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## what is the enthalpy for the following reaction? overall: c2h4 + h2oâ†’c2h5oh

What is the enthalpy for the following reaction? C2H4 H2O—
17,023 results
Chem
What is the enthalpy for the following reaction? C2H4+H2O—>C2H5OH

asked by Kay on November 4, 2010
Chem
What is the enthalpy for the following reaction? overall: C2H4+H2O—>C2H5OH is -1411kJ correct??

asked by Angel on November 4, 2010
chemistry
If you need to multiply the following reaction by 2 to be an intermediate reaction in a Hess’s law problem, what would be the final value for the enthalpy of reaction you use for this intermediate reaction? C2H4 + 3 O2 2 CO2 + 2 H2O, H = -1410 kJ

asked by Anonymous on November 24, 2014
chemistry
For the reaction shown below complete the following calculations. H2(g) + C2H4(g) –> C2H6(g) (a) Estimate the enthalpy of reaction using the bond energy values in Table 9.4. (b) Calculate the enthalpy of reaction, using standard enthalpies of formation.

asked by hannah on October 27, 2008
Chemistry
Calculate the enthalpy change for: C2H4(g) + H2 –> C2H6(g) delta Hrxn: H2(g) + 1/2O2 –> H2O (l) C2H4(g) + 3O2 –> 2H20(l) + 2CO2(g) C2H6(g) + 7/2O2(g) –> 3H20(l) + 2CO2(g) I know I have to flip the third reaction but I don’t know what to do next

asked by Jessica on October 29, 2014

chemistry

1. Calculate the enthalpy change of combustion for ethene gas (C2H4) given the following enthalpy changes of formation: ΔHºf(C2H4)(g) = +52 kJ mol^-1 ΔHºf(CO2)(g) = -394 kJ mol^-1 ΔHºf(H2O)(g) = -286 kJ mol^-1

asked by John on July 19, 2014
Chemistry
Calculate the work involved if a reaction with an enthalpy change of -2418 kJ is carried out in a vessel with a mobile, frictionless piston. Other details: the reaction is H2(g) + 1/2Oxygen2(g) yields H2O(g) with enthalpy change of -241.8 kJ/mol. The

asked by Mark on November 22, 2008
chemistry
Calculate the ΔH of reaction for: C2H4(g) + H2O(l) = C2H5OH(l) if the ΔH of formation for C2H4(g), H2O(l) and C2H5OH are +52, -286 and -278 kJ/mol, respectively? Enter a numerical value below and be sure to include a minus sign if needed. The error

asked by danny 16 on January 31, 2015
Chemistry
I know I posted this question before, but can you clarify it?? MY QUESTION IS AFTER YOU SWITCHED THE DELTA H1 THE CHANGE IN THE ENTHALPY IS NEGATIVE…. BUT THAT DOES NOT MAKE SENSE BECAUSE THE CHANGE IN ENTHALPY OF THE ORIGINAL DELTA H1 IS

asked by Anonymous on November 14, 2013
CHEMISTRY
I know I posted this question before, but can you clarify it?? MY QUESTION IS AFTER YOU SWITCHED THE DELTA H1 THE CHANGE IN THE ENTHALPY IS NEGATIVE…. BUT THAT DOES NOT MAKE SENSE BECAUSE THE CHANGE IN ENTHALPY OF THE ORIGINAL DELTA H1 IS

asked by Anonymous on November 14, 2013
chemistry

1. Calculate the standard enthalpy change for the reaction: C2H4(g) + H2(g) → C2H6(g) given that the enthalpy of combustion for the reactants and products are: ΔHºc(C2H4)(g) = -1411 kJ mol^-1 ΔHºc(C2H6)(g) = -1560 kJ mol^-1 ΔHºc(H2)(g) = -286 kJ

asked by John on July 19, 2014
Chemistry
Calculate enthalpy of reaction C2H4 + H2 gives C2H6.enthalpy of combustion of ethene, H2,and ethane are -1410,-286,-15.60kj/mol respectively

asked by Shaika on November 7, 2016
Chemistry
Ethanol (C2H5OH) is synthesized for industrial use by the following reaction, carried out at very high pressure. C2H4(g) + H2O(g) → C2H5OH(l) What is the maximum amount, in kg, of ethanol that can be produced when 1.65 kg of ethylene (C2H4) and 0.0610 kg

asked by Brittney on October 6, 2013
Chemistry
Ethanol (C2H5OH) is synthesized for industrial use by the following reaction, carried out at very high pressure. C2H4(g) + H2O(g) C2H5OH(l) What is the maximum amount of ethanol (in grams) that can be produced when 1.0 kg of ethylene (C2H4) and 0.014 kg of

asked by Jack on November 1, 2011
chemistry
What is the maximum amount of ethanol (in grams) that can be produced when 1.0 kg of ethylene (C2H4) and 0.014 kg of steam are placed into the reaction vessel? Ethanol (C2H5OH) is synthesized for industrial use by the following reaction, carried out at

asked by Amanda on November 1, 2011

NEED HELP WITH CHEM HW
Ethanol (C2H5OH) is synthesized for industrial use by the following reaction, carried out at very high pressure. C2H4(g) + H2O(g) C2H5OH(l) What is the maximum amount of ethanol (in grams) that can be produced when 2.2 kg of ethylene (C2H4) and 0.014 kg of

asked by Anonymous on October 1, 2011
Chemistry 2!
consider the following reaction, equilibrium concentrations, and equilibrium constant at a particular temperature. Determine the equilibrium concentration of H2O(g) C2H4(g) + H2O(g) C2H5OH(g) kc= 7.0* 10^3 [C2H4]= 0.010M [C2H5OH]= 1.99M

asked by anonymous. on December 10, 2014
Chemistry
Consider the following reaction, equilibrium concentrations, and equilibrium constant at a particular temperature. Determine the equilibrium concentration of H2O(g). C2H4(g) + H2O(g) C2H5OH(g) Kc = 9.0 × 103 [C2H4]eq = 0.015 M [C2H5OH]eq = 1.69 M

asked by Jane on December 2, 2014
Chemistry
CONTINUE>>>>>>>>>>> The enthalpy changes for two different hydrogenation reactions of C2H2 are: C2H2+H2—->C2H4 Delta H 1 (there is a degree sign….standard enthalpy of formation??) *WAIT A SECOND, IF I USE THE HEAT OF FORMATION VALUES TO CALCULATE

asked by Anonymous on November 14, 2013
Chemistry
Calculate the standard entropy, ΔS°rxn, of the following reaction at 25.0 °C using the data in this table. The standard enthalpy of the reaction, ΔH°rxn, is –44.2 kJ·mol–1. C2H4(G)+H20 —> C5H5OH ΔS°rxn= __ JK^-1mol^-1 Then, calculate

asked by Patrick Panasko on November 30, 2014
CHEMISTRY
Please explain. The enthalpy changes for two different hydrogenation reactions of C2H2 are: C2H2+H2—->C2H4 Delta H 1 C2H2+2H2—->C2H6 Delta H 2 Which expression represents the enthalpy change for the reaction below? C2H4+H2—->C2H6 Delta H = ? A. Delta

asked by Anonymous on November 11, 2013
Chemistry
Please explain. The enthalpy changes for two different hydrogenation reactions of C2H2 are: C2H2+H2—->C2H4 Delta H 1 C2H2+2H2—->C2H6 Delta H 2 Which expression represents the enthalpy change for the reaction below? C2H4+H2—->C2H6 Delta H = ? A. Delta

asked by Anonymous on November 11, 2013
Science
The enthalpy change for the reaction 2 H2 + O2 > 2 H20 is -571.6 kJ. Determine the enthalpy change for the decomposition of 24.0g H2O. My Process -571.6 is the enthalpy of 2 mols of H2O. So the enthalpy of 1 mol of H2O will be -285.8. Since it’s

asked by Mike on July 9, 2015
Chemistry
Calculate the work involved if a reaction with an enthalpy change of -2418 kJ is carried out in a vessel with a mobile, frictionless piston. Other details: the reaction is H2(g) + 1/2Oxygen2(g) yields H2O(g) with enthalpy change of -241.8 kJ/mol. The

asked by Mark on November 23, 2008
Chemistry
Ethylene glycol, HOCH2CH2OH, is used as antifreeze. It is produced from ethylene oxide, C2H4O, by the following reaction. C2H4O(g) + H2O(l) → HOCH2CH2OH(l) Use Hess’s law to obtain the enthalpy change for this reaction from the following enthalpy

asked by Mariam on December 13, 2009

chemistry
Ethylene glycol, HOCH2CH2OH, is used as antifreeze. It is produced from ethylene oxide, C2H4O, by the following reaction. C2H4O(g) + H2O(l) → HOCH2CH2OH(l) Use Hess’s law to obtain the enthalpy change for this reaction from the following enthalpy

asked by caroline on October 29, 2010
calculate enthalpy of H for the reaction N2H4(l) + 2H2O(l) -> N2(g) + 4H2)(l) Given the reactions N2H4(l) + O2(g) -> N2(g) + 2H2O(l) Enthalpy of H = -6.22.2 kJ H2(g) + (1/2)O2(g) -> H2O(l) enthalpy of H = -285.8 kJ/mol H2(g) + O2(g) -> H2O2(l) enthalpy of

asked by Rose Bud on February 16, 2012
calculate enthalpy of H for the reaction N2H4(l) + 2H2O(l) -> N2(g) + 4H2)(l) Given the reactions N2H4(l) + O2(g) -> N2(g) + 2H2O(l) Enthalpy of H = -6.22.2 kJ H2(g) + (1/2)O2(g) -> H2O(l) enthalpy of H = -285.8 kJ/mol H2(g) + O2(g) -> H2O2(l) enthalpy of

asked by Rose Bud on February 16, 2012
Chemistry!
Calculate the work involved if a reaction with an enthalpy change of -2418 kJ is carried out in a vessel with a mobile, frictionless piston. Other details: the reaction is H2(g) + 1/2Oxygen2(g) yields H2O(g) with enthalpy change of -241.8 kJ/mol. The

asked by Elizabeth on November 23, 2008
Chemistry due soon
What is enthalpy? A. Enthalpy is the kinetic energy of a system. B. Enthalpy is the heat involved in a reaction. C. Enthalpy is the temperature of a reaction. D. Enthalpy is the mass involved in a reaction. I think the answer is a or b

asked by Morgan on November 6, 2014
chemistry
Given the following equations: 2 H2O2 (aq) → 2 H2O (l) + O2 (g) and C2H4 (g) + 3 O2 (g) → 2 CO2 (g) + 2 H2O (l) The first reaction is the decomposition of hydrogen peroxide into water and oxygen gas. The oxygen gas generated in the first reaction is

asked by april on July 1, 2018
CHEMISTRY
calculate the delta h for the reaction 2C+2H–> C2H4 C+O2–> Co2 delta h= -393.5 C2H4+ 3O2–> 2CO2+ 2H2O delta h= 1410.9 H2+ 1/2 O2–> H2O delta h= -285.8 2CO+ O2–> 2CO2 delta h= -566.0 do you flip the first two equations and times the first and third one

asked by Anonymous on June 6, 2010
chemistry
A scientist measures the standard enthalpy change for the following reaction to be -53.4 kJ : Ca(OH)2(aq) + 2 HCl(aq) CaCl2(s) + 2 H2O(l) Based on this value and the standard enthalpies of formation for the other substances, the standard enthalpy of

asked by Austin on March 18, 2012
chemistry
A scientist measures the standard enthalpy change for the following reaction to be -53.4 kJ : Ca(OH)2(aq) + 2 HCl(aq) CaCl2(s) + 2 H2O(l) Based on this value and the standard enthalpies of formation for the other substances, the standard enthalpy of

asked by Austin on March 18, 2012
chemistry
Calculate enthalpy change of reaction for the combustion of gaseous ethanol. C2H5OH + 3O2 >> CO2 + 3H2O. Using standard molar enthalpies of formation. C2H5OH -235.3 ( it’s negative sign) CO2 -393.5 H2O -241.8 (1) Calculate the enthalpy change of reaction

asked by Alex on April 20, 2010

Chemistry
C2H4(g) + H2O(l) → C2H5O(l) what is the rendition percentage if 4.50g of C2H4 produce 4.7g of ethyl alcohol?

asked by Alex on September 11, 2012
Chemistry
Calculate the enthalpy change for the reaction 2C (s) + H2 (g) yield C2H2 (g) given the following reactions and their respective enthalpy changes: C2H2(g) + 5/2 O2(g) yield 2CO2(g) + H2O (l) = -1299.6kJ C(s) + O2(g) yield CO2 (g) -393.5 H2(g) + 1/2 O2(g)

asked by Lucy on December 29, 2007
Chemistry
Calculate the enthalpy change for the reaction 2C + H2 yield C2H2 given the following reactions and their respective enthalpy changes: C2H2 + 5/2 O2 yield 2CO + H2O -1299.6 C + O yield CO2 -393.5 H2 + 1/2 O2 yield H2O -285.9 I don’t even know how to start

asked by Lucy on December 24, 2007
chemistry
Calculate the enthalpy of reaction for the combustion of ethene. Express the enthalpy of reaction calculated in question above as a molar enthalpy of reaction per mole of carbon dioxide.

asked by shyanne on January 8, 2013
chemistry
c2h4(g) + 3O2(g) -> 2 CO2 (g) + 2 H2O (g) What volume of oxygen will react with 18 ml of ehtylene, c2h4, assuming that the gases are present at the same temperature and pressure?

asked by Monica on April 19, 2010
Chemistry
The standard enthalpy of formation of H2O (l) is -285.8 kJ/mol. Calculate ∆E° for the following reaction. H2O (l) → H2 (g) + 1/2 O2 (g)

asked by Mahnoor on November 15, 2014
Chemistry
The standard enthalpy of formation of H2O (l) is -285.8 kJ/mol. Calculate DEO for the following reaction. H2O (l) → H2 (g) + 1/2 O2 (g)

asked by Mahnoor on November 15, 2014
CHemistry
Given the following information calculate the heat of formation of C2H4. C2H4 + 3 O2 ¡æ 2 CO2 + 2 H2O ¥ÄH¡Æ = -414 kJ/mol C + O2 ¡æ CO2 ¥ÄH¡Æ = -393.5 kJ/mol H2 + ¨ö O2 ¡æ H2O ¥ÄH¡Æ = -241.8 kJ/mol

asked by sam on April 26, 2015
Chemistry
Reposted: Use Hess’s law to calculate the enthalpy change for the reaction: 3C(s) + 3H2(g) yield C3H6(g) Given the following thermochemical equations: 2C3H6(g) + 9O2(g) yield 6CO2(g) + 6H2O(l) enthalpy change= -4116.0 kJ/mol C(s) + O2(g) yield CO2(g)

asked by Hailee on March 17, 2012
Chemisty
I need a recap of how to do the question below. I just need the basic guidelines: The enthalpy change for the reaction 2H2(g)+O2 > 2H2O is -571.6kJ. Determine the enthalpy change for the decomposition of 24.0g H2O.

asked by Todd on June 26, 2015

chemistry
Consider the reaction, C2H4(g) + H2(g) ® C2H6(g), where DH = – 137 kJ. How many kilojoules are released when 55.3 g of C2H4 reacts?

