Compulsive Buying

Above all, it should be noted that shopping is big business. Shopping centers employ approximately 8% of the US workforce. These portion of the workforce helps drive the machine that creates about of each states tax revenues and there are currently more malls and shopping centers that US high schools (Farrell, J. 2003, pp. xi-xii). Seemingly powering this juggernaut of commerce is ever increasingand apparently insatiable appetite of the modern consumer. Behind the4x growth in the number of shopping centers and the over 3x growth inretail square footage during the 30-year period of 1970 2000, is thefact that Americans (and likely other civilized consumers) areconsuming goods at twice (2x) the rate as they did in 1950 and ten-time(10x) as just over seventy years ago (Farrell, J. 2003, pp. xii-xiii).It is also worth noting that this increase in consumption is evidencedacross all income levels though not necessarily equally across allsegments (Gini, A. 2003, p. 85). In fact, more severe cases aresignificantly correlated to a lower the level of income, a greaterlikelihood of having below-average income and spending a lowerpercentage of income on sale items, suggesting overall an inability tohandle financial issues well (Black, D. 2001, p. 23) As a counter-statistic, Americans have a level of production that iscurrently at approximately 2x that of the same period (1950). Thisimplies that, we could consume the same amount as in 1950 and work halfas much or, as reality has it, work even more to consume over twice asmuch (Gini, A. 2003 p. 82). Similarly, in a predictably correlationalfashion, the not only has the number of shoppers and shopping centersincreased but there has been a sharp increase in the number of newproducts, particularly in the advertised must have category as wellas the emergence of the entirely new disposable category (Pooler, J.2003, p. 9). As shoppers and products have changed, the relationship that existedbetween them has also morphed into something new. With theproliferation of retail venues that profer an ever increasing number ofproducts and categories, the arrival of the disposable product shouldnot go unnoticed. Though without question, many if not most productsare very high quality and manufactured to very exacting standards, manyproducts are less durable or are designed for obsolesce. Durabilitywas the characteristic that was promoted while the products of todaypush a message of convenience. In a society rampant with such explicitand implicit messages, it is no wonder that the emotional connectionsto most any product are decreasing (Pooler, J. 2003, p. 10). Productssuch as cameras or contact lenses were highly contemplated purchasesthat were expected to last a significant period of time. Likely more important than simple the volume of shopping is itsintensityshopping means more than it did in the past. Previously,people shopped for items that they needed. Now, such shopping stilloccurs but it occupies a small fraction of the process. Studiesestimate that as much as 2/3 of consumer purchases are unnecessary(Pooler, J. 2003 p.2). This excess is bought from a want rather thanneed. As an additional sign of the times, consumer research has evenindicated that over half of all gift purchases are actually gifts forme (Pooler, J. 2003, p. 11). Shopping used to be a more utilitarian and logical task in whichpurchases were planned and for the most part, the consumer focused onneeds. Contrasted with the modern shopper for whom it has beenestimated that only about 1/3 of purchases are necessary, it is clearthat unfulfilled desire must play a very much larger role (Pooler, J.2003, pp. 2, 6). For example, as Pooler states, people have a needfor a new pair of pants but a desire to buy designer-label pants isa want (Pooler, J. 2003, p. 22). Today, brands are power, disposablecontacts are the norm and OTUC, one-time use camera, are almostalways within arms reach. It is important to note these products arenot inferiorin many ways, they are functionally far superior toyesterdays products, rather, simply illustrative of a pervasivementality that merits acknowledgement and consideration. Understandingthe mentality that these wants, in the minds of individual consumers,are likely felt to be needs. The eye of the would-be beholder ispart icularly relevant. By utilizing the Hierarchy of Needs, it is possible to shedsignificant insight into how some of these psychological shifts areoccurring. Developed by noted psychologist Abraham Maslow over 75years ago, this pyramid of hierarchically ordered needs is fundamentalto many issues with psychological affect. At the base of the pyramidare basic needs such as food, shelter and clothing. Above the basic,physiological level are needs that could be classified as safety andwould include anything that can provide psychological security andstability. Above this are social needs such as the need for friendsand companionship. Nearing the top of the pyramid are needs under thelabel of self-esteem in which feeling such as pride and respectbecome important. Finally, the highest level of needs is characterizedas being self-actualization needs in which a person has the desire tomake the most of themselves and to be more. A key component of Maslows influence is his belief that higher needscannot be addressed until lower needs are satisfied. This isespecially salient as most people living in modern civilizedcountries have all the more basic needs met. Consequently and withfew exceptions, most can spend their days in pursuit of thesatisfaction of higher needs such as self-esteem andself-actualization. As America or any modern society has evolved, psychologist andphilosopher Eric Fromm indicates that society and its members have alsoevolved to a point at which being is confused with having (Gini,A. 2003, p. 84). Such as materialist possessive mindset will leavevacant the needs at the top of the pyramid and individuals will exhibitfeelings associated with not having these innate needs unfulfilled.Fromm further indicates that much of the symptoms of this empty questare typical of a western mindset and ultimately result in a mentalityof to be much is to have much (Gini, A. 2003, p. 82). To have a high standard of life means to enjoy a pleasure intensely and tire of it quickly. Simon Patten (Hine, T. 2002 p. 17) The fact that people, in general, are consuming more, that there aremore products and more places to buy them go a long way in describingin somewhat imprecise yet accurate terms that context of modernsociety. Maslows hierarchy of needs also provides significant insightinto the circumstances of the continuing patterns of increasingconsumption that indicated a struggle to satisfy a need that cannot besatiated through the mechanism of acquiring things. At this point, afurther differentiation between needs and wants can be drawn: aneed is often physical and should be satisfied externally; a want ismost likely a psychological, internally manifested desire. In the sameway that you could not satisfy a real, physical hunger withpsychological fish and chips, attempts to quench a psychological desirewith a tangible object are likely short-lived and misguided and willend in psychological frustration. This misguided attempts to assuage ones highest psychological needs isnot unreasonable given the mixed messages in society of which there isa clear emphasis placed upon highly superficial qualities. Shopping issimply the process whereby one attempts to execute these omnipresentmessages. As a cultural phenomenon, shopping is the proceduralexecution of economic decision-making. This decision-making takesplaces in a sea of in which image and emotion are perhaps more likelyto take precedence of narrowly defined economic and functionalutility. The price tag on an item reflects a certain value but thereal value is in the eye of the consumer and is the item worth thatmuch to me. Using economic terms such as opportunity cost andopportunity benefit are especially relevant as a purchase decisionhangs in the balance: what will my friends think?, does it make memore attractive?, does it make me happy? are examples of what goesthrough the new consumer mind. The fact that a product will do thejob is, at best, necessary but not sufficient and, at worst, totallyirrelevant. As noted above, the process of shopping along with the acquiredresultant booty are a reflection of a changing culture and valuesystem. Shopping