage from one side of the TV to the other. Scar tissue is the same as super glue with respect to skin. This is why this newly found technology is so astonishing, because it removes all of these factors and even gets rid of the alternative of skin grafting, the transplanting of skin from one patient to the other. Patients that have gone through skin grafting surgery have to deal with the conflict in pigmentation of their new skin and the probability of infection/rejection from the body. Pills will need to be taken to prevent this process. Imagine finding out that a child is diagnosed with diabetes. Now imagine if that child was yours. That is what happened with scientist Doug Melton. He was on a mission to find a cure for why his two children are diagnosed with diabetes. Diabetes is categorized in two parts; type 1 and type 2. Type 1 diabetes is when the persons body does not produce the right amount of insulin. Type 2 diabetes is when the persons body is not able to correctly convert glucose to sugar. What is mostly known of patients that have diabetes is that B-cells that produces insulin cannot be made by the pancreas. Since insulin acts as a buffer, this can result in an unsafe fluctuation with the bodies temperature. Scientist have found a way to fix this problem by having these patients inject insulin into their bodies ever few hours. Injecting insulin has been the treatment for nearly 100 years and the only real advances have been the way its provided, via a pen or a pump, says Melton. ( as cited in Devlin, H. 2017, December 05). Injecting insulin also has its downsides as well, since patients who have diabetes have to constantly be checking their insulin levels and the needs of our bodies are constantly changing. If a patient forgets to check their levels, the drastic changes of temperature can distort enzymes and can lead to blindness or amputation of an extremity. Melton didnt want to have this burden for his children or anyone for that matter, so he went to work. Melton was looking for a more natural way for diabetic patients to receive insulin/ B-cells. The thought process was as follows; if B-cells creates insulin, then why not create B-cells and inject them into the pancreas. Easier said than done. Melton worked for 15 years to get to the point where his lab could transform embryonic stem cells into pancreatic beta cells at large enough volumes to treat patients. (Devlin, H. 2017, December 05). These B-cells would later be put into a capsule that would be inserted under the skin. T his procedure has never been done on humans, it has only been tested on rats. Hence, why Melton does not know how long the inserted capsule of B-cells will last in a persons body. Nevertheless, this new advancement has taken away the burden of constantly checking insulin levels and the risk of losing a limb. You are driving a car on a stormy day. Your car swerves out of control and hits a pole at full force. You wake up in a hospital with the realization that you cannot move, youre paralyzed. Kristopher Boesen was in this same predicament. When someone is paralyzed this entails that the axons that act like a cord are missing myelin sheath, that act as bridges, are broken. Without these myelin sheath the axons can not correctly send sensory or motor actions to the arms or legs. This creates atrophy in the muscles because they are not being used. There are two cases of paralysis. Paraplegic, which is loss of motion of two extremities, are people who are still able to move their arms. This affects people that have been injured from the lumbar vertebrae. Quadriplegic, which is loss of motion of four extremities, are people who do not have the ability to move any extremity. This affects people that are injured from the cervical vertebrae. Kristopher was paralyzed from the neck down, he was qu adriplegic. However, there was hope; Kristopher was eligible for a clinical trial using stem cells. Nevertheless, Boesen would be the first to ever go through this process of having stem cells injected into his neck, no one really knew what would be the