asked by Cooper on October 21, 2011
Chemistry
Find the enthalpy for : 4Fe + 3O2 = 2Fe2O3 I got the following informations: Fe + 3H2O = Fe(OH)3 + 3/2H2 – Enthalpy is 160.9 kj H2 + 1/2O2 = H2O – Enthalpy is -285.8 kj Fe2O3 + 3H2O = 2Fe(OH)3 – Enthalpy is 288.6 I try using Hess Law but cannot solve it.

asked by Shadow on May 13, 2013
Chemistry
Which of the following is the best definition of Hess’ Law? A. Heat is always released by the decomposition of 1 mole of a compound into its constitute elements. B. The enthalpy of a process is the difference between the enthalpy of the products and the

asked by Anonymous on February 20, 2008
Consider the following equations. N2H4(l) + O2(g) N2(g) + 2 H2O(l) ÄH = -622.2 kJ H2(g) + 1/2 O2(g) H2O(l) ÄH = -258.5 kJ H2(g) + O2(g) H2O2(l) ÄH = -187.8 kJ Use this information to calculate the enthalpy change for the reaction shown below. N2H4(l) +

asked by hannah on November 6, 2012
chem- i reallyneed help
Consider the following equations. N2H4(l) + O2(g) N2(g) + 2 H2O(l) ÄH = -622.2 kJ H2(g) + 1/2 O2(g) H2O(l) ÄH = -258.5 kJ H2(g) + O2(g) H2O2(l) ÄH = -187.8 kJ Use this information to calculate the enthalpy change for the reaction shown below. N2H4(l) +

asked by hannah on November 6, 2012
chemistry- stoichiometry problems
C2H4+3 O2->2 co2+2 H2O If you start wit 45 grams of C2H4 how many grams of carbon dioxide will be produced?

asked by anon on April 22, 2009
Chemistry
Which of the following is the best definition of Hess’ Law? A. Heat evolved in a given process can be expressed as the sum of the heats of several processes that, when added, yield the process of interest. B. The enthalpy of a process is the difference

asked by Jared on May 7, 2007
Hess’ law
Which of the following is the best definition of Hess’ Law? A. Heat is always released by the decomposition of 1 mole of a compound into its constitute elements. B. Since enthalpy is a state function, it will be different if a reaction takes place in one

asked by christine on February 9, 2007
college chem
Calculate the molar enthalpy of reaction standard enthalpy of formation below. H20 = -285.8 kj/mole H+ = 0.0 kj/mole OH- = -229.9 kj/mol H+(aq) + OH-(aq)→H2O(l) For this, don’t you do the summation of products x stoichemtry + the sum of reactants x

asked by sam on November 20, 2014
Enthalypy Reaction
What is the standard enthalpy of reaction for the following chemical reaction? CO2(g) + 2KOH(s) –> H2O(g) + K2CO3 (s) Express your answers numerically in kJ.

asked by Sarah on September 23, 2008

Chemistry
Please write the chemical equation and calculate the reaction enthalpy (or energy) for the total chlorination (addition of chlorine gas to all double bonds) of cyclopentadiene (if you do not know what cyclopentadiene is, assume C2H4).

asked by Eddie on December 6, 2010
chemistry
Please write the chemical equation and calculate the reaction enthalpy (or energy) for the total bromination (addition of bromine gas to all double bonds) of 2,3-dimethylbutadiene (if you do not know what 2,3-dimethylbutadiene is, assume C2H4).

asked by Eddie on December 7, 2010
Thermochemistry determine the final temperature if 45.67 kJ of heat energy is removed from 18.5 g of H2O (g) at 122 degrees Celsius useful information sp. heat H2O (s) = 2.03 J/g(degree C) sp heat H2O (l) = 4.18 J/g(degree C) Sp heat H2O (g) = 2.01

asked by Rose Bud on February 15, 2012
Chemistry
Which of the following is the best definition of Hess’ Law? A. Since enthalpy is a state function, it will be different if a reaction takes place in one step or a series of steps. B. Heat is always released by the decomposition of 1 mole of a compound into

asked by Anonymous on February 24, 2008
Chemistry
Consider the reaction of Lithium with water: 2 Li(s) + 2H2O(l) —-> 2 LiOH(aq) + H2(g) The delta H of the reaction is -160 KJ The enthalpy of fusion of H2O is 6.0 kJ/mol The specific heat capacity of H2O(l) is 4.18 J/gC When 10 grams of Li(s) is dropped

asked by Vinit on October 27, 2015
Chemistry
With a platinum catalyst, ammonia will burn in oxygen to give nitric oxide, NO. 4 NH3(g) + 5 O2(g) 4 NO(g) + 6 H2O(g) ÄH = -906 kJ What is the enthalpy change for the following reaction? NO(g) + 3/2 H2O(g) NH3(g) + 5/4 O2(g)

asked by Glenna on October 18, 2008
Chemistry
What is the standard enthalpy of reaction for the following reaction: H2 + 1/2 O2 –> H2O(g)

asked by Lauren on March 11, 2011
Chemistry
Calculate the enthalpy of the reaction 2B2H6 + 6O2=2B2O3 +6H2O given the following pertinent information: A. B2O3(s) + 2H2) )g) = 3O2 (g) + B2H6 (g), delta H= +2035kJ B. 2B (s) + 3H2 (g) =B2H6 (g), delta H= +36 kJ C. H2 (g) + 1/2)2 (g) =H2O (l), delta

asked by B on April 22, 2012
Chemistry
The enthalpy of formation for a substance corresponds to the enthalpy change for a reaction. Write the specific chemical reaction defining the enthalpy of formation of butane: Just checking to make sure this is correct: 4C + 5H2 —> C4H10

asked by AJ on March 26, 2017
chemistry
A scientist measures the standard enthalpy change for the following reaction to be -2923.0 kJ : 2C2H6(g) + 7 O2(g) 4CO2(g) + 6 H2O(g) Based on this value and the standard enthalpies of formation for the other substances, the standard enthalpy of formation

asked by Anonymous on October 24, 2012

Chemistry
A calorimeter contains 30.0 mL of water at 15.0 C. When 1.50 g of X (a substance with a molar mas of 46.0g/ mol is added, it dissolves via the reaction X (s) + H2O (l) —-> X (aq) and the temperature of the solution increases to 26.5 C. Calculate the

asked by Student on March 11, 2016
chemistry
The reaction SO2 + H2O =H2SO4 Is the last step in the commercial production of sulfuric acid . the enthalpy change for this reaction is -227 KJ . In designing a sulfuric acid plant is it necessary to provide for heating or cooling of the reaction mixture ?

asked by mathew on November 12, 2014
Chemistry
Table sugar consists mostly of sucrose, C12H22O11. The standard enthalpy of combustion for sucrose is the standard state delta H for the reaction: C12H22O11 + 12 O 2 —> 12 CO2 + 11 H2O Calculate this standard state delta H. Give answer in units of kJ to

asked by Eli on December 3, 2016
chemistry
Consider the reaction, C2H4 (g) + H2 (g)- C2H6 (g) where -137kJ of heat is released. How many kilojoules are released when 55.3g of C2H4 reacts?

asked by Sandy on July 10, 2011
Chemistry
Estimate the enthalpy change for the following reaction OH(g)+CH4(g)==>CH3(g)+H2O(g)

asked by West on April 19, 2011
College Chemistry
Estimate the enthalpy change for the following reaction OH(g)+CH4(g)==>CH3(g)+H2O(g)

asked by West on April 21, 2011
chemistry
Calculate the standard enthalpy change for the following reaction at 25 °C. H2O+C(graphite)(s) –> H2(g) +CO(g)

asked by anon on October 28, 2016
chemistry
estimate the enthalpy change for the following reaction: OF2 + H2O = O2 + 2HF

asked by small on November 27, 2016
Chemistry
how many C2H4 molecules are contained in 45.8 mg C2H4 when the molar mass of C2H4 is 28.05g/mol

asked by Thomissa on September 5, 2011
Calculate the enthalpy of the reaction of boron trioxide with steam: B2O3(s) + 3H2O(g) → 3O2(g) + B2H6(g) Given: H2O(l) H2(g) + 1⁄2 O2(g) 2B(s) + 3H2(g) 2B(s) + 3/2 O2(g) → B2O3(s) → H2O(g) → H2O(l) → B2H6(g) 44 kJ/mol -286 kJ/mol 36 kJ/mol

asked by Lay on October 19, 2015

college chemistry
The chemical reaction representing production of water gas is as follows: C(s)+H2O(l)=CO(g)+H2(g) calculate the enthalpy change in the production of 200L(at 500mmHg and 65degree celcius) of hydrogen by this reaction.

asked by bennett on November 3, 2008
chemistry URGENT (2)
Label each of the following reactions as exothermic or endothermic (“exo” or “endo”), and according to whether work is done on or by the system (“on” or “by”)? Note that no “en-on” cases appear here, as these are always thermodynamically unfavourable.

asked by Anonymous on November 16, 2008
chemistry
Label each of the following reactions as exothermic or endothermic (“exo” or “endo”), and according to whether work is done on or by the system (“on” or “by”)? Note that no “en-on” cases appear here, as these are always thermodynamically unfavourable.

asked by Anonymous on November 16, 2008
Chemistry
The equation for the complete combustion of ethene (C2H4) is C2H4(g) + 3 O2(g) ==> 2CO2(g) + 2H2O(g) If 2.70 mol C2H4 is reacted with 6.30 mole O2, identify the limiting reagent. show all work.

asked by Danny on March 27, 2010
Chemistry
The reaction between 0.045 g of calcium with an excess of water was carried out in an ice calorimeter as used in this lab. The volume of water in the calorimeter decreased by 0.18 mL during the reaction a) Write the equation for the reaction which occurs.

asked by Sean on June 3, 2009
chemistry
When NH3 is treated with oxygen gas, the products obtained are N2(g) and H2O(l). If standard enthalpies of formation at 298 K for NH3(g) and H2O(l) are –46.00 kJ/mol and –286.0 kJ/mol respectively, calculate the enthalpy change of the reaction.

asked by Shana on January 27, 2015
chem
When NH3 is treated with oxygen gas, the products obtained are N2(g) and H2O(l). If standard enthalpies of formation at 298 K for NH3(g) and H2O(l) are –46.00 kJ/mol and –286.0 kJ/mol respectively, calculate the enthalpy change of the reaction.

asked by shana on January 27, 2015
Chemistry
Question 9 Unsaved What is the rate law for the following reaction, if the order of the reaction is m, an unknown? H2O2(aq) → H2O(l) + ½O2(g) a. k [H2O2]m b.k [H2O]m [O2]1/2 c.k [H2O] m /[H2O][O2 d.k[H2O] m [O2]m Thanks in advance. The k and m are meant

asked by Ramon on March 23, 2018
Chemistry
‘At 600.0 K, the equilibrium constant based on pressure is Kp = 1.83 x 10^2. Gaseous C2H4 and H2O are placed in a 1.2 L closed flask at 600.0 K. At equilibrium, the flask contains 0.0062 mol of C2H4 and 0.041 mol of H2O. Determine the equilibrium

asked by SaraF275 on January 30, 2018
Chemistry practice
Using the form of energy diagram,make a concept map of the two different methods of calculation of reaction enthalpy(via the bond enthalpy and via the enthalpy of formation)

asked by Gift on July 31, 2011

Chemistry
When a chemist burns ammonia according to the reaction below she finds that the reaction releases heat. (It is exothermic.) 4NH3(g) + 3O2(g) 2N2(g) + 6H2O(g) The enthalpy of the reaction DH = -1267 kJ. What is the enthalpy change (in kJ) when 7 grams of

asked by Devin on January 12, 2015
Chemisty
Calculate the standard enthalpy change for the following reaction at 25 °C. MgCl2(s)+H2O(l)–>MgO(s)+2HCl

asked by Orton on April 1, 2013
Chemistry
Calculate the standard enthalpy change for the following reaction at 25 °C. MgCl2(s) + H2o(l) —> MgO(s) + 2HCl(g)

asked by Matt on June 19, 2013
Chemistry
In the dehydrogenation of ethane two reactions take place: C2H6 => C2H4 + H2 C2H6 + H2 => 2CH4 The mass distribution of the product is: 27% C2H6; 33% C2H4; 13% H2; 27% CH4. 1. What was the conversion of C2H6 to CH4? 2. What was the yield of C2H4 expressed

asked by Hoang on November 24, 2016
Chemistry
O3 + NO –> O2 + NO2 (all in gas state) Calculate the change in enthalpy for the reaction at room temp. using the following data ^Hf: O3 = 143 NO = 90 NO2 = 33 So, I have 143+90–> X + 33. I don’t know what the enthalpy of O2 is. I assume you simply

asked by Anonymous on February 18, 2008
Chemistry
Calculate the enthalpy of formation if 78.5 g of carbon dioxide in the following reaction: C(s) + H2O(g) –> CO2(g) Use the following equations: a) H2O(l) –> H2(g) + (1/2)O2(g): Δ°f = +285.8 kJ/mol b) C2H6(g) –> 2C(s) + 3H2(g): Δ°f = +84.7 kJ/mol c)

asked by anon on March 23, 2017
Chemistry
Using standard enthalpies information, calculate the standard enthalpy change for this reaction. a)(thermite reaction) 2Al(s) + Fe2O3(s) = Al2O3(s) + 2Fe(s) b)Mg(OH)2(s) = MgO(s) + H2O(I) c)N2O4(g) + 4H2(g) = N2(g) + 4H2O(g) d)SiCl4(I) + 2H2O(I) = SiO2(s)

asked by Dan on July 3, 2014
Chemistry
Using standard enthalpies information, calculate the standard enthalpy change for this reaction: a) (thermite reaction) 2Al(s) + Fe2O3(s) = Al2O3(s) + 2Fe(s) b) Mg(OH)2(s) = MgO(s) + H2O(I) c) N2O4(g) + 4H2(g) = N2(g) + 4H2O(g) d) SiCl4(I) + 2H2O(I) =

asked by Brett on July 3, 2014
chemistry
Calculate the molar enthalpy change for this reaction: HCl(aq 1.00M) + NaOH -> NaCl(aq,.500M)+ H2O Initial temp: 22.15 degrees Celsius Extrapolated temp: 25.87 degrees Celsius DT: 3.72 degrees Celsius Notes: Calculate the enthalpy change for this reaction.

asked by Failure on November 10, 2015
chemistry
The reaction between 0.045 g of calcium with an excess of water was carried out in an ice calorimeter as used in this lab. The volume of water in the calorimeter decreased by 0.18 mL during the reaction a) Write the equation for the reaction which occurs.

asked by Anonymous on November 10, 2008

chem
Are bond energies (single and multiple bonds) applicable only to gas phase?? For instance, I can use the bond energy data to calculate for enthalpy of reaction for the formation of water: 2 H2(g) + O2(g) -> H2O(g) But I can’t directly use it to calculate

asked by Namie on September 19, 2012
chemistry
Are bond energies (single and multiple bonds) applicable only to gas phase?? For instance, I can use the bond energy data to calculate for enthalpy of reaction for the formation of water: 2 H2(g) + O2(g) -> H2O(g) But I can’t directly use it to calculate

asked by Namie on September 19, 2012
Chemistry
Calculate the enthalpy change, ΔrH, for the following reaction, 4 NH3 (g) + 5 O2(g) → 4 NO (g) + 6 H2O (g) given the thermochemical equations below. N2 (g) + O2 (g) → 2 NO (g) ΔrH° = +181 kJ N2 (g) + 3 H2 (g) → 2 NH3 (g) ΔrH° = 91.8 kJ 2 H2

asked by Hannah on October 2, 2011
physics 30
Given the reaction 3 NO2(g) + H2O(l) ¨ 2 HNO3(l) + NO(g) ƒ¢rH = -72.0 kJ, calculate the molar enthalpy of reaction, rH for: 1) NO2(g) 2) H20 (l) 3) HNO3 (l) 4) NO (g) Express you answer in Kj/mol

asked by ?????halp on February 10, 2015
Chemistry
The homework question is : Calculate the Delta H for the following reaction: C6H6 + O2 -> C + H2O(l) State whether the reaction is exothermic or endothermic. I’m not sure where to go with this but so far I balanced out the formula to this C6H6 + (3/2)O2 ->

asked by Alexa on December 1, 2014

Categories

## 2009 ap microeconomics free response answers

THE CORPORATION’S PLACE IN SOCIETY

Gabriel Rauterberg*

Morality, Competition, and the Firm: The Market Failures Approach to Business Ethics. By Joseph Heath. New York: Ox- ford University Press. 2014. Pp. ix, 372. \$65.