is part of a manner by which a person defines whothey are. What is bought, where it came from and the motives define aperson for themselves and, probably in large measure, to others aswell. Just as important as what, where and why that someone boughtsomething are the facts of omission: that they did not buy it at acertain store, etc. is as relevant as the facts of commission.Consider the following telling examples of self-expression: the shopper purchases prominently labeled Pampered Chef cookware in lieu of functionally equivalent store merchandise, the man who purchases a Polo sweater with its distinctive logo over the perhaps even pricier/better nondescript brand, the person who chooses name-brand drinks when company is expected over the undistinguishable other brand. While the rationale for purchases are intriguing issues, it isinteresting to note that everyone thinks they are good at it (Pooler,J.2003, p. 4). This is all the more interesting in light of how onemight possibly define good or success. Certainly, in the mind ofthe above average or even good consumer, it would be a short-livedexperience as the satisfaction of a successful hunt only fuels thethirst for additional quarry. That this ubiquitous activity is seldomrelegated to being considered just a functional activity in whichfunctional products are the goal is consistent with the fact that itis now something of a recreational pursuit in which objects of deeppsychological desire are hunted with a relish most often associatedwith sports participation. As most activities in which there is the reward, shopping can go tofar. For many the allure of shopping can be a bit too much. Theattraction of shiny products, sexy packaging, tempting displays,glamorous advertisements, ever-so-helpful service staff and the extremeease by which one can proffer payment, it is no wonder that someover-succumb to the retail sirens. Given a society that isbehaviorally and cognitively conditioned respond to the stimulus ofretail, it is no surprise that some spend beyond their means. Othersmay have the means to financially afford the habit but are continue toseek fulfillment in a venue that cannot provide anything else thantransitory happiness until the cycle begins again. The idea of more, of ever increasing wealth, has become the center ofour identity and our security, and we are caught by it as an addict byhis drugs. Paul Wachtel (Gini, A. 2003 p. 81) The idea that shopping can get out of hand does not escape theattention of either popular press such as Essence or more scholarlytomes such as the Journal of Consumer Research or CNS Drugs [CentralNervous System]. Behind the urge to splure reads Essence, is often aperson who some degree, find that they cannot help themselves. Forsome, a certain purchase is simply merchandise, even if a bit priceyand fashionable. For others, it may represent a conscious orunconscious sense of entitlement or it may be a form ofself-medication that is termed in some circles to be retail therapy(Bridgeforth, G. 2004, p. 156). This so-called therapy is likelycaused by the psychological frustration from the lack of lastingfulfillment of pasting attempts to achieve self-actualization viashopping as a compensation mechanism. While a problem in itself,shopping for psychological satisfaction may be masking serious issuessuch as a clinically-qualifying depression or just regular issuesfor which shopping is sim ply a surrogate means to attain a bit ofself-esteem through good shopping. Though many in the popular press refer to someone as being a shoppingaddict, it is important to note that there are different types ofaddiction. Commonly, when one refers to someone as an addict, themind conjures up the person who is addicted to cocaine,methamphetamines or even alcohol. These types of addictions areundoubtedly very real and, because of their nature, are referred to asphysiological addictions. The chemicals in the abused substanceshyper-stimulate certain receptors in the central nervous system andtheir prolonged use created a deficit in the bodys production of itsendogenous analog. Such a deficit is augmented by a strong desire forsuch chemical stimulation as well as certain psychological needs orperhaps more accurately, compunctions. If it were the case thatshopping was addictive in the same way that drugs are, we might expectto find that purchases of various persons showed little trends in thatthe same types or categories of items did not construe a consistentpurcha se incidence. In actuality, items that tend to be moreemotional in nature have a distinct tendency for a greater purchasefrequency that items with than items with less potential for attachment(Pooler, J. 2003, pp. 24-25). For example, duct tape or milk areitems that would not be likely to be on a shopping addicts listwhereas items such as jewelry, fashion items or elegant undergarmentsare strong contenders. Though not quite like a drug addiction, shopping for certainindividuals can be maladaptive or pathological in nature. Though itcannot be deemed a physiological addiction, as we will discuss in moredetail later, there are physiological consequences and manifestationsof what is otherwise a psychological presentation. For theseindividuals, the entire shopping experience is different: to someonewho has not experienced it, it would seem almost inconceivable that aperson could be out of control to the extent that those sufferingfrom compulsive spending disorder report as being. As Black reports,compulsive shoppers often describe their experiences as beingenhanced by color, lighting or the odor of stores, as well as thetextures of clothing [with] some even describing the experience asbeing sexually exciting (Black, D. 2001, p. 23). According to thesesame reports, 83% of compulsive shoppers report that it makes them feelhappy while 71% indicate a powerful feeling. This feeling persistin the face of the guilt and consequences following their purchaseswhich, in many cases, are either returned or given away and notretained (Black, D. 2001, p. 23). In determining if someone should be fitted with the label laypersonsterms being of a shopping addict or a shop-a-holic, a key qualifieris the expression of consumer demand that could be considered to beirrational. Such classification must be considered in the context ofthe consumers lifestyle and income. With this in mind, it is not theobject of demand so much as an extreme emotional or otherwiseinappropriate level of demand within a reasonable framework ofacceptability (Pooler, J. 2003, p. 26). For example, the strong desireof a comparatively wealthy person or perhaps the elite harrier whowants the very latest in performance athletic footwear isinsufficient to earn such a label. On the other hand, the individualwho is not, by any stretch of the imagination, remotely athletic andwhose income in inconsistent with shoes whose price exceeds ten hourswages would likely be labeled irrational. Such information inconjunction with other facts and the overall context would be in linewith cons ideration for such a designation. Another consideration in the determination of the appropriateness of anon-clinical label such as a shopping addict is the overall magnitudeof the behavior. A common behavior is that people, when they feel theyhave done a good job with some task will self-reward. Thisconstruct is could generally be termed to be a more benign presentationof the self-medicating label often is implemented in regards to awork-related behavior. This psychological pat on the back, whether aalternative compensation mechanism or a pure positive reinforcement ofa selected behavior. Regardless, there is an intuitive level ofreasonableness in relation to the magnitude of the reward with thedegree of difficulty or relative greatness of task achievement.Depending on a number of factors, one employee may seekself-gratification through treating themselves to lunch while anothercould give them a license to splurge and run up a disproportionatelyhefty bill. All in all, though it would be exceeding convenient if there were ablood test to determine if one were an addict, it is simply not thecase. Despite this, there are certain patterns that do fit thecriteria for shopping being an addiction. While there are diagnosticcriteria for the determination that an individual is a shoppingaddict, it is quite likely just as useful to define addictivebehavior as occurring when there is strong