outcome. Boesen was told what could go wrong. Since this is the first time this procedure was ever conducted no one knew the right amount of dosage. This came with the possibility of the injected stem cells to turn cancerous or the likeliness of losing the little movement he had, which was moving the left arm up and down. With Kristopher open to any chance of ever walking again, he agreed. Boesen had to go through several tests to make sure he would be ready to go for the surgery. After a month had passed since Boesens surgery to stabilize his spine when he was first admitted in the hospital and his neck had shrunken. He was ready for surgery, well his injection. Charles Liu, MD, PhD, director of the USC Neurorestoration Center, inje cted an experimental dose of 10 million AST-OPC1 cells directly into Kris cervical spinal cord. (Aldrich, M. 2016, September 07). In as little as two weeks, signs of increased movement was evident. Kris was able to move both of his arms. said Dr. Liu. In Kris case, two spinal cord levels means the difference between using your hands to brush your teeth, operate a computer or do other things you wouldnt otherwise be able to do, so having this level of functional independence cannot be overstated. (Aldrich, M. 2016, September 07). After three months, Kris was able to do more advanced movements like using a phone, writing his name, and even hugging family and friends. Thanks to Liu, Kris is able to live an independent life. Going from being quadriplegic to paraplegic is a huge step in the right direction, considering neurons were thought to be damaged after the myelin sheath was destroyed. This new discovery would help pave the way to help move forward with the study of stem cells and nerves. In conclusion, Stem cells are the superhero we all need in our lives. Stem cells help open the possibility of never having to do a skin graft for victims who have suffered from severe burns; or from ever needing to inject insulin into a diabetic patient. Stem cells can even assist quadriplegic patients turn into paraplegic patients. However, stem cells also has a possibility of turning cancerous and making the problem much worse. This is understandable since cancerous cells are really good are multiplying very quickly as do stem cells. With everything in life we need to outweigh the good and bad. We need to decide if its worth the risks like what Kristopher Boesen had to choose. Thanks to Boesens bravery, the concept of axons to be restored with myelin sheath is a humongous achievement in the study of nerves and neurons. Which is why stem cells are monumental for healthcare all around the globe. References: Aldrich, M. (2016, September 07). Paralyzed man regains use of arms and hands after experimental stem cell therapy at Keck Hospital of USC. Retrieved from https://stemcell.keck.usc.edu/paralyzed-man-regains-use-of-arms-and-hands-after-experimental-stem-cell-therapy-at-keck-hospital-of-usc/ Dance, A. (2017, January 15). Stem cell therapy gives paralyzed man second chance at independence. Retrieved from https://stemcell.keck.usc.edu/stem-cell-therapy-gives-paralyzed-man-second-chance-at-independence/ Devlin, H. (2017, December 05). Grow your own: The race to create body parts in the lab. Retrieved from https://www.theguardian.com/science/2017/dec/05/create-body-parts-replacement-skin-regenerative-medicine Scutti, S. (2016, December 07). Experimental SkinGun heals burns using stem cells. Retrieved from https://www.cnn.com/2016/12/07/health/skingun-burn-care-technologies/index.html Stem cells from adults function just as well as those from embryos. (2018, August 09). Retrieved from https://blog.frontiersin.org/2018/05/14/cardiovascular-medicine-stem-cells-embryonic-adult-personalized-medicine/ Stem cells: Frequently asked questions about stem cell research. (2018, October 24). Retrieved from https://www.mayoclinic.org/tests-procedures/bone-marrow-transplant/in-depth/stem-cells/art-20048117

SAT Mathematics Level 1 Subject Test Information

Basic Paragraph Structure Comparisons Speech In...