The social responsibility of business is to increase its profits.

—Milton Friedman1

Economic justice is concerned with the fairness with which benefits and bur- dens . . . are distributed . . . among organizational stakeholders.

—Newman S. Peery, Jr.2

The vast majority of economic activity is now organized through corpo- rations. The public corporation is usurping the state’s role as the most im- portant institution of wealthy capitalist societies. Across the developed world, there is increasing convergence on the shareholder-owned corpora- tion as the primary vehicle for creating wealth.3 Yet nothing like this degree of convergence has occurred in answering the fundamental questions of cor- porate capitalism: What role do corporations serve? What is the goal of cor- porate law? What should corporate managers do? Discussion of these questions is as old as the institutions involved.

Contemporary reflection on these questions takes the form of two starkly different and estranged orthodoxies.4 Both are now decades old, but neither shows any sign of either subsiding or emerging victorious. In corpo- rate finance, economics, and most of corporate law, the orthodoxy is that a corporation should aim exclusively to maximize shareholder value within

* Post-Doctoral Research Scholar, Program in the Law & Economics of Capital Markets, Columbia Law School.

1. Milton Friedman, The Social Responsibility of Business Is to Increase Its Profits, N.Y. Times, Sept. 13, 1970 (Magazine), at 32.

2. Newman S. Peery, Jr., Business, Government, and Society 12 (1995) (emphasis omitted).

3. Henry Hansmann & Reinier Kraakman, The End of History for Corporate Law, 89 Geo. L.J. 439, 439–41 (2001).

4. Usha Rodrigues, From Loyalty to Conflict: Addressing Fiduciary Duty at the Officer Level, 61 Fla. L. Rev. 1, 10 (2009) (“What is striking is that two different disciplines [of corporate law and business ethics] have apparently settled on two completely different answers to the central question in their fields—for whom should a corporation be governed? Even more striking has been the general lack of interest from either side in bridging the gulf be- tween business ethics and corporate law.” (footnote omitted)).

913

914 Michigan Law Review [Vol. 114:913

the constraints established by law (“shareholder theory”).5 In business eth- ics, the leading view is that corporate managers should balance the interests of all the constituencies affected by a firm’s actions, including employees, suppliers, consumers, owners, and the broader society (“stakeholder theory”).6

Joseph Heath’s new book, Morality, Competition, and the Firm,7 revisits these questions. Heath criticizes the two standard views and develops an alternative, which he calls a “market failures” approach (p. 1). Heath en- dorses much of the shareholder view, but offers a powerful critique of its application. In essence, he suggests that it is managers’ ethical responsibility to pursue shareholder wealth maximization if, and only if, doing so is con- ducive to aggregate social efficiency.8 Often this will be the case, but under

5. Academically, the shareholder value view is reflected in the leading treatises of corpo- rate finance, economics, and corporate law. See, e.g., Richard A. Brealey et al., Fundamen- tals of Corporate Finance 12 (8th ed. 2015) (“[T]here is a natural financial objective on which almost all shareholders can agree: Maximize the current market value of shareholders’ investment in the firm.”); Michael C. Jensen, Value Maximization, Stakeholder Theory, and the Corporate Objective Function, J. Applied Corp. Fin., Fall 2001, at 8, 8 (“Most economists would answer simply that managers must have a criterion for evaluating performance and deciding between alternative courses of action, and that the criterion should be maximization of the long-term market value of the firm.”); Eric W. Orts, The Complexity and Legitimacy of Corporate Law, 50 Wash. & Lee L. Rev. 1565, 1588 (1993) (“A favorite claim by law-and- economics reformers is that the principles of corporate law reduce to a single goal: maximize profit and shareholder wealth.”). Nor is this view merely an academic conceit. See Dodge v. Ford Motor Co., 170 N.W. 668, 684 (Mich. 1919), for what is certainly the most famous judi- cial articulation of this view: “[I]t is not within the lawful powers of a board of directors to shape and conduct the affairs of a corporation for the merely incidental benefit of sharehold- ers and for the primary purpose of benefiting others . . . .” See also Reinier Kraakman et al., The Anatomy of Corporate Law 28 (2d ed. 2009) (“[I]t is sometimes said that the appropri- ate role of corporate law is simply to assure that the corporation serves the best interests of its shareholders or, more specifically, to maximize financial returns to shareholders . . . .”); Busi- nesses’ Tax Dodges Are Burden to All, Morning Call (Mar. 1, 2000), http://articles.mcall.com/ 2000-03-01/news/3292412_1_tax-shelters-tax-loopholes-federal-income-taxes [http:// perma.cc/R4S8-8ZMR] (“The business of a corporation is to maximize its earnings for its shareholders[.]” (quoting then-House Majority Leader Dick Armey)).

6. Lumen N. Mulligan, What’s Good for the Goose Is Not Good for the Gander: Sarbanes- Oxley-Style Nonprofit Reforms, 105 Mich. L. Rev. 1981, 2004 (2007) (“By most accounts, stakeholder theory is the preeminent contemporary normative theory of business ethics, espe- cially among business practitioners.”); Robert Phillips et al., What Stakeholder Theory Is Not, 13 Bus. Ethics Q. 479, 489 (2003). See generally R. Edward Freeman, Strategic Manage- ment: A Stakeholder Approach (1984) (discussing stakeholder theory as a practical tool for business management); Robert Phillips, Stakeholder Theory and Organizational Eth- ics (2003) (discussing stakeholder theory as a dominant theory of organizational ethics).

7. Joseph Heath is a Professor in the Department of Philosophy and the School of Pub- lic Policy and Governance at the University of Toronto.

8. There are two principal conceptions of efficiency in welfare economics, termed Pareto efficiency and Kaldor-Hicks efficiency. One state of the world is a Pareto improvement over another if no one is worse off in the new state and at least one person is better off. A Pareto optimum exists when there could be no change to the state of the world that would make one person better off without making anyone worse off. Because of its extremely de- manding conditions, major social policies are unlikely to ever constitute strict Pareto improve- ments. Even a law against fraud, for example, makes con artists worse off. As a result, the

April 2016] The Corporation’s Place in Society 915

conditions of market failure—when the allocation of goods and services in a market is inefficient for some reason—it is possible to increase shareholder wealth without contributing to social efficiency. Heath’s approach forbids corporate managers from pursuing shareholders’ interests when doing so exploits a market failure. This simple ideal of corporate managers as custodi- ans of social efficiency turns out to have dramatic implications for business ethics.

The scholarship addressing what corporate managers should aim to achieve is extensive.9 What sets Heath’s book apart is the remarkable breadth of legal, economic, and political analyses that he brings to bear and the bril- liance with which he synthesizes them.10 This book is one of the new cen- tury’s most important contributions to addressing capitalism’s fundamental questions.

This Review begins with the foundations of the market failures ap- proach and a critique of the shareholder and stakeholder views. Heath’s crit- ical project is largely successful and surely one of the most important contributions of the book. I then turn to the viability of the market failures approach. While sympathetic to the insights driving it, I ultimately find the market failures view to be far more exacting than Heath imagines it to be. Heath’s book aspires to offer both compelling and realistic ethics for corpo- rate managers, and it is in his second aspiration that I think he fails. This is, in itself, rather striking. Heath explicitly takes his vision of corporate pur- pose and managerial ethics to consist solely of the pursuit of efficiency, which he calls a kind of “implicit morality of the market.”11 Yet even the naked goal of social efficiency imposes a set of moral requirements so de- manding as to be plainly utopian.

I then turn to what I take to be a clear-eyed—some might say pessimis- tic—assessment of the prospects for any demanding business ethic within the specific institutional environment of today’s corporate marketplace. Spe- cifically, I argue that features of that marketplace effectively punish any form of ethical conduct that cuts into corporate profits. In the current configura- tion, business ethics with bite is thus in a very real sense unsustainable. I

Kaldor-Hicks criterion of efficiency was developed. A change in the world is Kaldor-Hicks efficient if those who are better off as a result of the change could compensate those who are worse off, so that no individual was worse off, and at least one person was still better off. Jules L. Coleman, Economics and the Law: A Critical Review of the Foundations of the Economic Approach to Law, 94 Ethics 649, 649–51 (1984); see also J.R. Hicks, The Foundations of Welfare Economics, 49 Econ. J. 696, 700–01, 706 (1939); Nicholas Kaldor, Welfare Propositions of Eco- nomics and Interpersonal Comparisons of Utility, 49 Econ. J. 549 (1939).

9. See supra notes 4–6; infra Section I.A.

10. This Review cannot hope to cover the vast number of topics that Heath discusses in his provocative, nearly 400-page book, but students of applied ethics, sociology, political phi- losophy, corporate law, and economics will all find much of interest.

11. P. 173. Heath borrows this phrase from Christopher McMahon. See Christopher McMahon, Public Capitalism: The Political Authority of Corporate Executives 117 (2012).

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suggest how we might imagine alternative environments in which corpora- tions can aspire to more than profit.

I. What Are Corporations For?

There is nothing intrinsically valuable about the interests of sharehold- ers. So how did a single-minded emphasis on pursuing their interests be- come the dominant view of corporate purpose across economics, corporate law, and finance? Few slogans have put down as deep roots in the academic, popular, and political imaginations as Milton Friedman’s famous declara- tion that “The Social Responsibility of Business Is to Increase Its Profits.”12

Seeing the appeal of this view is thus important. Surprisingly, the easiest way to do so is through sketching the case for Heath’s own approach.

The basic architecture of the market failures approach is to focus on the normative goal of a system of private, market-based competition among producers and consumers, and then to elaborate a set of ethical principles based on promoting that goal. The goal is a simple one—social efficiency. The simplest way to see this is that the law actually prohibits forms of coop- eration that are promoted by everyday morality, effectively demanding that firms compete with one another. In particular, antitrust laws generally pro- hibit agreements among businesses in the same area to stop competing with each other.13 Corporate managers who agree, for instance, to charge the same price—and thus to “defect” from market competition—can go to prison as a result.14 This is despite the fact—or rather because of it—that price competition is a kind of prisoner’s dilemma for the firms involved, in which the outcome is suboptimal for all of them, but conducive to economic efficiency at a social level.15

Thus, the highly competitive markets that are characteristic of devel- oped economies do not simply appear by happenstance. They arise within a well-structured legal environment, which clearly defines and enforces con- tract and property rights16—and as mentioned, firms compete within a legal environment that expressly prohibits cartelization.17 A well-functioning market is thus a kind of staged competition or institutionalized collective- action problem designed to achieve the benefits of specific forms of compe- tition and avoid the pathologies associated with monopolies or price-fixing (pp. 5, 33).

The reason for seeking competitive markets is explained on the first day of Economics 101. A competitive market leads to an efficient allocation of

12. See Friedman, supra note 1, at 32.

13. Sherman Antitrust Act, 15 U.S.C. § 1 (2012) (making contracts, combinations, and conspiracies in restraint of trade potential felonies).

14. Id.

15. See p. 33.

16. Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else 6–10 (2000).

17. Sherman Antitrust Act § 1.

April 2016] The Corporation’s Place in Society 917

resources.18 Goods and services are directed toward those who express the greatest willingness to pay for them, and informative prices arise from the equalization of supply and demand.19 Heath thus takes efficiency to be the ultimate justification for market-based capitalism and the appropriate goal of corporate managers (p. 10). Markets are “essentially special-purpose in- stitutions designed to promote efficiency” (p. 10).

It would be more accurate to call the “market failures” approach to bus- iness ethics an “efficiency” account, as its guiding idea is that the ethic of business managers is to operate corporations to promote social efficiency. It bears emphasizing that this does not mean corporate managers are supposed to have social efficiency in mind whenever they make business decisions. In any adversarial context, participants can generate social benefits by compet- ing against each other—benefits that they need not personally have in mind (p. 28). For example, lawyers contribute to the justice of the adversarial sys- tem by zealously pursuing their clients’ cases, and athletes contribute to great athletic spectacles by pursuing their own victories.20

Indeed, managers’ usual contribution to competitive markets is compet- ing well, which means maximizing the value of the firm’s net product. This is equivalent to maximizing the value of the residual claim, that is, the re- turn to owners. Because most firms are owned by equity shareholders, max- imization of the residual claim means maximizing profits (profit is the revenue of a firm leftover after all of a firm’s contractual obligations have been satisfied).21 Thus, the typical way in which managers promote social efficiency is by pursuing shareholder wealth maximization. Heath thus walks us through the basic insights that lead quite naturally to the shareholder wealth maximization view of corporate ethics. That view boils down to the thesis that markets in which profit-seeking firms compete against each other generate benefits for all of society, and that the way to best ensure that firms are maximally profit-seeking are for managers to maximize the profits of a firm’s owners (pp. 28–33).

18. This well-known idea is formalized in the First Fundamental Theorem of Welfare Economics, which states that under certain general assumptions, a competitive equilibrium leads to a Pareto-efficient allocation of resources, which is a condition in which no one can be made better off without someone else being made worse off. This general conception of a competitive equilibrium is a foundation for welfare economics in general. See Hal R. Varian, Intermediate Microeconomics: A Modern Approach 522 (5th ed. 1999).

19. See, e.g., Paul Anthony Samuelson, Foundations of Economic Analysis 238–39 (photo. reprint 1971) (1947).

20. See p. 28.

21. See p. 31. The people best suited to ensuring that firms are competitive are their owners, for the simple reason that the owners of a business are its residual claimants—the group entitled to all of the profits of a firm, but only its profits. Other individuals involved with a firm, such as employees, bondholders, suppliers, and consumers, are fixed claimants— they have a specific contractual agreement with the firm, which grants them some fixed sum. Not so with owners, who are entitled only to any firm revenue that is leftover once everyone with a fixed contractual claim has been paid—that is, to profit. See Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416, 1446–47 (1989).

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A. The Market Failures Approach

So how does the market failures approach differ from the shareholder view? The key idea of the market failures approach is that, while pursuing shareholder wealth maximization will promote social efficiency under many circumstances, there are a wide variety of situations in which this is not the case. Under those circumstances, corporate managers are obliged to not maximize shareholder value because doing so does not promote social efficiency.