irrational desire based upona perceived need for some stimulus despite, in the long runpathological or maladaptive. The addict may likely know that thepursuit of such a stimulus is not in their best interests or they may,through ignorance or extreme desire, be blind to the negativeconsequences of continued consumption. Defined similarly as beingbehavior triggered by internal psychological tension and accompaniedby relief and frustration performed repeatedly despite its negativeconsequences by DeSarbo and Edwards in research conducted to moreaccurately ascertain related psychological factors, either definitionseems to adequately capture the intuitive connotation for such anassessment (DeSarbo, W. and E. Edwards 2004, p. 231). If 10% of the population have a problem and 9 of your friends are OKIs it YOU? While it may not, in fact, be 1 in 10, the incidence of compulsivebuying disorder has been estimated to be between 2-8% with theoverwhelming majority being female and with a comparatively young(30 years old) time of onset (Black, D. 2001, p. 21). Thoseafflicted with this compulsive shopping disorder are generally affectedaround the clock rather than simply when the urge hits them. Thispathological preoccupation with shopping and buying things occurs allthe time thought the actual incidence of overspending or emotionalspending varies from daily to a few times per year, depending on theindividual case (Glatt, M. and C. Cook 1987, p.1257). Before plunging headlong into the issue of shopping as an addiction, itis important to differentiate between compulsive and impulsivespending. The distinguishing feature between them is the source of theimpetus as being internal or external. Internal motivations such asanxiety or the seeking of increased self-esteem or gratification arethe motivations for compulsive spending. Impulsive spending isdifferentiated by the stimulus for purchase is being driven by anexternal mechanism such as a blinking package, prominent placement suchas an endcap or a special (DeSarbo, W. and E. Edwards 2004, p.233). Such as differentiation is important as it is not uncommon forcompulsive buyers to also be impulsive buyers yet there are discernabledifferences in their psychological makeup. Clearly, shopping can be addictive and merits attention and possiblyintervention. While there are common sense guidelines to assessing thesuch behavior as indicated previouly, more standard criteria have beendeveloped to aid both a person in determining that they ought to seekprofessional help as well as aiding mental health professionals inmaking a confirmatory diagnosis. Developed under the assumption thatmaterialism is a pervasive and global human trait, the Diagnostic Screener for Compulsive Buying Behavior (DSCB) was developed with seven key items: I made only the minimum payments on my credit cards. I wrote a check when I knew I didnt have enough money in the bank. I felt others would be horrified if they knew of my spending habits. If I have any money left at the end of a pay period, I just have to spend it. I bought things even though I couldnt afford them. I bought myself something in order to make myself feel better. I felt anxious on days I didnt go shopping (Kwak, H., G. Zinkman, M. Crask 2003, p. 166). These items had an approximate overall reliability of 0.75 and weresignificant at the p.05 level. Despite this, in trials withmultiple samples from both the US, represented individualized westernculture, and South Korea, representing more a community/group-driveneastern culture, the emergence of dimensionality in the data wasobserved. In US samples, the premise that the seven test items captureadequately the various psychological tensions and anxieties that aperson who suffers from compulsive buying issues is supported withoutmodification. However, South Korean samples, though supporting thehypothesis this instrument can reliably detect such issues, revealedbi-dimensionality in two constructs of: Financial outcomes (items 1,2 and 3), Unfettered spending (items 4,5 and 6) (Kwak, H. 2004, p. 167). Such a finding indicates that, in some cultures, consumers may seethat an certain issue has different or distinct angles. For example,either an problem with the financial outcomes of behaviors or the factthat one may not be very restrained in spending is likely seen as thesame issue by American consumers. In essence, the answers may be thesame and the result the same but the meaning that a certain cultureplaces upon one factor or another is relevant and only reiterates thechanging nature and that interpretation of such instruments cannot beremoved from the culture. Additional research by DeSarbo and Edwards published in the Journalof Consumer Psychology in which advanced statistical controls wereutilized provide significant additional insights in the both the natureof the problem of compulsive buying and the discernment of the problemitself. In this research the authors cite numerous previous studies inwhich the behavior of compulsive buying has been linked to a number ofpsychological personality characteristics such as: Dependence Denial Depression Lack of impulse control Low self-esteem Approval-seeking Anxiety Escape coping tendencies General compulsiveness Materialism Isolation Excitement-seeking Perfectionism In addition, the factors of family environment, childhoodexperiences with money and spending, family communication patterns, aswell as factors such as the number of credit cards regularly used,degree of credit debt and other compulsive behaviors demonstrated havebeen identified as potential predictors of compulsive buying activity(DeSarbo, W. and E. Edwards 2004, p. 232). Of all the factors indicated in assessing the issues that predisposean individual to compulsive buying behaviors, the escape from anxietyis most often labeled as the most influential factor. As multiplestudies indicate, compulsive buyers react to stress with higherlevels of anxiety than do noncompulsive buyers. When stressed out,compulsive shoppers attempt to utilize purchases as a compensationmechanism or as an escape from the anxiety (DeSarbo, W. and E. Edwards2004, pp. 235, 236). Additionally, the following significant contributing factors are listed below: 1. Self-Esteem Cited as the most common deficiency in those who are compulsiveshoppers, it is easy to see how the act of purchasing an item canconvey a sense of power and entitlement although it is one that isshort-lived (DeSarbo, W. and E. Edwards 2004, p. 236). Thisnon-durable pleasure serves to enhance the vicious cycle in which theprogressive qualities of the disease are exhibited. This cycle isvirtually identical to many physiological addictions in which there isdesensitization or habituation to a certain level of stimulus: whicheach engagement, the person wants/needs a larger dose or a greaterfrequency of stimulation. 2. Perfectionism Thistrait is frequently associated with invididuals who suffer fromaddiction and is characterized as being unrealistic expectationswhose unfulfillability can result in a variety of issues such asdepression, anxiety, and self-doubt. By purchasing, individuals withthis trait are seeking to assuage these feelings and, for a shortwhile, they may succeed (DeSarbo, W. and E. Edwards 2004, p. 236). 3. Impulsiveness In the scheme of medical or psychological diagnosis, compulsivebuying behaviors are close relatives of obsessive-compulsivebehavioral disorders. The inability to control impulsive thoughtsand/or the related ability to defer gratification are likely importantcontributors to this behavior (DeSarbo, W. and E. Edwards 2004, pp.236, 237). Also, as indicated earlier, there should be a distinctiondrawn between compulsive and impulsive buying behaviors in whichthe stimulation for action is internal or external, respectively. 