(Basic Paragraph Structure) (TS) The plot is what moves our protagonists story forward as he finds his way in the world. (MP) The battle royal serves as a plot device to the main plot of the protagonist giving his speech. (SS) â€Å"When I got there it was on the occasion of a smoker, and I was told since I was to be there I might as well take part in the battle royal†¦ The battle royal came first.† (Ellison 278). (ES) As a result of his taking part in the battle royal he would be subjected to a naked woman (279 Ellison), electrocution (284 Ellison) and rampant racism (280-285 Ellison). (MP) The main plot of this short story is his journey to give a speech to a group of rich and influential members of the community. (SS) â€Å"I was invited to give†¦show more content†¦(ES) He doesnt know what he wants to do with her perplexed by his inner emotions and feeling as though that only he can protect her from the eyes that surround him. (ES) The white men surrounding them can also be a metaphor for how we feel when we feel this way, looking, and subsequently feeling as though you have done something wrong and not looking and then feeling that temptation arise from within oneself. (ES) She doesnt just affect the protagonist, she also affects societys highest class causing them to go insane over her having given into the vices surrounding them. (MP) The â€Å"gold† coins are symbols of tools used to deceive and lie. (SS) â€Å"But what had excited me, scattered here and there, were the gold pieces.† (Ellison 283) â€Å"I did not even mind when I discovered that the gold pieces I had scrambled for were brass pocket tokens† (Ellison 287).(ES) The brass tokens were simply used to deceive the boys into fighting one another for the pleasure of the white men perversely watching the boys being electrocuted, laughing and enjoying themselves at watching the boys being in pain and desperation.(ES) This was all a lie though to the boys a s the gold coins were actually brass tokens, another way of these white men were appearing to help the boys but in actuality were only helping themselves and causing pain to the black youth. (Basic Paragraph Structure) (TS)Throughout this story multiple themes play at the same

Pollution Is The Top Most Problem Across The Planet Today

The environmental issue I am very concerned about is pollution. Pollution, we hear it every other day in our lives either at school, newspapers, or TV. So what is pollution? Pollution occurs when pollutants contaminate the natural surroundings; which brings about changes that affect our normal lifestyles adversely. Pollution is the top most problem across the planet today. Even no one knows what will the future be and how will it be if this continues. Increasing with every passing year and causing grave and irreparable damage to the atmosphere. The mechanization of society, the urbanization, introduction of motorized vehicles, and the explosion of the human population have caused an exponential growth in the increase of waste by-products.†¦show more content†¦It occurs due to many reasons. Excessive burning of fuel, which is a necessity of our daily lives for cooking, driving and other industrial activities; releases a huge amount of chemical substances in the air everyday; these pollute the air. What cause air pollution is smoke from chimneys, factories, vehicles or burning of wood basically occurs due to coal burning; this release sulphur dioxide into the air making it toxic. The effects of air pollution are evident too. Release of sulphur dioxide and hazardous gases into the air causes global warming and acid rain; which in turn have increased temperatures, erratic rains and droughts worldwide; making it tough for the animals to survive. We breathe in every polluted particle from the air; result is an increase in asthma and cancer in the lungs. Urban air pollution is set to become the biggest environmental cause of premature death in the coming decades, overtaking even such mass killers as poor sanitation and a lack of clean drinking water, according to a new report. Both developed and developing countries will be hit, and by 2050, there could be 3.6 million premature deaths a year from exposure to particulate matter. Air pollution is a primary prob lem in urban areas and for individuals who live near major roadways, since vehicles give off a high concentration of pollutants. As air pollution increases, researchers anticipate that the

