Steel Industry Term Paper Example | Topics and Well Written Essays - 7500 words

Steel Industry - Term Paper Example This has been the case in the oil industry. However, the steel industry is more complex. The steel industry does not suffer from scarcity of resources. Hence the same barriers of entry to the industry do not exist. Nor does the steel industry suffer from controls exercised by OPEC; the cartel that controls the oil industry. This lays the foundation of a very different and potentially more volatile industry especially when there are some governments that subsidise their steel industries which has an impact on the level and effectiveness of competition. There is little doubt that with the broad range of industries that are reliant on steel this is an industry with a long term future. However, this does not assure the future of any particular firm within the industry nor does it indicate the way that firms will have to compete within the industry. One thing is certain; the firms that are active within the industry will need to understand the influences, and this is likely to impact the performance of the companies. In order to develop an understanding of the steel industry as a whole the paper will start by giving a good overview of the state industry in terms of the cost at the present time. This will help to provide the context and background relevant to understanding the sector. Following the assessment of the industry three companies have been chosen, in order to give an insight into the way firms within the industry are performing. These are different in terms of size, types of steel produced and each firm has been incorporated in a different country, although all of the companies compete in the global marketplace. The three companies chosen are; The United States Steel Corporation, China Precision Steel Inc. and Arcelor Mittal. 2. The Steel Industry 2.1 Historical Performance of the Steel Industry In the middle of the 19th century, steel was used throughout the world, and the United States became the largest single steel producing nation by the end of the 19th centu

Capital Investment Assignment Example | Topics and Well Written Essays - 1750 words

Capital Investment - Assignment Example Even though after the democratic elections conducted in the year 2005, the country has been advised to be a safer destination for capital investments, there have been apprehensions about the stability of the country and the chances of the conflicts arising again which may hinder the sustained growth of the company's operations in the country. Apart from the political risk, there is the issue of Company's Social Responsibility and the related costs and ethical values that need consideration before taking any decision on investing in Medco Republic. In addition the report focuses on the foreign exchange risk in dealing with the currency of Medco Republic. The objective of this report therefore is to consider the soundness of the proposed capital investment from the angles of financial feasibility, country risk of Medco Republic and the foreign exchange risk in undertaking transactions in the currency of Medco Republic as against the British Pounds as the investments the commitment of substantially larger sums by the Company to be recouped over a longer period. The analysis is based on a review of the net cash flows from the project using the recognized capital budgeting evaluation methods of Net Present Value (NPV) and Internal Rate of Return (IRR), taking the weighted average cost of capital of the Company of 15% as the hurdle rate and the rate for discounting the present value of future cash flows from the project. Financial Feasibility The financial feasibility of any capital investment proposal can be judged based on the ability of the project to enhance the shareholders' wealth by contributing positive net cash inflows from the proposed investments. Just any other domestic capital project is being evaluated, for the international investments can also be evaluated by calculating the 'Net Present Value' (NPV) future cash flows expected out of the project. The NPV of the project depends on the initial investment or initial cash flow, expected future cash flows and the cost of capital. Based on the comparison of the NPV of the future cash flows with the proposed capital investment the feasibility of the project can be established. While working out the NPV the effect of the factors like Sales creation (additional sales), cannibalization (loss of sales), opportunity cost, transfer pricing and fees and royalties on the future cash flows should be taken into account. The Internal Rate of Return (IRR) is the other criter ion that needs to be carefully looked into while deciding on the capital investment. In the case of the proposed capital investment proposals the NPV and IRR from the projects have been worked out and exhibited in the Appendix. From the NPV calculations it is observed that the project has a negative net present value which implies that the project is not acceptable. The internal rate of return (IRR) is also much lower than that of the weighted cost of capital of the company. As against the cost of capital of 15% the IRR from the project works out to 5%. This also indicates that the proposed investment is unviable. Even though the Company can set off the tax payments in the country of Medco Republic against its income tax