4. Locus of Control Much compulsive buying is likely related to a internal struggle to gaincontrol of a confounding and stressful external environment. When aperson chooses to make a purchase, feelings of control are present asthe person chooses the object, means, timing, location and, in somecases, the cost of their desires. This highly controlled situationcould likely be contrasted to the context of the balance of their livesin which they are at the whim of others and exert no control andpossibly even little influence upon the events and objects in theirday. As such, those who are characterized as being compulsiveconsumers are likely to view themselves as being controlledexternally as they have an inability to see themselves from theperspective that they are able to influence their lives internally(DeSarbo, W. and E. Edwards 2004, p. 238). In addition, addition personality traits such as excitement seeking,approval seeking or dependence issues as well as environmentalfactors or familial factors are considered to be characteristics thatcan contribute to or perpetuate cycles of compulsive consumerism. Anexample of an environmental factors that are potentially relevant areisolation in which the occasion of compulsive buying may provide asocial outlet or materialism in which keeping up with the Jonesbecomes a compelling rationale for such spending (DeSarbo, W. and E.Edwards 2004, p. 239). With regards to familial factors, there are agreat many learned behaviors that are internalized as normal in thecontext of the home. Additionally, most people first experience withmoney and managing finances come through the context of chores, anallowance and forms of rationed spending. These early experiences havea significant influence upon adult behaviors as is the case in whichchildren learn that money is a reward or perhaps are not taught thatsaving is a very important part of earning as well as spending(DeSarbo, W. and E. Edwards 2004, pp. 239,240). One of the ultimate goals of psychology is to understand, predictand influence behavior. To more fully understand the role that thesepersonality traits, environmental and family or sociological issuesplays in the expression of compulsive buying behaviors, DeSarbo andEdwards utilized advanced regression techniques to tease outadditional insights that would otherwise be buried in using simplertechniques. T he basic idea behind regression analysis is to plot a line whichrepresents the extent to which a certain factor or group of factors canexplain the variance of measurable behaviors within a sample group.More basic regression techniques such as linear regression utilize aformula of y=mx+b in which y is the expected behavior and x is theindependent variable in which there it is posited there will be ainfluence y. In its most basic forms, variables are lumped togetherand one can determine only is a certain combination significantlyinfluences the outcome. In more intermediate approaches, differingvariables can be accounted for by there relative contribution to theoutcome. In the more advanced data manipulations, technology enablesthe rapid assessment of various combinations or clusters of variablescan be examined in order to more fully account for the observed samplevariability. It was such an approach, clusterwise constrained and unconstrainedstep-wise regression analysis, that was employed by DeSarbo andEdwards to predict the maximum likelihood of compulsive buying bygrouping specific combinations of these factors which each iterationtesting for deviations in outcome as various factors or groups offactors are included or omitted. Results from this manipulationconfirm the difference between compulsive buying in which thebehavioral stimulation is more due to internal psychological factorsand impulsive buying in which key drivers are more externallybiased. In this analysis, the study revealed the key predictors of compulsivebuying to be self-esteem, dependence and anxiety. For impulsivebuying, factors yielding statistically significant influence weredetermined to be denial, isolation, approval seeking and coping.Additionally, impulsiveness as a personality trait factor displayed asignificant degree of influence over internally- and externally-drivencompulsiv e buying behaviors (DeSarbo, W. and E. Edwards 2004, p. 248). Though the assessment devices that can shed insight on suchpsychological concepts as are indicated above, when utilized by atrained technician, can provide a more clinical means by whichcompulsive buying issues can be gauged, many of the same indices areoften incorporated in to what might be termed user-friendly fieldassessment quizzes. Such a screening tool may be especially helpfulas a guide to help one self-determine if there is a potentiallikelihood of an issue that may need merit professional assistance. Anexample of this type of quiz is given below: 1. Do you hide purchases from your partner to avoid a fight? 2. Are there garments in your closet from seasons past that still have tags on them? 3.Do you forget about purchases made and then find yourself without themoney to pay for them when the bill arrives at the end of the month? 4. Have you consolidated your credit card debt or rolled it into a refinance? 5. Do you travel at the drop of a hat and take additional trips before past trips are paid for? 6. Do you tap into emergency savings regularly to make ends meet? 7. Are you unable to contribute the maximum to your 401(k) because you need extra dollars to pay your bills? 8. Have you withdrawn from or made loans against your 401(k)? (Bridgeforth, G. 2004, p. 158) Though these yes or no questions are relatively unsophisticated, theycan provide significant insight into the issues identified by Kwak, etal., such as the emphasis on financial outcomes, unrestrained spendingand activities that might be suggestive of behavioral patterns asopposed to single incidents. Grappling with the Gray Area A Continuum Approach to Pathology One of the key features of this disease is that, like manypsychological issue, it typically begins almost unnoticed and graduallyprogresses. The initial cycle is likely to begin even innocuously yetthe behavior of spending is reinforced by the association of thepositive feeling that one has shortly after the purchase. Though thisseems reasonable, there is a pronounced tendency on behalf of mostpeople if not medical professionals are well to see illness in terms ofa dichotomous perspective. While this is a convenient method, it isindeed too convenient to model the reality of a continuum-approach tothis issue. Further, there are traits that seem to predispose one tocompulsive spending such as personality or familial factors.Additionally, there are factors such as stress at work or home whichappear to be more circumstantial in nature in that they temporarilycreate a disproportionate impact on perceptions leading up to thebehaviors in question (DeSarbo, W. and E. Edwards 2004, p. 235). Additionally, as with many psychological issues, it is often difficultto discern which occurred first, the behavior which was reinforcedthrough a reward or the personality trait or predisposing factorwhich led one to exhibit the behavior that was later reinforced.Though one cannot in every case discern and separate with certainty thecausative from the correlational factors. By using more sophisticatedtechniques and carefully thought out testing instruments, it ispossible to speak with greater (though seldom certain) confidence aboutcausation. For example, the following is an excerpt from DeSarbo andEdward that speaks to familial environmental factors: Parents of those in the internal compulsive [impulsive] buyinggroup tended to not encourage children to save and were more likely tobuy them whatever they wanted. This suggests that extreme compulsivebuyers were not deprived of possessions; and their behavior reflects acomponent in which the child does not learn to delay gratification.Such compulsive buyers lack impulse control, buy whenever the buyingurge strikes, and are unable to resist the urge to spend [another]variable concerns whether the compulsive buyers were given an allowanceas children those in the impulsive [external] buying group were morelikely to have received an allowance, suggesting that they come fromfamilies that not only did not deny them anything but also providedmoney to spend as they liked. Combined with finding that those in theinternal compulsive buying group were less likely to receive money as areward, this may reflect a general proclivity to spend without regardto financial situation. [and] a tendency to use their creditirrationally (DeSarbo, W. and E. Edwards 2004, p. 250). Such a findings are typical and reflect just one factor. Is this onefactor enough to tip a person into taking the first steps what whatwill eventually become a compulsive buyer? Such research is alwaysmore useful in explain past behavior yet a salient point is that thereare multiple paths to a particular destination. The accumulation ofwhat could be aptly labeled risk factors only increases thelikelihood that a certain