Lifestyle Furniture

Question: Describe about the Lifestyle Furniture. Answer: Background Lifestyle Furniture is one of the leading vendors of hardwood furniture. The Company founder and CEO, Mr Fred Smith has run the company well and it has generated a cumulative sales turnover of over $13 million with profits in excess of $1.75 million till 2015. To continue growth, the company has two choices to make 1. Renew an existing machine which costs $ 135,000 and will be usable for 5 years before being scrapped. Sales are expected to grow @ 13.5 % pa after the first year sales of $ 800,000. There are costs associated with operations, maintenance, consultant cost and other costs of salary overheads. Overall, the net cash flow of the option for the 5 years is $ 29,421 2. Buy new craft machine and sell the existing machine. This machine also has a 5 year life. Sales are expected to grow @ 13.5 % pa after the first year sales of $ 1,000,000. Other costs are generally similar to option 1 with some variation in their magnitude. Findings and Discussion The analysis is for the two options of Option 1 Renew existing machine Option 2 Buy new machine and scrap existing machine Incremental cash flows for both the options Based on the parameters given, the year wise cash flows are as given in the table below. Few points to consider are For option 1, the renewal cost of $ 135,000 and factoring a scrap value of $ 8,000 can be financed with debt @ 6 % which has an annual payout of $ 30,629 For option 2, the renewal cost of $ 225,000 and factoring a scrap value of $ 25,000 can be financed with debt @ 6 % which has an annual payout of $ 48,979 Cash flow for Option 1 Profit Loss - Renew existing machine Year 1 2 3 4 5 Sales 800,000 908,000 1,030,580 1,169,708 1,327,619 Deprn ( 27,000 ) ( 27,000 ) ( 27,000 ) ( 27,000 ) ( 27,000 ) Advertising Marketing ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 30,000 ) Maintenance Costs ( 42,200 ) ( 42,200 ) ( 42,200 ) ( 42,200 ) ( 42,200 ) Operating costs ( 75,000 ) ( 75,000 ) ( 75,000 ) ( 75,000 ) ( 75,000 ) Profit before tax 625,800 733,800 856,380 995,508 1,153,419 Tax ( 187,740 ) ( 220,140 ) ( 256,914 ) ( 298,652 ) ( 346,026 ) Profit after tax 438,060 513,660 599,466 696,856 807,393 Cash flow 465,060 540,660 626,466 723,856 834,393 Alternative 1 Cash Flows Year 0 1 2 3 4 5 Total EMI for Renewal cost of existing machine ( 30,629 ) ( 30,629 ) ( 30,629 ) ( 30,629 ) ( 30,629 ) ( 153,147 ) Consultant cost ( 25,000 ) ( 25,000 ) Cash flow from machine 465,060 540,660 626,466 723,856 834,393 3,190,435 Advertising Marketing ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 150,000 ) Maintenance Costs ( 42,200 ) ( 42,200 ) ( 42,200 ) ( 42,200 ) ( 42,200 ) ( 211,000 ) Raw material incremental capital ( 256,000 ) ( 34,560 ) ( 39,226 ) ( 44,521 ) ( 50,531 ) Operating costs ( 75,000 ) ( 75,000 ) ( 75,000 ) ( 75,000 ) ( 75,000 ) ( 375,000 ) Other expenses ( 352,000 ) ( 352,000 ) ( 352,000 ) ( 352,000 ) ( 352,000 ) ( 1,760,000 ) Increase in net WC ( 15,000 ) ( 15,000 ) Opportunity cost of selling existing machine ( net of tax ) ( 14,000 ) Tax on capital gain on sale of machinery ( 2,400 ) ( 2,400 ) Net Cash flow ( 126,200 ) ( 320,769 ) ( 23,729 ) 57,411 149,505 323,833 60,050 Cost of capital 17 % Net Present Value ( 154,363 ) Internal Rate of Return 3 % PI 0.4 Cash flow for Option 2 Profit Loss Year 1 2 3 4 5 Sales 1,000,000 1,135,000 1,288,225 1,462,135 1,659,524 Deprn ( 27,000 ) ( 27,000 ) ( 27,000 ) ( 27,000 ) ( 27,000 ) Advertising Marketing ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 30,000 ) Maintenance Costs ( 38,750 ) ( 38,750 ) ( 38,750 ) ( 38,750 ) ( 38,750 ) Operating costs ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 58,500 ) Profit before tax 845,750 980,750 1,133,975 1,307,885 1,505,274 