There are two important and distinct claims here. The first is identifying the conditions under which pursuit of firm profitability does not promote economic efficiency. These conditions are referred to as market failures.22 For market competition to generate Pareto efficiency, a number of restrictive conditions known as the Pareto conditions must be in place. When one or more of these conditions is not satisfied, a market will not reach a Pareto optimal condition—it will, put plainly, fail to be efficient.23 Well-known market failures include information asymmetries, externalities, and public goods.24 These market failures are unfortunately common.25 The simplest example of a market failure may be pollution, which is a negative externality. A negative externality is a situation in which one party imposes the costs of a decision he makes on another party without fully compensating that party. So, while it is comparatively easy to protect individuals’ property rights against trespass over their land, it is very difficult to enforce an individual’s right to clean air over her house. As a result, industrial firms can produce harmful toxins that permeate the atmosphere and go unpunished, allowing them to effectively externalize the costs of their firms’ business on the local citizens.26

When it is difficult to enforce property rights, say over air, a negative externality may occur. In that case, the market could fail because the pollut- ing business does not need to price the cost of its pollution into its activity.

22. See Paul A. Samuelson & William D. Nordhaus, Economics 677 (19th ed. 2010) (defining market failure as “[a]n imperfection in a price system that prevents an efficient allocation of resources”); Joshua D. Wright, The Antitrust/Consumer Protection Paradox: Two Policies at War with Each Other, 121 Yale L.J. 2216, 2222 (2012) (“A market failure occurs when functioning markets fail to realize full gains from trade through efficient production.”); see also Bernard Salanié, Microeconomics of Market Failures 1 (MIT Press 2000) (1998) (defining market failures as “circumstances where market equilibrium is not optimal”).

23. See Christopher R. Leslie, Achieving Efficiency Through Collusion: A Market Failure Defense to Horizontal Price-Fixing, 81 Calif. L. Rev. 243, 267–69 (1993).

24. Harvey S. Rosen, Public Finance 47–48 (7th ed. 2005); Maxwell A. Miller & Mark A. Glick, The Resurgence of Federalism: The Case for Tax-Exempt Bonds, 1 Tex. Rev. L. & Pol. 25, 29 (1997).

25. See generally Ryan Bubb & Richard H. Pildes, How Behavioral Economics Trims Its Sails and Why, 127 Harv. L. Rev. 1593, 1602 (2014) (“Familiar types of market failure include externalities, asymmetric information, and market power.”); Benjamin K. Sovacool, Placing a Glove on the Invisible Hand: How Intellectual Property Rights May Impede Innovation in Energy Research and Development (R&D), 18 Alb. L.J. Sci. & Tech. 381, 383 (2008).

26. See Miller & Glick, supra note 24, at 29–30.

April 2016] The Corporation’s Place in Society 919

Under such circumstances, pursuing shareholder profit by polluting maxi- mizes the firm’s value, but rather than promoting social efficiency, it en- riches shareholders at the expense of society.

Heath’s prescription is simple: in such cases, managers must not engi- neer or exploit the market failure. The “set of permissible profit-maximizing strategies is limited to those strategies that would be permissible under con- ditions of perfect competition” (p. 34). Corporate managers should not pol- lute (beyond what is socially desirable), seek monopolies, seek to deceive their customers about the quality of their products, erect barriers to entry, or otherwise bring about or exploit a market failure (pp. 36–37).

Instead, it is the duty of corporate managers to avoid adopting any busi- ness strategy that increases firm profitability by exploiting some market fail- ure (p. 37). Corporate managers may not pursue shareholders’ interests when they come at society’s expense (pp. 38–39). The approach’s major claim is as follows:

[T]he market is essentially a staged competition, designed to promote Pareto efficiency, and in cases where the explicit rules governing the com- petition are insufficient to secure the class of favored outcomes, economic actors should respect the spirit of these rules and refrain from pursuing strategies that run contrary to the point of the competition. (p. 5)

The market failures approach diverges from the shareholder view by insist- ing that when the justificatory link between shareholder wealth maximiza- tion and social efficiency breaks down, managers not only cease to have an obligation to maximize shareholder value, but they are obligated to avoid pursuing it when doing so exploits some market failure (pp. 31, 36–37). As Heath puts it, “[a] competitive market only serves to promote efficiency under certain conditions, and there are various ways of acting that subvert it. Such actions are not just unethical, but egregiously so, because they fail to satisfy even the artificially low standard that is set for the evaluation of mar- ketplace behavior” (p. 10).

I consider concerns about implementation in Part II, but putting those aside, it is difficult to disagree with Heath’s revision of the standard corpo- rate finance view. After all, few in economics, corporate finance, or corpo- rate law think there is something intrinsically valuable about serving shareholders’ interests; rather, serving those interests makes sense in a broader picture in which doing so serves society’s interests. The link between those two, however, is contingent. It requires an absence of market failure, and when markets fail, so may the link between shareholder value and social efficiency.

Two naı̈ve illusions may nonetheless fuel the position that the pursuit of shareholder value within the constraints of law exhausts managers’ moral obligations. One is that markets never fail in important ways. Given the experience of the last few decades with important market failures—includ- ing negative externalities like pollution, underproduction of public goods,

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information asymmetries, and market power—this position seems remarka- bly Pollyannaish. One need only recall the fairy-tale conditions under which the Coase theorem or First Fundamental Welfare theorem hold.27

The second illusion is that when markets fail, the government should resolve those failures, and if it does not do so, it is not managers’ obligation to do the right thing. This view cannot survive scrutiny either. First, even in principle, legal interventions are extremely costly and intrusive and face con- siderable difficulties in detecting and punishing all incidences of wrongdo- ing (p. 34). Even more importantly, the process of passing legislation is subject to a widely documented set of pathologies that make it difficult even for responsive democratic governments to pass desirable laws.28

Lest Heath’s account sound like that of a philosophical radical, it is worth examining precisely how close his view is to the mainstream of corpo- rate law. A leading treatise on the subject, The Anatomy of Corporate Law,29

provides a brief account of the normative foundations of the authors’ theory of corporate law. Authors Henry Hansmann, Reinier Kraakman, and others ask, “[w]hat is the goal of corporate law?” and answer that “[a]s a normative matter, the overall objective of corporate law—as of any branch of law—is presumably to serve the interests of society as a whole[,]” and in particular, “the aggregate welfare of all who are affected by a firm’s activities, including the firm’s shareholders, employees, suppliers, and customers, as well as third parties such as local communities and beneficiaries of the natural environment.”30

They then turn to the narrower proposition that the goal of corpora- tions should be to serve the interests of shareholders or maximize the firm’s value for them. It is a claim Hansmann and Kraakman have endorsed else- where,31 but Hansmann and Kraakman’s service in The Anatomy of Corpo- rate Law is to disambiguate two distinct interpretations of that claim. One interpretation is to take the assertion at face value as saying that the sole

27. See pp. 3, 34.

28. See, e.g., Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups 22–57 (1971).

29. Kraakman et al., supra note 5. Heath is clearly familiar with the seminal treatises on corporate law. See, e.g., p. 123.

30. Kraakman et al., supra note 5, at 28. Kraakman and his coauthors equate “the aggregate welfare” with “overall social efficiency” and Kaldor-Hicks efficiency, and I use these terms interchangeably here as well. Id. More precisely, they equate social welfare with “Kaldor- Hicks efficiency within acceptable patterns of distribution”—an important caveat. Id. at 28 n.79; see also William T. Allen et al., Commentaries and Cases on the Law of Business Organization 7 (3d ed. 2009) (urging the use of Kaldor-Hicks efficiency as the criterion for evaluating corporate law and corporate governance arrangements).

31. See, e.g., Henry Hansmann & Reinier Kraakman, Reflections on the End of History for Corporate Law, in The Convergence of Corporate Governance: Promise and Prospects 32, 32–33 (Abdul A. Rasheed & Toru Yoshikawa eds., 2012) (“The strongest and clearest claim we make is . . . that what we term the ‘standard shareholder oriented model’ (SSM) . . . is the most attractive social ideal for the organization of large-scale enterprise.”); Hansmann & Kraakman, supra note 3, at 439 (“There is no longer any serious competitor to the view that corporate law should principally strive to increase long-term shareholder value.”).

April 2016] The Corporation’s Place in Society 921

interest of corporate law is maximizing value for shareholders. They dismiss this interpretation, noting that “[t]here would be little to recommend” a system in which creditors or employees lost \$2 for every \$1 shareholders gained.32 Instead, they endorse a second interpretation, which is that “focus- ing principally on the maximization of shareholder returns is, in general, the best means by which corporate law can serve the broader goal of advancing overall social welfare.”33

In essence, the market failures approach claims that corporate managers should seek to maximize shareholder value when and only when it promotes aggregate efficiency, serving the interests of society as a whole.34 Generally, pursuing shareholder wealth does promote social efficiency, but under cer- tain identifiable circumstances, this is clearly not the case. In those situa- tions, Heath insists, the very foundations of a view like Hansmann and Kraakman’s require that corporate managers not pursue shareholders’ profits.

B. Stakeholder Theory

The most important alternative to the corporate finance view is stake- holder theory, which Heath subjects to exacting criticism. Stakeholder the- ory claims that corporations should treat their many constituents— shareholders, employees, creditors, consumers, neighborhoods—equally, carefully balancing their interests when they conflict.35 Heath’s objections to stakeholder theory generally fall into two broad camps. The first set of criti- cisms aims to deflate motivations for the theory by showing that ordinary adversarial marketplace behavior is neither principally about self-interest nor immoral, contrary to certain commonsense intuitions that motivate some stakeholder theorists. The second set of criticisms aims to show that a firm that genuinely catered equally to the interests of all of its patrons or constituents, as desired by stakeholder theory, would be significantly ineffi- cient. This matters because stakeholder theory does not present itself as an alternative to capitalism, like socialism. Instead, it presents itself as a concep- tion of business ethics to be taught to corporate managers. As a result, it would be a very curious feature of such a view if it was foundationally in- compatible with a competitive corporate marketplace.

32. Kraakman et al., supra note 5, at 28.

33. Id.

34. Heath refers to his own view as “Paretian,” p. 5, but given the near-impossibility of genuine Pareto improvements when a policy dramatically alters a business’s strategy, it seems more accurate to conceptualize his account as aiming at Kaldor-Hicks efficiency. It is worth noting that while Heath’s view is a novel entrant to the current debate in business ethics, his general position that the structures of a market economy are justified where (and only where) they serve the interests of society as a whole is at least as ancient as Aquinas.

35. See Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 Va. L. Rev. 247, 253 (1999); Kevin Gibson, The Moral Basis of Stakeholder Theory, 26 J. Bus. Ethics 245, 245–46 (2000); see also Julia Sferlazzo, Learning Legal Ethics from MBAs: How a Comparison of Legal and Business Ethics Could Promote Ethical Professional Behavior, 25 Geo. J. Legal Ethics 769, 773 (2012).

922 Michigan Law Review [Vol. 114:913

A preliminary confusion, while not especially sophisticated, is suffi- ciently widespread to merit attention. In substance, this position posits that shareholder wealth maximization merely glorifies the self-interest of share- holders and that the exclusive pursuit of self-interest is a bad thing. Equating self-interest with shareholder wealth maximization is confused, however, at least if treated as a criticism of shareholder value as a goal of corporate law or corporate managers. After all, shareholder wealth maximization is typi- cally not the self-interested goal of corporate managers. The natural goal of corporate managers is to enrich themselves, rather than shareholders. Indeed, this problem of corporate managers’ interests not being aligned with that of a firm’s owners is widely considered the chief problem for corporate law to ameliorate.36

Heath persuasively demonstrates that stakeholder theory dramatically exacerbates the principal-agent problem between shareholders and corpo- rate managers. He points out that the developed world actually has ample experience in the operation of stakeholder-oriented firms (pp. 55–58). After all, in the mid-twentieth century, it was common for the governments of wealthy nations to operate major corporations that were expected not only to turn a profit, but also to serve other social responsibilities (pp. 55–57). Heath surveys the ample social-scientific evidence on the difficulties these state-owned enterprises faced in accomplishing their goals. The bottom line is that these firms failed not only to be profitable, but also to produce many of the social benefits they were supposed to achieve. They became instead havens for unprofitability and for opposition—within the government- owned enterprise—to state regulation of market failures (pp. 57–58).

A different line of criticism of stakeholder theory builds on Henry Hansmann’s enormously influential work on corporate ownership.37 One of Hansmann’s most interesting contributions is showing that while most firms are owned by shareholders—contributors of equity capital—every one of the firm’s constituents sometimes owns a firm.38 So, in a dairy cooperative, suppliers jointly own the business; in a mutual insurance company, the cus- tomers own it; in a law firm, the partners collectively own it, and so on.39

Hansmann’s analysis of when a given constituent will own a firm—and of why shareholders are such prevalent owners—centers on the political costs of ownership.40 In general, the most efficient owners of the firm tend to be the stakeholders who share homogenous interests in the firm’s perform- ance.41 The more heterogeneous the desires of the owners, the more conflict

36. See, e.g., Kraakman et al., supra note 5, at 35–53.

37. See chapter 5.

38. Henry Hansmann, The Ownership of Enterprise 12–16 (1996); see also Henry Hansmann, Ownership of the Firm, 4 J.L. Econ. & Org. 267 (1988).

39. Hansmann, The Ownership of Enterprise, supra note 38, at 13–16.

40. Hansmann, Ownership of the Firm, supra note 38, at 277–78.

41. Id. at 278.

April 2016] The Corporation’s Place in Society 923

there is among owners, and the harder it becomes to assess whether manage- ment is performing well.42 From this perspective, stakeholder theory poses an enormous problem for efficiently run businesses because it requires man- agers to attempt to equally balance the interests of all constituents, effec- tively importing into every firm the defects of extremely heterogeneous owner interests. The problem is that no firm is owned by all of its patrons and almost no businesses are even owned by multiple groups of patrons.43 The total absence of such firms is powerful evidence that there are deep ineffi- ciencies introduced by management that must cater to heterogeneous stakeholders.

II. The Prospects for Business Ethics: A Critical Assessment

“[T]he point of philosophy is not just to understand the world, but to change it.”44 Heath laudably thinks the point of business ethics is to improve the quality of corporate management. He notes that while “[m]any business ethicists . . . deny that they have any ambition to make people behave more ethically[,]” he “actually consider[s] that objective to be central to [his] task” (p. 12). Indeed, Heath is emphatic in his belief that:

[T]he central role of business ethics is to . . . correct the self-understanding of participants in the market economy, who are being bombarded—both by the business press and a certain segment of the academy, who appear not to have recovered from the epiphany they experienced in their first- year economics class—by a seductive but ultimately false suggestion that the institutions of the market free them from all forms of moral constraint. (p. 19)

Thus, while Heath’s theory may have implications for a variety of domains, its central ambition is to offer realistic prescriptions for the business ethics that managers should be taught.

Unfortunately, the market failures approach faces some debilitating and potentially fatal problems. In fact, these problems generalize across the en- tire class of theories in business ethics that ask more of corporate managers than the shareholder approach does. This diagnosis is rather grim, but it is necessary to understand the obstacles that business ethics faces to make progress.

A. The Problem of Competition

The most immediate problem is the competitive structure of the econ- omy itself—a “staged competition” (p. 5) in which we deliberately pit busi- nesses against each other in an adversarial contest designed to produce

42. Id. at 279.

43. But see p. 130.

44. P. 12. This is, of course, an echo of Marx’s famous declaration that “The philoso- phers have only interpreted the world in various ways; the point is to change it.” Karl Marx, Theses on Feuerbach, in The German Ideology 571 (1998).