behavior or pattern of behaviors will beexhibited. Despite this, there are no guarantees: some individuals whoare loaded do not develop the behavior while others who seem normalface a lifetime of struggle over the issue. Also complicated a diagnosis is the very nature of the issue: thereare no set cut-offs to determine if some is or is not a compulsiveshopper. This complicates matters as the illness is progressive and itis a slippery slope to determine the extent to which compulsivity is aproblem. The line is typically drawn with specific reference to theindividuals life circumstances and the overall context and theconsequences of the behavior. While such a flexible diagnosis makes itpossible to treat a wide range of degrees of affliction, it also delaysthe decision of a person to get help until the problem is obvious andthere the likely to be significant personal and financial costs incleaning up the mess. Another complication of a diagnosis is the frequent incidence ofcomorbid conditions for which the less than responsible use of money isa frequent symptom. For example, many bipolar individuals have moneyissues. These issues may manifest themselves as compulsive spendinghabits and often accompany grand schemes in which a positive outcomeis virtually assured. If one were to be treated utilizing onlypsychological models and not the medical model for which lithium ishighly effective in approximately 70% of bipolar cases, there is agreat likely hood that one would be simply treating the symptoms andnot the underlying cause. Similarly, depression is a common issue forwhich symptoms often include poor self-esteem and the individual mayseek to self-medicate by spending in order to gain some transientrelief. Seeking relief by spending from bi- or uni-polar depressionand other issues can in effect create issues on issues, thusemphasizing the importance of seeking professional assistance whenis sues such as these arise without help, more often than not, theyonly grow and will eventually be discovered when the problem becomestoo big to be ignored. Four Theoretical Approaches to Rational Behavior Like many disciplines, there seems to be an initial predisposition fora singular philosophy for addressing an issue. As any student in ageneral survey psychology course can attest, the best outcome isachieved either by an integrated approach or by a single approachchosen after seeing the problem through the lens of an open mind inorder to best choose the most efficacious treatment plan. Such is thecase with compulsive spending in which there four distinct approachesto addressing the likely personality and psychological culprits. Perhaps the most straight forward approach is to realize that ascompulsive shopping is a behavior the behavioristic school is a goodplace to begin. Behaviorism has its roots in the methods of Pavlov andSkinner and posits that exhibited behaviors are the function of whatworks for an given individual. Learning or conditioning occurs withinthe context of the pairing a stimulus and a response. The response isclassified as either a reward or a punishment and is either negative(taking something away not the application of punishment) or positive(introducing some element into a situation not necessarily theapplication of a good thing). Utilizing this framework, behavioristsanalyze situations in order to discern what the operational parametersare in terms of reward and punishment. In doing so, thebehaviorally-biased psychologist would seek to re-pair the act ofsplurging with the longer term negative consequences that inevitablefollow rather than the short-term pleasure. By doing so, theindiv idual should theoretically be able to implement behavioralavoidance strategies for the punishments that would follow compulsivebuying. Alternatively, the cognitive approach would also likely be quiteappropriate. One of the more common devices this discipline utilizesis to assist the patient in exploring where they have made cognitiveerrors. A cognitive error is simply a mistake in thinking. As anexample, one approach would be to ask a patient to utilize a pro/conchart with any purchase over some predetermined cost. By using such amethod, the client is forced to consider their motivations and toconfront potential faulty logic before the purchase is made. Acognitive theorist would likely focus on the idea of need versuswant and would work with the client to reconcile these issue. Much of the compulsive buying also arises out of psychological conflictbetween wants and needs and early childhood or familial issues. Suchconflict inevitably causes feeling of guilt, low-self esteem andincreased levels of anxiety which serve to fuel the vicious cycle.Psychoanalysis, as a discipline within the psychology, is well suitedto ferreting out real motivations and the rationale for certainbehaviors. Begun by Freud, psychoanalysts posit that much of whathappens in the brain goes unnoticed by conscious thought. Much likethe proverbial iceberg in which most of it actually lies under thesurface, the unconscious mind influences our conscious decisions inways which we are unaware. In the unconscious is are the hypotheticalstructures of the id, ego and the superego in which each wants its ownagenda fulfilled and is often in conflict. Using the example of compulsive buying, a psychoanalyst mighthypothesize that there are unresolved childhood conflicts in which theclient is expressing through the egotistical acquisition of materialgoods. Such actions while gratifying to the ego for a little whileonly reappear later as increasingly unsatisfied frustrations. Another common approach to therapeutic intervention is the use ofcombined disciplines. Perhaps the most common of these is acognitive-behavioral approach in which individuals are essentiallytaught to rethink issues and to consider the reward system that is inplace when compulsive spending occurs. In addition, in the modern tradition of pharmaceuticalintervention, there does appear to be some physiological basis forcompulsive buying. Utilizing the approach the compulsive buying is aclose relative of obsessive-compulsive disorders as well as the fact offrequent cormorbidity with depression, there has been some success inattenuating the symptoms of shopping addicts by the use of the latestclass of anti-depressants, serotonin-reuptake inhibitors (SSRIs)(Black, E. 2001, pp.17, 25). Sertonin is a key neurotransmitter thathas a tremendous effect on mood, sexual behavior and general bodyfunctioning. Success treating compulsive buying with SSRIs could havebe due to the effectiveness of the agent on the cormorbid condition ofdepression which, upon relief, the patient did not need the boostthat shopping provided. Finally, the use of an integrated approach which utilizes both amedical model as well as psychological paradigms may be especiallyuseful as a consequence of the nearly 60% of those exhibiting signs ofcompulsive spending also presented with symptoms of other personalitydisorders. In addition in one study, nearly 100% of first-degreerelatives of those diagnosed with compulsive spending disorder have hadincidences of major depression, over half had alcohol-related issues intheir family backgrounds and about 15% indicated a family history ofanxiety-related disorders (Black, E. 2001, p.22). Due to the variedefficacy of particular disorders, some treatment disciplines may bemore effective than others in relieving either the compulsive spendingor the accompanying disorder. Many have likened modern shopping and societys extreme bias toconsumption as a modern day drug. This so-called panacea is especiallymade for all the unfilfilled that accumulates over a lifetime ofoverindulgence and entitlement. The only real problem with this isthat it is only a temporary solution that only results in greaterfrustration as desire fuels desire. Is shopping the modern day drug?The answer is a resounding yes but, it need not be. Like drugs, when used for the right reasons and in the rightquantities, shopping can have a therapeutic effect, connecting thepayment for societys best efforts with a process in which money isexchanged for the best efforts of others. Also like drugs, they canbecome addictive as Fromm so aptly stated that is possible to confusebeing with having. When this occurs, misplaced motivations lead onto psychological and financial ruin, much as would any other drug orsubstitute for a real inner state of fulfilling the