Tax ( 253,725 ) ( 294,225 ) ( 340,193 ) ( 392,366 ) ( 451,582 ) Profit after tax 592,025 686,525 793,783 915,520 1,053,692 Cash flow 619,025 713,525 820,783 942,520 1,080,692 Alternative 2 Cash Flows Year 0 1 2 3 4 5 Total Purchase of new machine ( 48,979 ) ( 48,979 ) ( 48,979 ) ( 48,979 ) ( 48,979 ) ( 244,896 ) Consultant cost ( 25,000 ) ( 25,000 ) Installation cost ( 20,000 ) ( 20,000 ) Cash flow from machine 619,025 713,525 820,783 942,520 1,080,692 4,176,544 Advertising Marketing ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 30,000 ) ( 150,000 ) Maintenance Costs ( 38,750 ) ( 38,750 ) ( 38,750 ) ( 38,750 ) ( 38,750 ) ( 193,750 ) Raw material incremental capital ( 320,000 ) ( 43,200 ) ( 49,032 ) ( 55,651 ) ( 63,164 ) Operating costs ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 292,500 ) Other expenses ( 345,000 ) ( 345,000 ) ( 345,000 ) ( 345,000 ) ( 345,000 ) ( 1,725,000 ) Increase in net WC ( 22,000 ) ( 22,000 ) Sale of existing machine 14,000 14,000 Tax on capital gain ( 7,500 ) ( 7,500 ) Net Cash flow ( 346,750 ) ( 222,204 ) 149,096 250,521 365,639 557,548 753,850 Cost of capital 17 % Net Present Value 471,973 Internal Rate of Return 27 % PI 3.4 Based on this analysis the Net Present Value for Option 1 @ cost of capital 17 % is negative $ ( 154,363 ). The Internal Rate of Return @ 3 % is less than the cost of capital. Even the profitability index is less than 1. For option 2, all the parameters of Net Present Value, Internal Rate of Return and PI at $ 471,973, 27 % , 3.4 respectively are favorable. Hence the recommendation is to go ahead with buying new machinery Net Present Value and Internal Rate of Return profile The Net Present Value and Internal Rate of Return profile table and graph are shown below Alt 1 Alt 2 Net Present Value ( 154,363 ) 471,973 Internal Rate of Return 3 % 27 % Though the Net Present Value is negative for Option 1, the Internal Rate of Return is still positive but substantially lower than the cost of capital. In option 2, Internal Rate of Return being higher than cost of capital, Net Present Value is positive. There is no conflict between Net Present Value and Internal Rate of Return for the two options Inflation linked Incremental cash flows for both the options Inflation linked Cash flow for Option 1 Profit Loss Year 1 2 3 4 5 Sales 800,000 908,000 1,030,580 1,169,708 1,327,619 Deprn ( 27,000 ) ( 27,000 ) ( 27,000 ) ( 27,000 ) ( 27,000 ) Advertising Marketing ( 30,000 ) ( 31,200 ) ( 32,448 ) ( 33,746 ) ( 35,096 ) Maintenance Costs ( 42,200 ) ( 43,466 ) ( 44,770 ) ( 46,113 ) ( 47,496 ) Operating costs ( 77,250 ) ( 79,568 ) ( 81,955 ) ( 84,413 ) ( 86,946 ) Profit before tax 623,550 726,767 844,407 978,436 1,131,081 Tax ( 187,065 ) ( 218,030 ) ( 253,322 ) ( 293,531 ) ( 339,324 ) Profit after tax 436,485 508,737 591,085 684,905 791,757 Cash flow 463,485 535,737 618,085 711,905 818,757 Alternative 1 Cash Flows Year 0 1 2 3 4 5 Total EMI for Renewal cost of existing machine ( 30,629 ) ( 30,629 ) ( 30,629 ) ( 30,629 ) ( 30,629 ) ( 153,147 ) Consultant cost ( 25,000 ) ( 25,000 ) Cash flow from machine 463,485 535,737 618,085 711,905 818,757 3,147,969 Advertising Marketing ( 30,000 ) ( 31,200 ) ( 32,448 ) ( 33,746 ) ( 35,096 ) ( 162,490 ) Maintenance Costs ( 42,200 ) ( 43,466 ) ( 44,770 ) ( 46,113 ) ( 47,496 ) ( 224,046 ) Raw material incremental capital ( 256,000 ) ( 34,560 ) ( 39,226 ) ( 44,521 ) ( 50,531 ) Operating costs ( 77,250 ) ( 79,568 ) ( 81,955 ) ( 84,413 ) ( 86,946 ) ( 410,131 ) Other expenses ( 364,320 ) ( 377,071 ) ( 390,269 ) ( 403,928 ) ( 418,066 ) ( 1,953,654 ) Increase in net WC ( 15,000 ) ( 15,000 ) Opportunity cost of selling existing machine ( net of tax ) ( 14,000 ) Tax on capital gain on sale of machinery ( 2,400 ) ( 2,400 ) Net Cash flow ( 126,200 ) ( 339,380 ) ( 63,309 ) ( 3,852 ) 65,821 230,185 ( 236,735 ) Cost of capital 17 % Net Present Value ( 324,807 ) Internal Rate of Return -14 % PI ( 1.8 ) Inflation linked Cash flow for Option 2 Profit Loss Year 1 2 3 4 5 Sales 1,000,000 1,135,000 1,288,225 1,462,135 1,659,524 Deprn ( 27,000 ) ( 27,000 ) ( 27,000 ) ( 27,000 ) ( 27,000 ) Advertising Marketing ( 30,000 ) ( 31,200 ) ( 32,448 ) ( 33,746 ) ( 35,096 ) Maintenance Costs ( 38,750 ) ( 39,913 ) ( 41,110 ) ( 42,343 ) ( 43,613 ) Operating costs ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 58,500 ) Profit before tax 845,750 978,388 1,129,167 1,300,546 1,495,314 Tax ( 253,725 ) ( 293,516 ) ( 338,750 ) ( 390,164 ) ( 448,594 ) Profit after tax 592,025 684,871 790,417 910,382 1,046,720 Cash flow 619,025 711,871 817,417 937,382 1,073,720 Alternative 2 Cash Flows Year 0 1 2 3 4 5 Total Purchase of new machine ( 48,979 ) ( 48,979 ) ( 48,979 ) ( 48,979 ) ( 48,979 ) ( 244,896 ) Consultant cost ( 25,000 ) ( 25,000 ) Installation cost ( 20,000 ) ( 20,000 ) Cash flow from machine 619,025 711,871 817,417 937,382 1,073,720 4,159,416 Advertising Marketing ( 30,000 ) ( 31,200 ) ( 32,448 ) ( 33,746 ) ( 35,096 ) ( 162,490 ) Maintenance Costs ( 38,750 ) ( 39,913 ) ( 41,110 ) ( 42,343 ) ( 43,613 ) ( 205,729 ) Raw material incremental capital ( 320,000 ) ( 43,200 ) ( 49,032 ) ( 55,651 ) ( 63,164 ) Operating costs ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 58,500 ) ( 292,500 ) Other expenses ( 345,000 ) ( 345,000 ) ( 345,000 ) ( 345,000 ) ( 345,000 ) ( 1,725,000 ) Increase in net WC ( 22,000 ) ( 22,000 ) Sale of existing machine 14,000 14,000 Tax on capital gain ( 7,500 ) ( 7,500 ) Net Cash flow ( 346,750 ) ( 224,567 ) 142,634 239,817 350,543 550,577 712,253 Cost of capital 17 % Net Present Value 431,098 Internal Rate of Return 26 % PI 3.2 Base Case with Sensitivity Since only Option 2 is feasible, the sensitivity is done on Option 2. Currently, the operations and maintenance cost for Option 2 aggregate $ 97,250 and the project has a positive Net Present Value. In case the expenses rise to $ 148,019 (i.e. an increase of $ 50,769, the project becomes un feasible) Currently, the sales for the first year are $ 1000,000. In case, the sales drop to $ 882,080, the option becomes unfeasible since the Net Present Value is below zero. Option of Operating versus Finance Lease Since the borrowing rate is lesser than the cost of capital, it makes sense for the company to lease the new craft machinery. Among lease, the choices are operation lease or finance lease. In operating lease, the ownership of the asset will be with the finance company. Hence depreciation and tax benefits on the same cannot be claimed by Lifestyle. In finance lease, since the ownership of the asset will be with the Lifestyle, they can claim depreciation and tax benefits on the same. The finance company will accordingly adjust the lease rentals to reflect this fact Calculation of Weighted Average Cost of Capital The company has the following parameters and based on that the Weighted Average Cost of Capital is as under Cost Book Market Cost of equity 17 % 1,060,000 3,000,000 AT cost of debt 6 % 4,000,000 3,840,000 Preference Shares 13 % 40,000 60,000 Total 5,100,000 6,900,000 Weighted Equity 21 % 43 % Weighted Debt 78 % 56 % Weighted PS 1 % 1 % Weighted Average Cost of Capital 8.3 % 10.8 % On book value basis, the weighted debt is 78 % of the capital mix compared to 56 % in the case of market method. This is compensated by the equity and preference share weights. Since the cost of debt is lowest @ 6 % and the book method gives highest weightage to debt, the Weighted Average Cost of Capital for book method is lower than market method. Recommendation Lifestyle has to cater to the growth prospects it envisages in future. Based on the analysis above, the recommendation is to buy the new age craft machinery i.e. Option 2 for the following reasons The Net Present Value, Internal Rate of Return and PI for Option 2 is higher than Option 1 . Net Present Value for Option 1 is negative and hence the option is outright discarded Even after adjusting for inflation, the conclusion does not change. References "Profitability Index - Complete Guide To Corporate Finance | Investopedia".Investopedia. N.p., 2012. Web. 30 May 2016. S, Surbhi. "Difference Between NPV And IRR (With Comparison Chart) - Key Differences".Key Differences. N.p., 2015. Web. 30 May 2016.