924 Michigan Law Review [Vol. 114:913

certain efficiency benefits. In this competitive environment, any firm willing to substantially reduce its profits to act more ethically will see its market share progressively diminish until it goes out of business. Deliberately rais- ing prices to act ethically is unsustainable unless every other competitor also does so (p. 85). This is because the character of market competition selects out unprofitable firms and makes no exceptions for unprofitability driven by ethical conduct. Thus, in highly competitive industries, firms opting to es- chew profitable, legal, but unethical business strategies are unlikely to sur- vive. The very structured competition that makes the market effective in establishing useful incentives and generating informative prices will punish conduct designed to unilaterally serve the ends of the broader society.

Heath’s book hints at a response to this objection,45 which is that busi- ness ethics should strive to facilitate multilateral action by corporate manag- ers to stop exploiting some market failure or avoid engineering or exploiting new market failures. This is not as far-fetched as it may seem. There are other areas of the economy that are highly competitive but in which ethical behavior is widely observed—ethical behavior that eats into profits. We do not generally think that doctors prescribe the most expensive drugs and treatments possible simply because they can. The medical profession, we think, instills in its members norms that have at least some ethical bite.46

Heath suggests that through iterative interactions, managers in the same in- dustry may build up sufficient trust with one another so as to enter agree- ments to each avoid taking advantage of some market failure (p. 38).

Agreements among corporate managers to jointly engage in unprofita- ble ethical conduct, however, will suffer from the same powerful temptation to “defect,” which makes agreements to fix prices so unstable, even in the absence of antitrust enforcement.47 Because a member of a cartel can always make more money by unilaterally defecting and lowering prices, cartels are inherently unstable.48 Agreements sacrificing profit would also be unstable because such industries would attract new and less scrupulous entrants.49

These problems do not suggest that agreements among managers to act un- profitably but ethically are impossible—only that they are difficult.

45. See p. 38.

46. See p. 71 (noting the medical profession’s “stringent” code of conduct enforced by mechanisms such as medical licensing boards). There are legitimate questions as to whether the ethical professionalization of corporate managers is a plausible goal. Management certainly lacks the historical pedigree and accrued norms of other professions, such as law, medicine, or engineering, but there are some hints that MBA students are beginning to take the idea of ethical norms seriously. See, e.g., Robert Rhee et al., Ethical Issues in Business and the Lawyer’s Role, 12 Transactions: Tenn. J. Bus. L., no. 3, 2011, at 37, 37 (discussing Harvard and Columbia business schools’ requirement that MBA students make pledges to act ethically and responsibly).

47. See Christopher R. Leslie, Trust, Distrust, and Antitrust, 82 Tex. L. Rev. 515, 524–25 (2004).

48. See id. at 526.

49. See id. at 565.

April 2016] The Corporation’s Place in Society 925

To recap, the first distinct problem facing business ethics is the competi- tive structure of the corporate marketplace. Firms run by ethical managers willing to sacrifice profit for society’s interests will likely be eliminated by competitors in the long run. Let us assume, however, that because of manag- ers’ professionalization, business ethics avoids this obstacle.

B. The Problem of External Control

A second distinct problem will still arise to bar business ethics with bite from surviving. This is the fact that corporate managers ultimately answer to a corporation’s shareholders.50 Even if business ethicists succeeded in instil- ling in corporate managers a sense of their high ethical vocation, ethical managers would soon be weeded out by less ethical owners, unless the latter were also converted. If profits began to decline at a firm or even across an entire industry, shareholders would quickly assemble at the next board of directors meeting and select a new board. This board would promptly fire the ethical officers and replace them with less scrupulous successors. Unlike the partners of a law firm, who must answer solely to each other, the manag- ers of a public corporation must answer to the unprofessionalized share- holders of the firm. There is, of course, some room for slack, even in competitive product markets with competition for corporate control as well. Managers are able to extract some private benefits—and create some public benefits—without repercussions, but the competitiveness of both markets will impose important limits.

It seems to be a curious myopia of business ethics—in which, unfortu- nately, Heath is also guilty—that it has largely sought to reimagine the ethics of managers without revisiting the ethics of owners or consumers as well. We are left groping for a reason why business ethics has left our broader understanding of capitalism and its central regulatory institutions un- touched. Perhaps it is that in everyday life we do not expect there to be a class of controlling persons who oversee and systematically punish the altru- istic for their sacrificial conduct. But this is exactly the situation that will face socially minded managers in a world in which nothing has changed the perspective or control of shareholders over firms’ management. Unlike, per- haps, personal ethics, you simply cannot formulate viable business ethics for corporate managers without paying careful attention to the corporate environment.

Even a publicly traded firm both owned and managed by individuals who subscribed to a market failures philosophy would be dynamically unstable. The share price of that company’s stock would be depressed relative to what its value would have been if the company acted less ethically. The price of a public company’s shares reflects the discounted value of the future cash flows associated with that company.51 If that company had made an ethically

50. See, e.g., Edward B. Rock, The General Counsel of a Nonprofit Enterprise: Some Ques- tions, 46 Hous. L. Rev. 17, 19 (2009).

51. Lawrence A. Hamermesh & Michael L. Wachter, The Short and Puzzling Life of the “Implicit Minority Discount” in Delaware Appraisal Law, 156 U. Pa. L. Rev. 1, 47 (2007) (“In

926 Michigan Law Review [Vol. 114:913

driven decision to be less profitable, then the share price would reflect that long-term drop in profitability. This depression of the share price, however, creates an automatic profit opportunity for a prospective purchaser willing to take control of the firm and reverse course. As a result, for the very reason of their ethical conduct, ethical firms would be perennial takeover targets.52

We should expect business ethics that target solely corporate managers to suffer greatly at the hands of an ownership class if the owners remained indifferent to those ethical values.

If this seems extreme, consider the effects of adopting a market failures approach on some of the largest corporations. Assume that the scientific majority is correct that adverse global climate change is driven by current human levels of carbon use. If so, the carbon used in fossil fuels is enor- mously underpriced because of a market failure that prevents the price of carbon products from reflecting environmental harms caused by carbon use.53 Part of the profit of major oil companies, such as ExxonMobil, is driven by the fact that they sell products that are hugely underpriced—as opposed to how they would be priced in a complete market—since they benefit from market failure. Imagine, if you can, that the senior manage- ment of ExxonMobil decided to begin pricing their products at a level that reflected the actual cost of those products to society. That is, they decided to stop exploiting the market failure. According to current estimates, they would have to voluntarily pay \$85 per CO-2 ton.54 Adopting this policy would not only cause Exxon’s share price to drop, it would cause it to plum- met. Even if the owners did not sue management,55 either their own share- holders or new owners would soon fire them. The new owners would

both finance theory and the appraisal remedy, the value of a shareholder’s stock is the pro rata value of the discounted future free cash flows . . . .”).

52. The shareholder approach does not face this obstacle. Agency costs are overwhelm- ingly more likely to make a corporation unprofitable than profitable, so corporations that are better at controlling agency costs should be more likely to survive in the long run. Id. at 36.

53. Cf. Timothy J. Brennan, Prizes Versus Patents: A Comment on Jonathan Adler’s Eyes on a Climate Prize: Rewarding Energy Innovation to Achieve Climate Stabilization, 42 Envtl. L. Rep. 10719, 10719 n.7 (2012) (“The primary virtue is that if carbon used in fossil fuels is underpriced because environmental harms, particularly from climate change, are not incorpo- rated in the price, then a carbon tax comes closer to getting prices right in the economy rather than force a gap between prices and marginal cost.”).

54. Nicholas Stern, Executive Summary of Stern Review: The Economics of Cli- mate Change xvi (2007), http://webarchive.nationalarchives.gov.uk/20130129110402/http:// www.hm-treasury.gov.uk/d/Executive_Summary.pdf [http://perma.cc/8XT2-837S].

55. It is unclear whether a firm’s owners could have a viable suit against their managers for breach of fiduciary duty if management were to avoid a profitable business strategy for ethical reasons. The substantial discretion provided to corporate managers by the business judgment rule may protect them from such a suit, and the case law of many states suggests that their highest courts do not share the view of many corporate scholars that the duty of corporate managers is solely to maximize shareholder value within the constraints of law. See generally Einer Elhauge, Sacrificing Corporate Profits in the Public Interest, 80 N.Y.U. L. Rev. 733, 738 (2005) (“Corporate managers . . . have always had some legal discretion (implicit or explicit) to sacrifice corporate profits in the public interest. . . . None of the fifty states has a statute that imposes a duty to profit-maximize or that makes profit-maximization the sole

April 2016] The Corporation’s Place in Society 927

acquire shares at low prices, intending to quickly increase shareholder value (at society’s expense) by reversing corporate policy. This example is not cho- sen at random. The Stern Report, probably the best known government re- port on the subject, notes that “[c]limate change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen.”56

This is a point worth emphasizing. Any approach to business ethics that bites into the profits of a firm but ignores the market for corporate control is going to suffer enormous problems in achieving any acceptance. Realizing a market failures or “efficiency” approach to business ethics thus faces con- siderable obstacles, which is something to reflect on. Market efficiency on its own implies a set of moral demands that are so startling in their scope as to seem almost utopian.

So, what is to be done? I propose a brief suggestion, not as an actual candidate for reform (it is too radical for my taste), but rather as an illustra- tion of the kind of dramatic change to the corporate control environment that might ease some of the tensions facing business ethics. There has been an increasing trend over the last fifteen years for U.S. financial legislation to include substantive corporate governance requirements.57 There has also been a recent rethinking of what exactly the status of being a “public” cor- poration should entail.58 At the intersection of these two developments is a candidate for the kind of structural reform that is likely necessary for a vi- sion of business ethics like Heath’s to become feasible. The idea is to have a “market failures” independent director on the board of each public com- pany. This director would ensure that the firm did not exploit any market failure, or more modestly, ensure that a firm did not try to engineer any new

purpose of the corporation. . . . [T]he influential Principles of Corporate Governance by the American Law Institute (ALI) explicitly state that common law fiduciary duties do not pro- hibit managers from sacrificing profits to further the public interest . . . .”). But see Kent Greenfield, Using Behavioral Economics to Show the Power and Efficiency of Corporate Law as Regulatory Tool, 35 U.C. Davis L. Rev. 581, 605 (2002) (“Since the early-twentieth century case of Dodge v Ford, corporations have been deemed to have an ‘unyielding’ duty to look after the interests of the shareholders, which has been translated into a duty to maximize profits.” (footnotes omitted)).

56. Stern, supra note 54, at i.

57. See, e.g., Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010); Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745. This trend has not been without its able and trenchant critics. See, e.g., Roberta Romano, The Sarbanes-Oxley Act and the Making of Quack Corporate Governance, 114 Yale L.J. 1521, 1528 (2005); Stephen M. Bainbridge, The Creeping Federalization of Corporate Law, Reg., Spring 2003, at 26, 31.

58. See, e.g., Donald C. Langevoort & Robert B. Thompson, “Publicness” in Contempo- rary Securities Regulation After the JOBS Act, 101 Geo. L.J. 337, 338 (2013); Hillary A. Sale, The New “Public” Corporation, 74 Law & Contemp. Probs. 137, 141 (2011); Hillary A. Sale, Public Governance, 81 Geo. Wash. L. Rev. 1012, 1013–14 (2013).

928 Michigan Law Review [Vol. 114:913

market failure. So, for instance, such a director might oversee a firm’s lobby- ing activities to check whether the firm was inappropriately seeking to dis- suade government officials from trying to regulate some market failure.59

These market failures directors might also be part of organizations within industries devoted to reaching consensus on how that industry might stop exploiting a given market failure.

Conclusion

The obstacles of competition and owner control, while significant, should not cause us to despair. For inspiration, just look to the ingenuity that scholars have devoted to the central quest of corporate law—aligning the interests of managers with shareholders to overcome the agency problem created by the separation of ownership and control. Boards of directors, in- dependent directors, the market for corporate control, shareholder empow- erment, incentive contracts—the list of devices heralded at one time or another as the silver bullet for agency costs goes on and on.60 Heath’s book is a clarion call for scholars of corporate law and corporate finance to start taking seriously how the corporate environment could be altered to make it easier for corporations—as well as the government—to take steps to elimi- nate market failure. Imagining a more robust ethics for corporations re- quires carefully and comprehensively rethinking the institutional and social environment in which they function. Perhaps the greatest contribution of Joseph Heath’s wonderful book is to have clarified this task ahead.

59. Cf. Leo E. Strine, Jr. & Nicholas Walter, Conservative Collision Course?: The Tension Between Conservative Corporate Law Theory and Citizens United, 100 Cornell L. Rev. 335, 385 (2015) (noting that the ultimate shareholders of for-profit corporations are humans with concerns about the negative externalities that a profit-seeking motive alone may cause). An- other possible response—which I owe to Heath—is the use of “other constituency” statutes, which explicitly permit managers to consider nonshareholder interests. See A.A. Sommer, Jr., Whom Should the Corporation Serve? The Berle-Dodd Debate Revisited Sixty Years Later, 16 Del. J. Corp. L. 33, 41 (1991).

60. See, e.g., Ronald J. Gilson & Charles K. Whitehead, Deconstructing Equity: Public Ownership, Agency Costs, and Complete Capital Markets, 108 Colum. L. Rev. 231, 232 (2008).

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Categories

## parable of the sadhu

The Parable of the Sadhu Melissa W

The purpose of this assignment is to read The Parable of the Sadhu and compare the lessons to one’s ethical conduct in the workplace. During the comparison, one should identify ideas and images descriptive of how one should behave ethically in the workplace, who is easily stepped over on the way to the top, and the manner in which older workers are treated.

The Parable of the Sadhu is a story following a group of hiker’s trekking up the mountain to reach the summit (McCoy, 1983). They stumble upon an Indian Holy Man, a Sadhu, naked and barely alive in the snow (McCoy, 1983). Each member of differing hiking teams assisted the Sadhu with various items (McCoy, 1983). A few of the men clothed him, some transported him to a different, potentially better, environment, and one gave him food and drink (McCoy, 1983). Ultimately, the various people assisted him, but then left him while continuing the hike, not caring until later what the outcome of those actions on that day might mean (McCoy, 1983).

The story, full of imagery and descriptive words, one can almost see the beautiful icy scenery. There is unique irony in the story of the Mountaineers hiking up the mountain in comparison to hiking up the corporate ladder. One might even say it is impossible to do this climb in an ethical fashion (Integrity Consulting Services Ltd., 2014-2017). The men consistently gave to the Sadhu, but never really cared about the true betterment of the Sadhu (Integrity Consulting Services Ltd., 2014-2017). In the end, they left him on the mountain and it is unknown if he lives or dies (Integrity Consulting Services Ltd., 2014-2017).  It’s shallow for the Men to think they can throw wealth at the Man who had nothing, but still get to claim they have done right by him (Integrity Consulting Services Ltd., 2014-2017).