highest needs ofman. Shopping, like most things, when done moderation is a valid means ofboth the physical acquisition of goods as well as a source ofpsychological pleasure. By focusing solely on the purchase one canmissing the pleasure in the trip; likewise, by focusing only onprocess, the functionality of the activity is lost. When an activitycan be conducted in moderation in conjunction with an emotionallyenjoyable process and an objectively satisfactory outcome, shoppingbecomes a benign if not outright edifying part of the human experience,yet, like all other human activity, quite subject to perversion. Works Consulted Black, D. (2001). Compulsive Buying Disorder: Definition,Assessment, Epidemiology and Clinical Management. CNS Drugs (15),1,pp. 17-27. Bridgforth, B. (2004, August). When Shopping is a Sickness. Essence. pp. 154 -158. DeSarbo, W. E. Edwards. (1996). Typologies of Compulsive BuyingBehavior: A Constrained Clusterwise Regression Approach. Journal ofConsumer Psychology (5), 3, pp.231 262. Farrell, J. (2003). One Nation Under Goods. Smithsonian Books, Washington D.C. Gini, A. (2003). The Importance of Being Lazy: In Praise of Play,Leisure and Vacations. Taylor Francis Group: New York London. Pooler, J. (2003). Why We Shop: Emotional Rewards and Retail Strategies. Praeger: West Port, Connecticut, USA. Glatt, M. C. Cook. (1987). Pathological Spending as a Form ofPsychological Dependence. British Journal of Addiction (82), pp. 1257 1258. Hine, T. (2002) I Want THAT!: How We All Became Shoppers. HarperCollins: New York, New York. Kwak, H., G. Zinkman M. Crask. (2003, Summer). DiagnosticScreener for Compulsive Buying: Applications to the USA and SouthKorea. The Journal of Consumer Affairs (37), 1, pp. 161 169.

Money For The Future College - 955 Words

Money For The Future Many say that education is a right, not a privilege. Others may argue that education, especially higher education like college, is a privilege. Everyone is entitled to an education, but what is holding a lot of students back is their financial situation. The cost of college education is getting out of hand; its prices are alarming, leaving students with little ways to pay for it, in the dust. The unfortunate reality of students dealing with debt is a fear-mongering tactic used so that students sike themselves out and never attend college. This harsh reality applies to many students who have to pay for their college expenses out of pocket, unlike the lucky few who attend accredited four-year colleges with the money of their financially stable parents. According to the essay Is College Tuition a Sound Investment, college is not only time consuming, but expensive. Its prices are rising higher and higher every single year, costing students roughly 15,000 dollars a ye ar for tuition and room and board. Some say that these prices are priced fairly and by doing so it creates competition between colleges around the nation to attract students to the commodities that these colleges offer. Though expensive, there is always financial aid and scholarships available to anyone who needs it. The author states that some colleges are expensive because of the different luxuries they offer which includes the high quality of education provided, which is inevitablyShow MoreRelatedCollege Education Essay1257 Words   |  6 PagesComparing between college education and the other secondary things we need in life, mostly education comes at the first. Many high school students know pretty much everything about how much college education is essential in their life and many students want to have college education. 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Happiness can be found through college education. It is also clearRead MoreEducation Is The Establishment Of Accomplishment1220 Words   |  5 Pagesfulfill them through education. Higher education is a system where a four year degree can give you a wide enduring future. Being that the higher education is the most specific way to achieve a goal in the future in terms of jobs and higher earnings. More on the higher education are now financially aided by the government and that helps students a considerable during their four years of college. â€Å"Higher education is all about the more you learn the more you earn.† Its contention is compressed: â€Å"The evidenceRead MoreThe Advantage of a College Education794 Words   |  4 Pagesafter high school is whether to pursue a college degree, or not. There are many things that would influence this decision; therefore it is common for a person to wonder if a college education is actually significant or not. While the facts and details suggest that attending a college will provide a tremendous advantage, and the opportunity to achieve a higher level of success; many high school students do not enjoy school. It is a well-known fact that a college education can be the way into a prosperousRead More Exploring Birds Article, College is a Waste of Time and Money530 Word s   |  3 PagesExploring Birds Article, College is a Waste of Time and Money In the article College is a Waste of Time and Money, Caroline Bird explains why higher education may not be the best choice for high school graduates. Bird writes that students do not attend college because they want to, but because of what others expect. College is merely the trend in todays society. It is an escape from the real world. Students may be shuffled into a system that is neither financially nor academically beneficial

Emotional Intelligence And Effective Leadership - 1250 Words

Emotional Intelligence and Effective Leadership What is emotional intelligence? â€Å" Emotional intelligence is the ability to perceive emotions, to access and generate emotions, to access and generate emotions so as to assist thought, to understand emotions and emotional knowledge, and to reflectively regulate emotions so as to promote emotional and intellectual growth.† – Mayer Salovery, 1997 Emotionally intelligent leaders are somewhat manipulative. Emotionally intelligent leaders are able to achieve success in the work place because they are capable of persuading employees to comply with requests, acclimate to change, or work together collaboratively in a manner that is beneficial to the company without causing harm. Batool (2013) argues unlike intelligence quotient; emotional intelligence does not involve mathematical or logical adept. Emotional Intelligence requires the ability to perceive, understand, manage, and use emotions (Batool, 2013, p. 85). The Case Of Caroline EXAMPLE 1: Caroline has more than enough years to retire. In fact, past supervisors have openly tried to persuade her to retire because she has the years and her salary could allow the department to hire two more people. Caroline is a widow; her only son lives hundreds of miles away and just welcomed his first child with his wife. Caroline hints at retirement, but she enjoys working. Although she is a great worker, she is moody and sometimes rude. One of her main offenses is implying that herShow MoreRelatedEmotional Intelligence And Effective Leadership768 Words   |  4 PagesEmotional Intelligence and Effective Leadership Candice Burnett Professor Judy Smith Mannings BUS520: Leadership and Organizational Behavior 10/31/2015 â€Æ' Abstract Emotions are a quality that each individual possess. Organizations place leaders in place that have an understanding on how to maintain emotions while in upper positions. 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Leadership can be described as having a social relation with personnel within an organization to support mission goals and purpose. â€Å"Emotional intelligence includes the ability to perceive, express emotions accurately and adaptively†¦Ã¢â‚¬  (as cited in Ramchunder Martins, 2014). EI is a measurement of leaders to observant of others viewpoints as well your o wn judgments and beliefs. Key leadership capabilities involves emotionsRead MoreEmotional Intelligence And Effective Leadership1426 Words   |  6 Pages Assignment 1: Emotional Intelligence and Effective Leadership Vigilkumar C. Patel BUS520: LEADERSHIP AND ORGANIZATIONAL BEHAVIOUR Dr. Eartha Eve Barnett October 29th 2015 â€Å"Emotional Intelligence and Effective Leadership†, one of the most important constructs in leadership today is the concept and application of emotional intelligence (EI). 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It means having the skills to control one s emotions, as well as to read the room or interpret the moods and emotions of others with whom one is interacting. As a leader this is invaluable, since it is important to maximize the potential of one s staff. Getting along with others is a keyRead MoreIs Emotional Intelligence Beneficial for Effective Leadership?1509 Words   |  7 Pagesare many different definitions of what emotional intelligence is and exactly which components should be included to comprise it. The most basic model of emotional intelligence is the four branch model described by John Mayer and Peter Salovey in 1997. 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Gothic Horror The Epic Battle Of Good Versus Evil