Financial Regulation Repricing Gap of Planning

Question: Describe about the Financial Regulation for Repricing Gap of Planning. Answer: Part A. Repricing gap if planning period is 3 month Maturity Assets Liability Cumulative Gap 3 months 150 -150 Maturity Assets Liability Gap Cumulative Gap 3 months 150 -150 -150 6 months 50 50 -100 9 months 150 -150 -250 1 year 520 -520 -770 2 years 100 200 -100 -870 2.) Interest foregone on the rate sensitive assets: 14.91 (0.6% on 2485 for 6 months) Interest to be paid on the rate sensitive liabilities: 6.0125(0.25% on 2405) Hence net interest income would come down by 20.9225 3.) Under asset liability management financial institutions seeks to minimize the hazards related with mismatch arising between asset items and liability items on the balance sheet of a bank. If the in demand deposits decrease it would lead to a mismatch between assets and liabilities. The assets would decrease and hence the banks volatility would increase. 4.) Basel III norms demand that any time a bank maintains common equity and retained earnings which is not less than 4.5% of the Risk Weighted Assets. CET1 is given by Equity + Retained earnings/Risk weighted assets. In the following table RWA is calculated by assigning risk weight as er Basel III directives as follows: Givt securities and cash:0% Corporate exposure:100% Personal Loans: 100% Foreign exposure with credit rating B, BB:100% Total Equity and retained earnings as per the balance sheet is 80. Hence value of Risk Weighted assets can be a maximum of 1777 as per the formula applicable. However, from the table above we find that the value of RWAs is calculated as 2290. Hence as per Basel 3 norms the bank is not equipped to handle an economic downturn. Part B 5. Amount Duration(years) Weighted Duration(years) 250 5 12.5 100 10 10 350 10 35 Average Duration 57.5 Total value of assets is 700 million Amount Duration Weighted Duration 250 0.5 1.25 200 3 6 100 3 3 50 Average Duration 10.25 Total value of liabilities is 700 million Hence duration gap is Dur gap=Dura-(L/A*Durl) 57.5- (1*10.25) Duration gap is 47.25 years 6.) Change in net worth/Assets is given by -Dur gap* (Change in interest rate/1+i) Since change in interest rate is 1.5% and interest rate earlier was 6.5% plugging the values we get change in net worth as -0.66%. 7.) Maturity gap of banks seeks to measure albeit in a traditional way the interest rate risk arising by the changes in quantum of value of assets and liabilities which are bound to be affected by fluctuations in interest rate at relevant intervals. Each different class of asset or liability defines an interval that must be assessed. Part C Difference between Basel and Basel 3 norms The global financial crisis of 2007-2008 which led to a greater need for capital mountainous by the banks so they be better equipped to handle any crisis and financial or economic downturn. (Kubat, 2014)The table below summarises the key differences between Basel 2 and Basel 3. Basel II Requirement Basel III 8% Minimum ratio of Total capital to RWAs 10.5% 2% Minimum ratio of common equity to RWAs 4.5-7% 4% Tier 1 capital to RWAs 6% 2% Core tier 1 Capital to RWAs 5% None Capital conversation buffer to RWAs 2.5% None Leverage Ratio 3% None Countercyclical buffer 0-2.5% None Minimum liquidity Coverage ratio Tbd None Minimum Net stable funding ratio Tbd None Systematically important financial institutional change Tbd *Tbd stands for to be decided. Let us look at the various areas where Basel III seeks to improve over Basel II Changes in definition of capital When we compare Basel III with Basel II one striking difference is how the two norms define capital. There is stress on definition of key items. A notable omission is that of T3 as a capital component which was deemed so essential earlier to cover market risks, now only Tier and Tier 2 remain and there is clear purpose and intent seen of consolidating the Tier 1 component. The main aim of this change would be to improve the quality, consistency and transparency of the capital. Industry experts and veterans and the committee members of Basel themselves opine that the changing and inconsistent definition of capital across all levels might have been the biggest reasons why Basel II norms couldnt avoid the GFC of 2007-08 Capital requirements changes Capital requirements were made more stringent which means that banks need to hold more liquidity and more capital. As a result of this the banks cannot indulge in excessive leveraging the way they did in Pre Basel III era, one of the key reasons for the downfall of behemoths such as Lehman and Bear Sterns. Problems faced in implementing Basel III Even though the measures implemented in Basel III seek to tighten the capital requirements on banks and seek to avoid any financial crisis akin to the one that happened in 2007 industry veterans have criticised the complexity of Basel III. While Basel I had seven risk Basel III has more than 200,000 categories with more than 200 million calculations.(Caprio, 2014) Therefore its but natural the banks have been facing problems in implementing Basel III norms. Apart from its complexity the increased quantity and quality of capital required is going to be time taking and time consuming.(Jayadev, 2013) References Caprio, G., 2014. Financial Regulation after the Crisis:How Did We Get Here, and How Do We Get Out?, s.l.: s.n. Hussain, M. S., Akhtar, W. Ahmad, K., 2015. Challenges and failure of Implementation of Basel Accord II and reasons to adopt asons to adopt, s.l.: s.n. Jayadev, M., 2013. Basel III implementation: Issues and challenges for Indian banks. IIMB Management Review, 25(2), pp. 115-130. Kubat, M., 2014. DOES BASEL III BRING ANYTHING NEW? A COMPARISON. Vienna, s.n.