In the comparison to business, the Sadhu could be considered weak and therefore a risk to have around. Certainly, no one is feeling obligated to take full responsibility for him, rather, each Man gives a little, in order to proclaim they gave a lot (Integrity Consulting Services Ltd., 2014-2017). Also, how one responds to crisis demonstrates the ethical backbone one will have in the workplace. Hindsight is 20/20 and this is also true in this story as Bowen McCoy, ultimately, feels guilty about his ethical decision to leave the Sadhu on the Mountain while he continued his summit (McCoy, 1983). The right decisions are not always so clear (Integrity Consulting Services Ltd., 2014-2017).

To close, one can make numerous comparisons between personal ethics and group ethics in the corporate environment. The author of this essay has described the comparisons between the story and ethics in the workplace. Without clear direction, ethics go out the window and blame takes over (Integrity Consulting Services Ltd., 2014-2017). Since doing the right thing may vary when facing certain circumstances, it is almost guaranteed decisions one makes today, may not be the decision one makes tomorrow (Integrity Consulting Services Ltd., 2014-2017).

References

Categories

## devryu edu

7/27/2014 Operating Systems with Lab

http://www.devryu.net/re/DotNextLaunch.asp?courseid=9941870&userid=12233696&sessionid=dbc13b274a&tabid=Byw+Gpyv9Fc4t79+z0nw2UgHFsHnpXE5WPZx0XNBiVo7mxdUutJr3h8ER84OTUru&sessionFirst… 1/3

Lab 4 of 7: Main Memory Allocation – Part 1 of 2 (50 Points)

Click here to open the instructions to access the Linux environment.

Main Memory Allocation – Part 1 of 2

The objective of this week’s lab is to simulate and evaluate different memory allocation/deallocation techniques (first fit, next fit, best fit,

and worst fit)when a linked list is used to keep track of memory usage. You will implement a separate Memory component for TWO

of the four memory allocation/deallocation techniques. This lab is designed to be completed in two weeks. One

allocation/deallocation technique is due on Week 4, and the second technique is due on Week 5.

Print

Submit your assignment to the Dropbox located on the silver tab at the top of this page.

(See the Syllabus section “Due Dates for Assignments & Exams” for due dates.)

Remember This

Connect to the iLab

here .

i L A B A C C E S S

Accessing the Linux Environment

i L A B O V E R V I E W

7/27/2014 Operating Systems with Lab

http://www.devryu.net/re/DotNextLaunch.asp?courseid=9941870&userid=12233696&sessionid=dbc13b274a&tabid=Byw+Gpyv9Fc4t79+z0nw2UgHFsHnpXE5WPZx0XNBiVo7mxdUutJr3h8ER84OTUru&sessionFirst… 2/3

Assume that the memory is 256 KB and is divided into units of 2 KB each. A process may request between 3 and 10 units of memory.

Your simulation consists of three components: a Memory component that implements a specific allocation/deallocation technique, a

request generation component that generates allocation/deallocation requests, and a statistics reporting component that prints out the

relevant statistics. The Memory component exports the following functions:

1. int allocate_mem(int process_id, int num_units): allocates num_units units of memory to a process whose id is

process_id. If successful, it returns the number of nodes traversed in the linked list. Otherwise, it returns -1.

2. int deallocate_mem(int process_id): deallocates the memory allocated to the process whose ID is process_id. It returns 1,

if successful, otherwise “1.

3. int fragment_count( ): returns the number of holes (fragments of sizes 1 or 2 units).

The request generation component generates allocation and deallocation requests. For allocation requests, the component specifies the

process ID of the process for which memory is requested as well as the number of memory units being requested. For this simulation,

assume that memory is requested for each process only once. For deallocation requests, the component specifies the process ID of the

process whose memory has to be deallocated. For this simulation, assume that the entire memory allocated to a process is deallocated on

a deallocation request. You may generate these requests based on some specific criteria, e.g., at random or from a memory

allocation/deallocation trace obtained from some source.

There are three performance parameters that your simulation should calculate for the chosen two techniques: average number of external

fragments, average allocation time in terms of the average number of nodes traversed in allocation, and the percentage of times an

allocation request is denied.

Generate 10,000 requests using the request generation component, and for each request, invoke the appropriate function of the Memory

component for each of the memory allocation/deallocation techniques. After every request, update the three performance parameters for

each of the techniques. The statistics reporting component prints the value of the three parameters for the two techniques at the end.

You will submit four separate files to the dropbox for Week 4:

1. C or C++ program (source code)

2. Executable file (object)

Deliverables

7/27/2014 Operating Systems with Lab

http://www.devryu.net/re/DotNextLaunch.asp?courseid=9941870&userid=12233696&sessionid=dbc13b274a&tabid=Byw+Gpyv9Fc4t79+z0nw2UgHFsHnpXE5WPZx0XNBiVo7mxdUutJr3h8ER84OTUru&sessionFirst… 3/3

3. Instructions to execute the program

4. Analysis of the results for the chosen allocation/deallocation technique

The program for the main memory allocation/deallocation for the first chosen technique is due this week. This program is to be written in

C or C++ programming language on a Linux environment. The second technique is due on Week 5.

IMPORTANT: Please make sure that any questions or clarification about these labs are addressed early.

i L A B S T E P S

Main Memory Allocation – Technique 1 (50 points) Back to Top

Categories

# FINC 340- FINAL EXAMINATION

A- MULTIPLE CHOICE – Answer any 60 of the following (60 points -1 point each)

1– An exchange traded fund that invests in the stocks of large corporations is an example of

A) direct investment.

B) indirect investment.

C) derivative investment.

D) tangible investment.

2- On a net basis, funds in the financial markets are generally supplied by

A) individuals.

B) both individuals and business firms.

D) the government.

3- Which of the following is an example of a tangible asset.

A) Bonds

B) mutual funds

C) real estate

D) stocks

4. Sarah purchased a stock one year ago at a price of \$32 a share. In the past year, she has received four quarterly dividends of \$0.75 each. Today she sold the stock for \$38 a share. Her capital gain per share is

A) \$3.00.

B) \$6.00.

C) \$(6.00).

D) \$9.00.

5. Investment bankers who join together to share the financial risk associated with buying an entire issue of new securities and reselling them to the public is called a(n)

A) selling group.

B) tombstone group.

C) underwriting syndicate.

D) primary market group.

6. Which one of the following statements about the NYSE is correct?

A) Each member of the exchange owns a trading post.

B) Any listed stock may be traded at any of 20 trading posts.

C) Brokerage firms are only permitted to have one individual trading on the floor of the exchange.

D) Buy orders are filled at the lowest price and sell orders are filled at the highest price.

7. The price an individual investor will pay to purchase a stock in the OTC market is the

C) bid price.

D) broker price.

8. Kayla invested \$3,000 and purchased shares of a German corporation when the exchange rate was \$1.00 = .70 euro. After six months, she sold all of the shares for 3,180 euros, when the exchange rate was \$1.00 = .68 euro. No dividends were paid during the time Heidi owned the shares of stock. What is the amount of Kayla’s gain or loss on this investment?

A) \$129.60 gain

B) \$1676 gain

C) \$1676 loss

D) \$250 loss

9. The purchase of stock with cash in the hope of earning a capital gain is known as taking a

A) long position in the stock.

B) short position in the stock.

C) long, margined position in the stock.

D) short, margined position in the stock.

10. Megan bought 200 shares of stock at a price of \$10 a share. She used her 70% margin account to make the purchase. Megan sold her stock after a year for \$12 a share. Ignoring margin interest and trading costs, what is Megan’s return on investor’s equity for this investment?

A) 67%

B) 29%

C) 14%

D) 10%

11. Emily bought 200 shares of ABC Co. stock for \$29.00 per share on 60% margin. Assume she holds the stock for one year and that her interest costs will be \$80 over the holding period. Ignoring commissions, what is her percentage return (loss) on invested capital if the stock price went down 10%?

A) -32%

B) -21%

C) -16%

D) -10%

12. Which of the following types of information will NOT be found in major urban newspapers?

A) price quotations for stocks of local interest

C) interest rates offered by local and national banks

D) real time price quotes for widely held stocks and exchange traded funds

13. Kelly bought a stock at a price of \$22.50. She received a \$1.75 dividend and sold the stock for \$24.75. What is Kelly’s capital gain on this investment?

A) \$4.00

B) \$3.75

C) \$2.25

D) \$1.75

14. Inflation tends to have a favorable impact on

A) real estate.

B) common stock.

C) preferred stock.

D) bonds.

15. When calculating the present value of either a future single sum or a future annuity, the applicable interest rate is usually called the

A) yield to maturity.

B) compound interest rate.

C) internal rate of return.

D) discount rate.

16. The closest approximation to the real, risk-free rate of interest is

A) The short-term Treasury bill rate plus the inflation rate.

B) The short-term Treasury bill rate minus the inflation rate.

C) The 10 year Treasury bond rate minus the inflation rate.

D) The 10 year Treasury bond rate minus the 1 year Treasury bill rate.

17. The markets in general are paying a 2% real rate of return. Inflation is expected to be 3%. ABC stock commands a 6% risk premium. What is the expected rate of return on ABC stock?

A) 2%

B) 5%

C) 8%

D) 11%

18. The required return on Beta stock is 14%. The risk-free rate of return is 4% and the real rate of return is 2%. How much are investors requiring as compensation for risk?

A) 8%

B) 10%

C) 12%

D) 14%

19. You find that the bid and ask prices for a stock are \$10.25 and \$10.30 respectively. If you purchase or sell the stock you must pay a flat commission of \$25. If you buy 100 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars?  A. \$50 B. \$25 C. \$30 D. \$55

20. Systematic risks

A) can be eliminated by investing in a variety of economic sectors.

B) are forces that affect all investment categories.

C) result from random firm-specific events.

D) are unique to certain types of investment.

21. When the stock market has bottomed out and is beginning to recover, the best portfolio to own is the one with a beta of

A) 0.0.

B) +0.5.

C) +1.5.

D) +2.0.

22. Which one of the following statements about common stock is true?

A) Common stock can provide attractive capital appreciation opportunities.

B) Dividends generally provide the greatest rate of return on common stocks.

C) Common stocks generally have a negative rate of return over a ten-year period.

D) The DJIA is the best indicator of the overall performance of common stocks.

23. Substituting EBITDA for EBIT when computing the times interest earned ratio will make the company appear

A) more leveraged.

B) less leveraged.

C) more profitable.

D) less efficient.

24. Nadine Enterprises has total assets of \$240,000, a debt-equity ratio of 0.60, and a return on assets of 9%. What is the return on equity?

A) 5.4%

B) 5.6%

C) 14.4%

D) 15.0%

25.  Which one of the following is a leverage measure?

A) times interest earned

B) net working capital

C) return on equity

D) net profit margin

26. Assume that you have recently purchased 100 shares in an investment company. Upon examining the balance sheet, you note the firm is reporting \$225 million in assets, \$30 million in liabilities, and 10 million shares outstanding. What is the Net Asset Value (NAV) of these shares?  A. \$25.50 B. \$22.50 C. \$19.50 D. \$1.95

27. The offer price of an open-end fund is \$18.00 and the fund is sold with a front-end load of 5%? What is the fund’s NAV?  A. \$18.74 B. \$17.10 C. \$15.40 D. \$16.57

28. Whisper numbers are

A) officially published forecast numbers provided by company management.

B) the official released estimates prepared by financial analysts.

C) generally less accurate than the released estimates by analysts.

D) generally higher than the released analysts’ forecasts.

29. You invest in a mutual fund that charges a 3% front end load, 1% total annual fees, and a 0% back end load on Class A shares. The same fund charges 0% front end load, 1% total annual fees, and a 2% back end load on Class B shares. What are the total fees in year one on a Class A investment of \$20,000 with no growth in value?  A. 658 B. 794 C. 885 D. 902

30. You invest in a mutual fund that charges a 3% front end load, 1% total annual fees, and a 0% back end load on Class A shares. The same fund charges 0% front end load, 1% total annual fees, and a 2% back end load on Class B shares. What are the total fees in year one on a Class B investment of \$20,000 if you redeem shares with no growth in value?  A. 596 B. 794 C. 885 D. 902

31. You put up \$50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of \$3.50. Your HPR was ____.  A. 4.00% B. 3.50% C. 7.00% D. 11.00%

32. The complete portfolio refers to the investment in _________.  A. the risk-free asset B. the risky portfolio C. the risk-free asset and the risky portfolio combined D. the risky portfolio and the index

33. An investment earns 10% the first year, 15% the second year and loses 12% the third year. Your total compound return over the three years was ______.  A. 41.68% B. 11.32% C. 3.64% D. 13.00%

34. Suppose you pay \$9,700 for a \$10,000 par Treasury bill maturing in three months. What is the holding period return for this investment?  A. 3.01% B. 3.09% C. 12.42% D. 16.71%

35. The rate of return on _____ is known at the beginning of the holding period while the rate of return on ____ is not known until the end of the holding period.  A. risky assets, Treasury bills B. Treasury bills, risky assets C. excess returns, risky assets D. index assets, bonds

36. Most studies indicate that investors’ risk aversion is in the range _____.  A. 1-3 B. 2-4 C. 3-5 D. 4-6

37. A measure of the riskiness of an asset held in isolation is ____________.  A. beta B. standard deviation C. covariance D. semi-variance

38.  If enough investors decide to purchase stocks they are likely to drive up stock prices thereby causing _____________ and ___________.  A. expected returns to fall; risk premiums to fall B. expected returns to rise; risk premiums to fall C. expected returns to rise; risk premiums to rise D. expected returns to fall; risk premiums to rise

39. Building a zero-investment portfolio will always involve _____________.  A. an unknown mixture of short and long positions B. only short positions C. only long positions D. equal investments in a short and a long position

40. Liquidity is a risk factor that __________.  A. has yet to be accurately measured and incorporated into portfolio management B. is unaffected by trading mechanisms on various stock exchanges C. has no effect on the market value of an asset D. affects bond prices but not stock prices

41. A stock’s alpha measures the stock’s ____________________.  A. expected return B. abnormal return C. excess return D. residual return

42. The measure of risk used in the Capital Asset Pricing Model is ___________.  A. specific risk B. the standard deviation of returns C. reinvestment risk D. beta

43. Random price movements indicate ________.  A. irrational markets B. that prices cannot equal fundamental values C. that technical analysis to uncover trends can be quite useful D. that markets are functioning efficiently

44. Stock prices that are stable over time _______.  A. indicate that prices are useful indicators of true economic value B. indicate that the market is not incorporating new information into current stock prices C. ensure that an economy allocates its resources efficiently D. indicates that returns follow a random walk process

45. If you believe in the __________ form of the EMH, you believe that stock prices reflect all relevant information including information that is available only to insiders.  A. semi-strong B. strong C. weak D. perfect

46. __________ is the return on a stock beyond what would be predicted from market movements alone.  A. A normal return B. A subliminal return C. An abnormal return D. An excess return

47. A market anomaly refers to _______.  A. an exogenous shock to the market that is sharp but not persistent B. a price or volume event that is inconsistent with historical price or volume trends C. a trading or pricing structure that interferes with efficient buying and selling of securities D. price behavior that differs from the behavior predicted by the efficient market hypothesis

48. The semi-strong form of the efficient market hypothesis implies that ____________ generate abnormal returns and ____________ generate abnormal returns.  A. Technical analysis cannot; fundamental analysis can B. Technical analysis can; fundamental analysis can C. Technical analysis can; fundamental analysis cannot D. Technical analysis cannot; fundamental analysis cannot