Gothic horror, what does it symbolize, does it connect to our modern lives, what exactly is it? Gothic horror is the genre of literature that has elements of both romance and horror. Gothic horror is very dark, stormy full of eerie winds and is usually set in an old mansion or in castles on high cliffs. Usually gothic horror is a combination of fiction, horror, and romance. This genre was famous throughout England and had and still does have a big influence on British culture and how they live their lives today. â€Å"Some get the gothic horror mixed up with paranormal romance but the difference between the two is in the results The Gothic builds up the protagonist until he achieves what he’s after, and then details the terrible consequences of achieving it† (Dittmer 1). The theme in Dracula is that classic Gothic theme of the epic battle of good versus evil. â€Å"In this novel this is expressed in a very direct way, there is never any question as to who is right and who is wrong. According to Duran â€Å"it can be clearly seen the protagonists on the side of good have many endearing qualities while the antagonists on the side of evil have a pact with Lucifer and are of the purest evil† (mikeduran.com). Bram Stokers Dracula demonstrates how religion can influence the mind of others and how they react and encounter to different situations of their lives. The supernatural effect plays a huge role in Stoker’s Dracula. Dracula is an Immortal being which means he cannot die, which we all knowShow MoreRelatedThe Genre of Stokers Dracula Essay6296 Words   |  26 Pages This is almost like an epic poem. The theme in this case is of good versus evil. The evil has almost supernatural powers yet the good triumph over it. The good consists of ordinary men, god fearing and courageous. They are consistent in their effort to stamp out evil. In the end they triumph over evil even though the evil is very strong. This theme slowly and steadily gathers momentum until it becomes clearer in the end. In Dracula, Bram Stoker emphasizes how as the

The Political Economy Of Apple - 1629 Words

The Political Economy of Apple Apple has become the leading competitor of electronic goods in the 21st century. They are a billion dollar corporation that distributes products to consumers to satisfy their needs of innovative and advanced technology. Apple’s producer, Foxconn has multiple locations, however their main location is based in China. However, news outlets have shed a new light regarding their manufacturing company. There has been a rising concern regarding the working conditions at Foxconn. Employees and student interns would often live in dormitories with other workers that were essentially adult strangers. Journalists from multiple news companies have gone undercover to expose the truth of the wellbeing of their employees. The working conditions were so terrible that there had been multiple cases of suicide. Working long hours affected their mental and physical well being. Foxconn in China has on the cheapest labour markets in the world and to further profit, th ey hire student interns to work for them and pay them with low wages. Apple prioritizes profit maximization by continuing to undermine the working conditions of their partnering companies. Apple Inc. is an American multinational technology company based in Cupertino, California that was founded by Steve Jobs and Steve Wozniak. Their first creation was the Apple Computer, which was a success and Steve Jobs led the creation of innovative products including the iMAC, iPod, and iPhone. They designed,Show MoreRelatedStrategic Analysis Of Iphone 6 And Ipad 61237 Words   |  5 PagesAnalysis of iPhone 6 and iPhone 6 Plus Background Company Overview Apple, Inc. is a multinational company of American origin that majors in the design, manufacture, and marketing of personal computers, portable digital music players, and mobile communication and media devices (Reuters, 2017). 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This competition can be exerted on many different levels including substitute products. There are a number of challengers in the different market niches who offer relatively similar products. Furthermore, in most cases, competitors products are offered at a discount compared to Apple branded products. Although, Apples maintains its edge throughRead MoreGreece s Economic Impact On The Global Economy1221 Words   |  5 PagesDeveloped-market economies have been improving incrementally. After going through a soft patch in the first quarter, the U.S. has regained its momentum in job creation, although the quality of those jobs is open to debate. Europe has turned a corner, with GDP expanding modestly and deflation subsiding. Japan is also experiencing a notable uptick in economic activity. Emerging markets, on the other hand, are going through what the World Bank has called a structural slowdown. This i s likely to lastRead MoreEssay on Conducting Business in the US and Globally1239 Words   |  5 Pagesthe United States and globally that I am familiar with is Apple Inc. I will include an analysis of global economic interdependence and effects of international technology industry practices and agreements. The importance of demographics, physical infrastructure, social responsibility and ethics versus legal obligations of the organizations will be aspects I examine. I will include an analysis of cultural differences, effects of political systems and influences of international relationships, alongRead MoreApple Corporation : Competitive Advantage With Evolving External Environment And Executive Succession Essay1493 Words   |  6 PagesThe Apple Corporation Apple Corporation was initially operating into the personal computer arena but later diversified into other segments. The change was brought by changes in management and differences in views that were coupled with missed opportunities resulting in loss of competitive advantages. The company currently operates in the music and personal computer industry as part of its initiative to continue providing innovative products for its customers. Despite venturing into differentRead MoreOrganic Food : An Major Factor For The Overall Economic Growth Of India Essay1377 Words   |  6 Pagesuse of any pesticides, synthetic fertilizers Industrial waste etc. NZ Rose apple is one of the best apple came in the varieties of apple. Rose apple has a unique rose pink color from medium to large size of variety with crispy juicy flesh and sweet flavor. NZ Organic Rose apples is a good looking apple with a sweet juicy taste, they are large in size, firm, fine texture, very crisp and juicy flesh. Eating NZ rose apples all year around is possible due to modern refrigeration technology to controlledRead MoreGlobalization is the highest stage of internationalization, where the broader representation under1200 Words   |  5 Pagesthe global marketing is associated with higher risk because of the instability of exchange rates, unstable governments, trade barriers, protectionist measures and other factors. The first driving force is competition. One of the factors that forced Apple Company to expand its products globally was due to high competition in domestic market. Also, opportunities to growth became hard for the company as domestic market started producing competitive products which brought to decrease of market share. SolutionRead MoreExternal And Internal Environment Analysis835 Words   |  4 Pageseconomic growth, political trends, legal issues, advances in technology, and sociocultural trends (Ferrell Hartline, 2014). I have a strong interest in technology and gadgets. 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Adidas Case Study SWOT analysis and Michael Porters Five...

Executive Summary: Adidas was the dominating manufacturer of sporting goods. It achieved this success by developing cleated shoes for the soccer and track and field sports. The landscape of the sporting goods industry has changes, but Adidas has not changed with it. Sporting good textiles and footwear have become popular with younger individuals as a substitute for casual wear. Soccer and track and field sports are no longer the mainstream sports. These sports have been replaced in market share by sports such as baseball, basketball, football, and fitness activities like aerobics. Adidas has not developed the marketing mix to compete in these sports and fitness activities. The participation by women in these sports is growing, yet Adidas†¦show more content†¦Industry The sporting goods industry consists of three segments: athletic footwear, apparel, and equipment. Athletic footwear makes up 33% of the sporting goods industry, apparel 50%, and equipment makes up the remaining market share. The three largest markets for athletic equipment are the U.S. at 50% of the market share, Western Europe at 25% of the market share, and Japan at 10% market share. An industry that had one primary market segment consisting of the serious male soccer and track athlete has now separated into several market segments containing the professional athlete, the amateur athlete, the fitness group (aerobics and cross-training), and the mass consumer who is not interested in athletics but enjoys the comfort of wearing athletic apparel. Barriers to Entry The footwear-manufacturing segment has the highest barriers to entry out of the three sporting good industry segments. In the U.S. 53% of the footwear market share is controlled by two companies- Nike and Reebok. Adidas came in at 7th place with only 4% of the U.S. market share. The competition in the industry is fierce, requiring a substantial investment in marketing to establish a successful brand. Research and development expenses are high requiring a substantial investment to develop a shoe that could provide the necessary level of comfort to compete with companies like Nike and Reebok. Substitutes ForShow MoreRelatedNike Report13324 Words   |  54 Pagesfew of its competitors; Adidas-Salomon and Reebok, Sketchers, and K-Swiss. A brief overview of Nike and its competitor’s company profiles, brand portfolios, and current developments will provide an understanding that leads to an analysis of the external environment. This analysis further discusses the geographic distribution, general environment, industry environment using Porter’s Analysis, Nike’s competitor analysis, its dominant economic characteristics, driving forces, and key success factorsRead MoreCase Study148348 Words   |  594 Pages978-0-273-73552-6 (web) All rights reserved. Permission is hereby given for the material in this publication to be reproduced for OHP transparencies and student handouts, without express permission of the Publishers, for educational purposes only. In all other cases, no part of this publication may be reproduced, stored in a retrieval system, or transmitted in an y form or by any means, electronic, mechanical, photocopying, recording, or otherwise without either the prior written permission of the Publishers orRead MoreStrategic Marketing Management337596 Words   |  1351 PagesStrategic Marketing Management Dedication This book is dedicated to the authors’ wives – Gillian and Rosie – and to Ben Gilligan for their support while it was being written. Acknowledgements Our thanks go to Janice Nunn for all the effort that she put in to the preparation of the manuscript. Strategic Marketing Management Planning, implementation and control Third edition Richard M.S. Wilson Emeritus Professor of Business Administration The Business School Loughborough University

Net Present Value (NPV) Definition and Meaning

Question: Describe about the Net Present Value (NPV) of Definition and Meaning? Answer: WACC WACC is a computation of a company's cost of capital in which every class of capital is proportionately weighted. All capital sources - common stock, bonds and some other long term obligation - are incorporated in a WACC computation. All else break even with, the WACC of a firm increments as the beta and rate of return on equity increments, as an increment in WACC noticed a lessening in valuation and a higher risk. CAPM can be used to estimate the cost of equity which is a part of WACC. Ke 0.15 Kd 0.07 WACC 0.096 Where Ke is the cost of equity and Kd is the cost of debt after tax. Net Present Value Using the NPV technique, one would discount all the relevant cash flows in the given scenario using the WACC of the company. The rule that applies is to accept any project that has a positive NPV or the project with greater NPV as compared to others. (BusinessDictionary.com, 2015) One of the advantages of using NPV is that it takes account of time value of money and it also incorporates the risk factor while assessing an project however it doesnt predict how long the project will take to recover the investment, Internal Rate of Return The discounted cash flow rate of return, or internal rate of return, provides analysts a way to determine the rate of return provided by the investment. Generally speaking, IRR is the rate at which NPV of the given project is equal to zero. The higher the better. One of the main issues of using IRR method is that it sometimes provides multiple rates which may confuse the users. (Kinney, Prather-Kinsey and Raiborn, 2006) Payback Period Payback period allows to estimate how long the project will take to recover the investment. One of the main advantages is that it allows for an easy interpretation by stakeholders of the company when the investment will be recovered. However it fails to incorporate time value of money. (McAllister, 2005) 0 1 2 3 4 investment -900000 Sale 5670000 5953500 6251175 6563733.75 Variable cost -2970000 -3118500 -3274425 -3438146.25 depreciation -237500 -237500 -237500 -237500 fixed cost -2000000 -2000000 -2000000 -2000000 Profit 462500 597500 739250 888087.5 tax -185000 -239000 -295700 -355235 depreciation add back 237500 237500 237500 237500 operating cash flows 515000 596000 681050 770352.5 working capital -100000 100000 Salvage value 50000 Net cash flows -1000000 515000 596000 681050 920352.5 NPV $1,121,200.52 IRR 49% MIRR 32% Payback 1.813 Considering all factors such as positive NPV, high IRR and low Payback period, project is acceptable. selling price NPV 1.9 11102.1873 2 566151.353 2.1 1121200.52 2.2 1676249.68 2.3 2231298.85 Project still provides positive NPV regardless of above changes in selling process. References: BusinessDictionary.com,. (2015).What is net present value (NPV)? definition and meaning. Retrieved 29 March 2015, from https://www.businessdictionary.com/definition/net-present-value-NPV Kinney, M., Prather-Kinsey, J., Raiborn, C. (2006).Cost accounting. Mason, Ohio.: Thomson/South-Western. McAllister, E. (2005).Pipeline rules of thumb handbook. Amsterdam: Elsevier.