49. Insiders are able to profitably trade and earn abnormal returns prior to the announcement of positive news. This is a violation of which form of efficiency?  A. Weak form efficiency B. Semi-strong form efficiency C. Strong form efficiency D. Technical analysis

50. In an efficient market and for an investor that believes in a passive approach to investing, what is the primary duty of a portfolio manager?  A. Accounting for results B. Diversification C. Identifying undervalued stocks D. No need for a portfolio manager

51. The lack of adequate trading volume in stock that may ultimately lead to its ability to produce excess returns is referred to as the ____________________.  A. January effect B. liquidity effect C. neglected firm effect D. P/E effect

52. The put/call ratio is a ______ indicator.  A. sentiment B. flow of funds C. market structure D. fundamental

53. Consider two bonds, A and B. Both bonds presently are selling at their par value of \$1,000. Each pay interest of \$120 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 14%, _________.  A. both bonds will increase in value but bond A will increase more than bond B B. both bonds will increase in value but bond B will increase more than bond A C. both bonds will decrease in value but bond A will decrease more than bond B D. both bonds will decrease in value but bond B will decrease more than bond A

54. A high amount of short interest is typically considered as a __________ signal and contrarians may consider it as a _________ signal.  A. bearish; bullish B. bullish; bearish C. bearish; false D. bullish; false

55. An investor holds a very conservative portfolio invested for retirement but she takes some extra cash she earned from her year-end bonus and buys gold futures. She appears to be engaging in ___________.  A. overconfidence B. representativeness C. forecast errors D. mental accounting

56. If mutual fund portfolios are heavy in cash, market contrarians may interpret this as what kind of signal?  A. Buy signal B. Sell signal C. Hold signal D. This is not interpreted as a signal

57. Bonds rated _____ or better by Standard and Poor’s are considered investment grade.  A. AA B. BBB C. BB D. CCC

58. The __________ of a bond is computed as the ratio of coupon payments to market price.  A. nominal yield B. current yield C. yield to maturity D. yield to call

59. Which of the following bonds would most likely sell at the lowest yield?  A. A callable debenture B. A putable mortgage bond C. A callable mortgage bond D. A putable debenture

60. A 1% decline in yield will have the least effect on the price of the bond with a _________.  A. 10-year maturity, selling at 80 B. 10-year maturity, selling at 100 C. 20-year maturity, selling at 80 D. 20-year maturity, selling at 100

61. Yields on municipal bonds are generally lower than yields on similar corporate bonds because of differences in _________.  A. marketability B. risk C. taxation D. call protection

62. If interest rates are expected to rise, then Joe Hill should ____.  A. prefer the Wildwood bond to the Asbury bond B. prefer the Asbury bond to the Wildwood bond C. be indifferent between the Wildwood bond and the Asbury bond D. there is not enough information given to tell

63. The price of a bond at the beginning of a period is \$980.00 and \$975.00 at the end of the period. What is the holding period return if the annual coupon rate is 4.5%?  A. 4.08% B. 4.50% C. 5.10% D. 5.6%

64. All other things equal, which of the following has the longest duration?  A. A 20 year bond with a 10% coupon yielding 10% B. A 20 year bond with a 10% coupon yielding 11% C. A 20 year zero coupon bond yielding 10% D. A 20 year zero coupon bond yielding 11%

65. As a result of bond convexity an increase in a bond’s price when yield to maturity falls is ________ the price decrease resulting from an increase in yield of equal magnitude.  A. greater than B. equivalent to C. smaller than D. The answer is indeterminate.

66. The duration of a 5-year zero coupon bond is ____ years.  A. 4.5 B. 5.0 C. 5.5 D. 3..

67. Pension fund managers can generally best bring about an effective reduction in their interest rate risk by holding ___________________.  A. long maturity bonds B. long duration bonds C. short maturity bonds D. short duration bonds

68. The use of leverage is practiced in the futures markets due to the existence of _________.  A. banks B. brokers C. clearinghouse D. margin

69. Perfect timing ability is equivalent to having __________ on the market portfolio.  A. a call option B. a futures contract C. a put option D. a forward contract

70. Active portfolio managers try to construct a risky portfolio with _______.  A. a higher Sharpe measure than a passive strategy B. a lower Sharpe measure than a passive strategy C. the same Sharpe measure as a passive strategy D. very few securities

B- TRUE/FALSE- Answer any 15 out of the following (15 points-1 point each)

1-In the financial markets, individuals are net demanders of funds.

2-Under current tax laws, most taxpayers will pay a lower tax rate on capital gains than on income from wages.

3-Capital markets deal exclusively in stock. Money markets deal exclusively in debt instruments.

4-Securities that trade in the over-the-counter market are called unlisted securities.

5- Diversification is the inclusion of a number of different investments in a portfolio with the goal of increasing returns or reducing risk.

6-On-line trading has greatly lowered greatly lowered the cost of buying and selling stock as well as greatly increasing the speed of transactions.

7-Descriptive information might include the company’s lines of business, a list of major competitors, and recent changes in management.

8- An investor who requires a 7% rate of return should be willing to pay \$934.58 now to receive \$1,000 at the end of one year.

9- Sydney invested \$10,000 for an indefinite period at 5% per year. At the end of each year, she receives a a \$500 check for interest earned. This type of account pays simple interest.

10-\$10,000 invested in the NASDAQ Composite at the beginning of 1995 would have increased in value to over \$50,000 by the end of 1999.

11– High dividend payout ratios are more of a concern to analysts than low payout ratios.

12-The dividend valuation model (DVM) is very sensitive to the growth rate (g) being used, because it affects both the model’s numerator and its denominator.

13– Advocates of the weak-form efficient market hypothesis claim that past price movements are the best predictors of future price movements.

14- For technical analysts, the forces of supply and demand have an important effect on the prices of securities.

15- Bonds are typically a good investment choice for an individual who is seeking long-term preservation of capital.

16-The risk premium component of a bond’s market interest rate is related to the characteristics of the particular bond and its issuer.

17– According to the expectations hypothesis, if investors anticipate higher rates of inflation in the future, the yield curve will be down sloping.

18- If a bond’s yield to maturity is lower than its coupon rate, the bond will sell at a discount.

19- When developing an asset allocation scheme, it is best to weight each type of asset equally.

20– Investors need to monitor economic and market activity to assess the potential impact these factors can have on their investment portfolios.

C- QUESTIONS/ANSWERS- Answer any 5 of the following ( 25 points- 5 points each)

1) Discuss the relationship between stock prices and investors’ beliefs about the business cycle.

2) What is the advantage of charting the price of a security over a period of time?

3) Zachary has purchased an investment that he expects to produce income of \$3,000 at the end of the first year and \$4,000 at the end of the second year. If he requires an 8% rate of return compounded annually, what is the maximum amount that he can pay and still earn the required rate of return?

4) Over the past 4 years, the annual rates of return on stock of Brown & Warren Inc. have been -2%, 4%, 14% and 6%, respectively, over the past four years. Compute the standard deviation of these returns.

5) Dr. Zweibel’s portfolio consists of four stocks: AZMN, 35%, beta 2.4; MKR, 20%, beta 1.6; ABDE, 25%, beta 1.8; and SBUK, 20%, beta 2.1. Compute Dr. Z’s portfolio beta. Does he seem to be a conservative or aggressive investor?

6) Why do some companies split their stock?

7) ROE = (net profit margin)(total asset turnover)(equity multiplier). What is the advantage of using this expanded version of the ROE formula versus using the simplified version which is net income divided by total equity?

8) The common stock of Peachtree Paper, Inc., is currently selling for \$40 a share. A dividend of \$2.00 per share was just paid. You are estimating that this dividend will grow at a constant rate of 10%.

(a) Using the constant growth DVM model, what is your required rate of return if \$40 is a reasonable trading price? (Show all work.)

(b) If Peachtree Papers is a new company that produces a relatively unknown product, is the constant growth model a good valuation method for a potential investor to use? Justify your answer.

9) Explain the concept of bond immunization and the benefits derived from using this technique.

10) Explain why closed-end funds can sell at prices other than the fund’s NAV.

Categories

## which of the following statements is true about the glycocalyx

1.    The most important aspect of a good microscope is

resolution.

magnification.

condensation.

the number of ocular lenses.

2.Select the statement(s) that accurately describe homeostasis.

The body has the ability to detect change, activate mechanisms that oppose it, and maintain relatively stable internal conditions.

The loss of homeostatic control can cause illness but cannot cause death.

Internal conditions are absolutely constant and must not fluctuate within a range.

The internal state of the body is best described as a dynamic equilibrium in which there is a certain set point and conditions fluctuate slightly around this point.

The first and fourth choices are correct.

3.    Which of the following statements is not true regarding inclusions?

Inclusions are not enclosed by a membrane.

nclusions have no functions that are necessary for cellular survival.

Inclusions can participate in ATP production in the cell.

Inclusions could be viruses or bacteria inside the cell.

None of the these is a false statement.

4.    Which of the following statements is true about the glycocalyx?

All animal cells have a glycocalyx.

Even between identical twins, the glycocalyx is chemically unique.

The glycocalyx helps one cell adhere to another.

All of these are true statements.

Only the first and third statements are true.

5.    Cells of all species have many fundamental similarities because of

spontaneous generation.

coincidence.

common ancestry.

the laws of randomness.

6.    What is the volume of a cuboidal cell that measures 5 µm on each side?

125 µm2

25 µm2

25 µm3

125 µm3

None of the choices is correct.

7.    In 1859 Louis Pasteur determined beyond all reasonable doubt that

cells arose from non-living matter.

cells only arose from other cells.

cells do not spontaneously generate.

All of the choices are correct.

Only the second and third choices are correct

8.    Dynamic equilibrium can be described as having a certain set point for a given variable where internal conditions remain constant at this point.

True

False

9.    Which of the following best distinguishes a Law from a Theory?

A law is a generalization about the predictive ways in which matter and energy behave, while a theory represents information that can be independently verified by any trained person.

A law is a generalization about the predictive ways in which matter and energy behave, while a theory is the result of inductive reasoning based on repeated, confirmed observations.

A law is the result of inductive reasoning based on repeated, confirmed observations while a theory is an explanatory statement or set of statements derived from facts and confirmed hypotheses.

A law is an explanatory statement or set of statements derived from facts and confirmed hypotheses while a theory is information that can be independently verified by any trained person.

10.  What is the surface area of a cuboidal cell that measures 5 µm on each side?

25 µm2

150 µm2

25 µm3

150 µm3

None of the choices are correct.

Categories

## uacds

### ASSIGNMENT: Data Sets

• Demonstrate compliance with healthcare data sets (Blooms 3)

Instructions:

Part I: Review the information on Data Sets from your lesson. Study the Table 1 provided in the lesson. Create your own table with 3 columns and copy the information from the table in the lesson for the first 2 columns for DEEDS, MDS, OASIS, UACDS, and UHDDS.

Part II: Research each of these online and/or in the Peden textbook

– In the 3rd column, show 4 data elements that are required for each of the data sets.

Part III: Open the inpatient record provided as an attachment below

– Analyze the documentation in the record to see if it would meet the requirement for the UHDDS data elements you included in your table.

– Type a Yes or a No after each of the data elements to indicate if you were able to find the data element in the chart.

Categories

## valdosta blazeview

Introduction to Public Administration POLS 3600 – IC1

 Gain understanding on how public policies are administered

 Gain understanding about organizational theories as they pertain to the public and nonprofit sectors

 Comprehend the impact of the “iron triangle” and other influences on the bureaucracy

 Build understanding on the internal processes that support the bureaucracy such as human resource management and financial management

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 Build the capability to critically determine solutions to common bureaucratic problems and improve decision-making skills

 Will be skilled in inquiry, logical reasoning, and critical analysis, enabling arguments, synthesize facts and information, and offer logical arguments leading to creative solutions to problems

Required Textbook/Readings The Politics of the Administrative Process, 6th Edition, Donald F. Kettl. ISBN: 978-1- 4833-3293-2 Required Technology

This course uses Desire2Learn as a course management system. If you have problems accessing any of the materials, The IT Help Desk provides support Monday – Thursday, 8:00 AM– 6:00 PM, Friday: 8:00 AM – 5:00 PM, Saturday: 12:00 PM – 5:00 PM, and Sunday: 1:00 PM – 6:00 PM Contact the IT Helpdesk at (229) 245-4357. You can also get assistance by contacting the USG D2L Help Center at https://d2lhelp.view.usg.edu or the BlazeVIEW Help Center TOLL FREE – 1-855-772- 0423 for help at any time, day or night. Technology issues may not be used as an excuse for not submitting or completing assignments, so be sure to plan ahead. Considerations will be allowed when there are system-wide errors or issues that affect the entire class. Attendance Policy Class attendance is mandatory. If you are not able to complete class requirements on a regular basis, you must drop the course and re-take it in a future semester. If a student is irregular and missing more than two assignments during the semester without any valid excuse, she/he will lose 5 points for each such absence. Exams & Assignments Assignments Assignment Points Quizzes (6) 138 Readings Discussions (7) 42 Final Exam 100 Total 280

Grading Scale 252– 280 A 224 – 251 B 196 – 223 C 168 – 195 Dhttps://d2lhelp.view.usg.edu/

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Below 168 F

Discussions about Readings- 7 worth 6 points each = 42 points (due by Midnight Sunday of the week assigned)

Responses are posted by deadline; the question is answered thoroughly incorporating the readings into the answer.

Responses are posted by deadline

Weekly Quizzes – 6 worth 23 points= 138 points (due by Midnight Sunday of the week assigned)

There will be six (6) weekly quizzes of 25 questions that will count toward your grade. Each will cover the assigned readings for that week and will have a time limit of 45 minutes to complete. You will have one attempt at completing the quiz so each students needs to make sure to schedule time to complete the quiz before he/she starts the quiz. Each quiz will be available to take from Wednesday-Sunday of the assigned week and students may take the quiz anytime during that period. There is a great deal of material in the chapters, so it is imperative that students read the material before taking the quiz.

Final- 100 points

There will a 50 questions final at the end of the course. The questions will come from the material provided in the text.

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Major Academic Dates This is an eight week course and it is important that students understand that the

certain deadlines will be different than those for full semester (16-week) courses. For example, withdrawals will have to be done before the midterm of the 8-week session and not the midterm of the 16-week semester. The following is a table with important dates for this course.

Spring Semester 2017 (Short Session I)

Classes Begin/End January 09 – March 09

Last Day to Add January 12

Last Day to Drop January 12

January 20 by midnight

Midpoint Date – Last Day to withdraw with a “W”

February 10

Holidays/Breaks NA

Final Exam Day March 03

Class Schedule Schedule is tentative and may be subject to change.

Date Reading Assignments Assignments 01/09- 01/15 Wk. 1

Kettl Chapters 1 & 2: Chapter 1: Accountability Chapter 2: What Is Public Administration?

Discussion Question: Discussion 1: Introduce yourself to the class. Include in your response your experience with online classes and state how you would define public administration. Quiz 1 (Open 01/11 thru 01/15; Due NLT Midnight 01/15)

01/16- 01/22 Wk. 2

Kettl Chapters 3 & 4 Chapter 3: What Government Does And How It Does It Chapter 4: Organizational Theory

Discussion Question: Discussion 2: The text discusses the functions of government at the federal, state, and local levels. Which level do you feel has the greatest impact on the lives of American citizens? Why do you feel this way? QUIZ 2 (Open 01/18 thru 01/22; Due NLT Midnight 01/22)

5

01/23- 01/29 Wk. 3

Kettl Chapters 5 & 6 Chapter 5: The Executive Branch Chapter 6: Organization Problems

Discussion Question: Discussion 3: What is “government by proxy” and how do you feel about it? In your opinion, does it increase or hinder government transparency and accountability? QUIZ 3 (Open 01/25 thru 01/29; Due NLT Midnight 01/29)

01/30- 02/05 Wk. 4

Kettl Chapters 7 & 8 Chapter 7: Administrative Reform Chapter 8: The Civil Service

Discussion Question: Discussion 4: Which of the three major administrative reform strategies—downsizing, reengineering, or continuous improvement—do you find to be the most compelling and why? QUIZ 4 (Open 02/01 thru 02/05; Due NLT Midnight 02/05)

02/06- 02/12 Wk. 5

Kettl Chapters 9 & 10 Chapter 9: Human Capital Chapter 10: Decision Making

Discussion Question: Discussion 5: Comment on the Deborah Stone quote reprinted in the text: “Because politics is driven by how people interpret information, much political activity is an effort to control interpretations.” What do you think of this idea that even information is political in the way that interpretations are controlled and perpetuated? QUIZ 5 (Open 02/08 thru 02/12; Due NLT Midnight 02/12)

02/13- 02/19 Wk. 6

Kettl Chapters 11 & 12 Chapter 11: Budgeting Chapter 12: Implementation

Discussion Question: Discussion 6: Within congressional budgeting, there were traditionally two main processes: authorizations and appropriations. Which do you think is more important and why? QUIZ 6 (Open 02/15 thru 02/19; Due NLT Midnight 02/19)

02/20- 02/26 Wk. 7

Kettl Chapters 13 & 14 Chapter 13: Regulation and the Courts Chapter 14: Executive Power and Political Accountability

Discussion Question: Discussion 7: Since many consider Congress to be the “most democratic” of all the branches because its leaders are elected by district and there are so many congressional leaders who have to act together for something to happen, how does American democracy benefit and/or suffer from congressional oversight? Quiz 7 (Open 02/22 thru 02/26; Due NLT Midnight 02/26)

02/27- 03/03 Wk. 8

FINAL EXAM WEEK Final Exam- Students will be able to take the exam any time beginning 12:00 A.M. 03/01 through Midnight 03/03.

Classroom Policies: Make-Up Work

6

Make up work or alternative assignments will be determined by the

instructor and at the sole discretion of the instructor. These assignments may or may not exactly duplicate the original and will not entitle other students to the same alternatives since they may not have experienced the same situations. Communications regarding assignments:

Students are responsible for communicating with the instructor if they need

clarification on assignment instructions and grading. Students should initiate such

communication well before the due date of submission of an assignment. Students

should not seek clarity about assignment instructions after receiving grade for a

particular assignment.

POLICIES FOR SUBMISSION OF ASSIGNMENTS:

Students are required to submit assignments online. Students are also

responsible for their access to internet to meet course responsibilities in a timely

manner. Students must keep track of all updates via VSU email and Blazeview. If an

update is scheduled at the same time as the due date for an assignment, students must

submit their assignments beforehand or inform the instructor at the earliest.

If students experience any technical difficulties, then they will need to contact the

BlazeView help desk available through D2L. Any student who does not follow this

procedure will have his/her assignment counted as “late.” Students should keep copies

of all communications with Blazeview helpdesk, VSU IT help desk and use them later to

justify late submission to the instructor.

Policies for missed assignments, make-up assignments, late assignments:

Missed Assignments: If a student misses an assignment or submits an assignment late,

he/she need to submit acceptable documentation to the instructor.

Make-Up Work: After satisfactory review of the documentation provided in support of

the excuse, make up work or alternative assignments will be determined by the sole

discretion of the professor. These assignments may or may not exactly duplicate the

original and will not entitle other students to the same alternatives since they may not

have experienced the same situations.

COURSE COMMUNICATION POLICIES:

Students should check Blazeview course page and their Blazeview email account

regularly. I will communicate with you via your Blazeview email. I will post

announcements, readings, and exam grades on Blazeview. You are responsible for

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course materials, it is your responsibility to email the instructor in a timely manner.

Lack of disk space in personal computers or similar types of reasons are not acceptable

Contacting the Instructor

E-Mail Protocol: Most of the communications in this course will be via e-mail.

Generally, e-mails to the instructor will be answered within 24-72 hours. All e-mail

communication must:

 Be through the VSU email system and not personal e-mail accounts;

 Be properly addressed and follow appropriate Netiquette;

 Include the student’s name and section number for the class; in addition any attachment sent to the instructor must include the sender’s name, course number, and project title as part of the file name, e.g., Smith_POLS_3600IC1_Assign1.doc.

Telephonic Conversation Protocol: If you would like to talk with your instructor,

schedule an appointment one week in advance for phone conversation.

GRADING AND FEEDBACK TIMELINE:

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Categories

## every inductive argument is __________.

6Deduction and Induction: Putting It All Together

Wavebreakmedia Ltd./Thinkstock and GoldenShrimp/iStock/Thinkstock

Learning Objectives After reading this chapter, you should be able to:

1. Compare and contrast the advantages of deduction and induction.

2. Explain why one might choose an inductive argument over a deductive argument.

3. Analyze an argument for its deductive and inductive components.

4. Explain the use of induction within the hypothetico–deductive method.

5. Compare and contrast falsification and confirmation within scientific inquiry.

6. Describe the combined use of induction and deduction within scientific reasoning.

7. Explain the role of inference to the best explanation in science and in daily life.

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Section 6.1 Contrasting Deduction and Induction

Now that you have learned something about deduction and induction, you may be wondering why we need both. This chapter is devoted to answering that question. We will start by learn- ing a bit more about the differences between deductive and inductive reasoning and how the two types of reasoning can work together. After that, we will move on to explore how scien- tific reasoning applies to both types of reasoning to achieve spectacular results. Arguments with both inductive and deductive elements are very common. Recognizing the advantages and disadvantages of each type can help you build better arguments. We will also investigate another very useful type of inference, known as inference to the best explanation, and explore its advantages.

6.1 Contrasting Deduction and Induction Remember that in logic, the difference between induction and deduction lies in the connec- tion between the premises and conclusion. Deductive arguments aim for an absolute connec- tion, one in which it is impossible that the premises could all be true and the conclusion false. Arguments that achieve this aim are called valid. Inductive arguments aim for a probable connection, one in which, if all the premises are true, the conclusion is more likely to be true than it would be otherwise. Arguments that achieve this aim are called strong. (For a discus- sion on common misconceptions about the meanings of induction and deduction, see A Closer Look: Doesn’t Induction Mean Going From Specific to General?). Recall from Chapter 5 that inductive strength is the counterpart of deductive validity, and cogency is the inductive coun- terpart of deductive soundness. One of the purposes of this chapter is to properly understand the differences and connections between these two major types of reasoning.

There is another important difference between deductive and inductive rea- soning. As discussed in Chapter 5, if you add another premise to an induc- tive argument, the argument may become either stronger or weaker. For example, suppose you are thinking of buying a new cell phone. After looking at all your options, you decide that one model suits your needs better than the others. New information about the phone may make you either more con- vinced or less convinced that it is the right one for you—it depends on what the new information is. With deductive reasoning, by contrast, adding prem- ises to a valid argument can never render it invalid. New information may show that a deductive argument

Fuse/Thinkstock

New information can have an impact on both deductive and inductive arguments. It can render deductive arguments unsound and can strengthen or weaken inductive arguments, such as arguments for buying one car over another.

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Section 6.1 Contrasting Deduction and Induction

is unsound or that one of its premises is not true after all, but it cannot undermine a valid connection between the premises and the conclusion. For example, consider the following argument:

All whales are mammals. Shamu is a whale. Therefore, Shamu is a mammal.

This argument is valid, and there is nothing at all we could learn about Shamu that would change this. We might learn that we were mistaken about whales being mammals or about Shamu being a whale, but that would lead us to conclude that the argument is unsound, not invalid. Compare this to an inductive argument about Shamu.

Whales typically live in the ocean. Shamu is a whale. Therefore, Shamu lives in the ocean.

Now suppose you learn that Shamu has been trained to do tricks in front of audiences at an amusement park. This seems to make it less likely that Shamu lives in the ocean. The addition of this new information has made this strong inductive argument weaker. It is, however, pos- sible to make it stronger again with the addition of more information. For example, we could learn that Shamu was part of a captive release program.

An interesting exercise for exploring this concept is to see if you can keep adding premises to make an inductive argument stronger, then weaker, then stronger again. For example, see if you can think of a series of premises that make you change your mind back and forth about the quality of the cell phone discussed earlier.

Determining whether an argument is deductive or inductive is an important step both in evaluating arguments that you encounter and in developing your own arguments. If an argu- ment is deductive, there are really only two questions to ask: Is it valid? And, are the premises true? If you determine that the argument is valid, then only the truth of the premises remains in question. If it is valid and all of the premises are true, then we know that the argument is sound and that therefore the conclusion must be true as well.

On the other hand, because inductive arguments can go from strong to weak with the addi- tion of more information, there are more questions to consider regarding the connection between the premises and conclusion. In addition to considering the truth of the premises and the strength of the connection between the premises and conclusion, you must also con- sider whether relevant information has been left out of the premises. If so, the argument may become either stronger or weaker when the relevant information is included.

Later in this chapter we will see that many arguments combine both inductive and deductive elements. Learning to carefully distinguish between these elements will help you know what questions to ask when evaluating the argument.

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Section 6.1 Contrasting Deduction and Induction

A Closer Look: Doesn’t Induction Mean Going From Specific to General? A common misunderstanding of the meanings of induction and deduction is that deduction goes from the general to the specific, whereas induction goes from the specific to the gen- eral. This definition is used by some fields, but not by logic or philosophy. It is true that some deductive arguments go from general premises to specific conclusions, and that some induc- tive arguments go from the specific premises to general conclusions. However, neither state- ment is true in general.

First, although some deductive arguments go from general to specific, there are many deduc- tive arguments that do not go from general to specific. Some deductive arguments, for exam- ple, go from general to general, like the following:

All S are M. All M are P. Therefore, all S are P.

Propositional logic is deductive, but its arguments do not go from general to specific. Instead, arguments are based on the use of connectives (and, or, not, and if . . . then). For example, modus ponens (discussed in Chapter 4) does not go from the general to the spe- cific, but it is deductively valid. When it comes to inductive arguments, some—for example, inductive generalizations—go from specific to general; others do not. Statistical syllogisms, for example, go from general to specific, yet they are inductive.

This common misunderstanding about the definitions of induction and deduction is not sur- prising given the different goals of the fields in which the terms are used. However, the defini- tions used by logicians are especially suited for the classification and evaluation of different types of reasoning.

For example, if we defined terms the old way, then the category of deductive reasoning would include arguments from analogy, statistical syllogisms, and some categorical syllogisms. Inductive reasoning, on the other hand, would include only inductive generalizations. In addi- tion, there would be other types of inference that would fit into neither category, like many categorical syllogisms, inferences to the best explanation, appeals to authority, and the whole field of propositional logic.

The use of the old definitions, therefore, would not clear up or simplify the categories of logic at all but would make them more confusing. The current distinction, based on whether the premises are intended to guarantee the truth of the conclusion, does a much better job of simplifying logic’s categories, and it does so based on a very important and relevant distinction.

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Section 6.2 Choosing Between Induction and Deduction

Practice Problems 6.1

1. A deductive argument that establishes an absolute connection between the premises and conclusion is called a __________. a. strong argument b. weak argument c. invalid argument d. valid argument

2. An inductive argument whose premises give a lot of support for the truth of its con- clusion is said to be __________. a. strong b. weak c. valid d. invalid

3. Inductive arguments always reason from the specific to the general. a. true b. false

4. Deductive arguments always reason from the general to the specific. a. true b. false

6.2 Choosing Between Induction and Deduction You might wonder why one would choose to use inductive reasoning over deductive reason- ing. After all, why would you want to show that a conclusion was only probably true rather than guaranteed to be true? There are several reasons, which will be discussed in this sec- tion. First, there may not be an available deductive argument based on agreeable premises. Second, inductive arguments can be more robust than deductive arguments. Third, inductive arguments can be more persuasive than deductive arguments.

Availability Sometimes the best evidence available does not lend itself to a deductive argument. Let us consider a readily accepted fact: Gravity is a force that pulls everything toward the earth. How would you provide an argument for that claim? You would probably pick something up, let go of it, and note that it falls toward the earth. For added effect, you might pick up several things and show that each of them falls. Put in premise–conclusion form, your argument looks something like the following:

My coffee cup fell when I let go of it. My wallet fell when I let go of it. This rock fell when I let go of it. Therefore, everything will fall when I let go of it.

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Section 6.2 Choosing Between Induction and Deduction

When we put the argument that way, it should be clear that it is inductive. Even if we grant that the premises are true, it is not guaranteed that every- thing will fall when you let go of it. Perhaps grav- ity does not affect very small things or very large things. We could do more experiments, but we can- not check every single thing to make sure that it is affected by gravity. Our belief in gravity is the result of extremely strong inductive reasoning. We there- fore have great reasons to believe in gravity, even if our reasoning is not deductive.

All subjects that rely on observation use induc- tive reasoning: It is at least theoretically possible that future observations may be totally different than past ones. Therefore, our inferences based on observation are at best probable. It turns out that there are very few subjects in which we can pro- ceed entirely by deductive reasoning. These tend to be very abstract and formal subjects, such as math- ematics. Although other fields also use deductive reasoning, they do so in combination with inductive reasoning. The result is that most fields rely heavily on inductive reasoning.

Robustness Inductive arguments have some other advantages over deductive arguments. Deductive argu- ments can be extremely persuasive, but they are also fragile in a certain sense. When some- thing goes wrong in a deductive argument, if a premise is found to be false or if it is found to be invalid, there is typically not much of an argument left. In contrast, inductive arguments tend to be more robust. The robustness of an inductive argument means that it is less fragile; if there is a problem with a premise, the argument may become weaker, but it can still be quite persuasive. Deductive arguments, by contrast, tend to be completely unconvincing once they are shown not to be sound. Let us work through a couple of examples to see what this means in practice.

Consider the following deductive argument:

All dogs are mammals. Some dogs are brown. Therefore, some mammals are brown.

As it stands, the argument is sound. However, if we change a premise so that it is no longer sound, then we end up with an argument that is nearly worthless. For example, if you change the first premise to “Most dogs are mammals,” you end up with an invalid argument. Valid- ity is an all-or-nothing affair; there is no such thing as “sort of valid” or “more valid.” The

Alistair Scott/iStock/Thinkstock

Despite knowing that a helium-filled balloon will rise when we let go of it, we still hold our belief in gravity due to strong inductive reasoning and our reliance on observation.

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Section 6.2 Choosing Between Induction and Deduction

argument would simply be invalid and therefore unsound; it would not accomplish its pur- pose of demonstrating that the conclusion must be true. Similarly, if you were to change the second premise to something false, like “Some dogs are purple,” then the argument would be unsound and therefore would supply no reason to accept the conclusion.

In contrast, inductive arguments may retain much of their strength even when there are prob- lems with them. An inductive argument may list several reasons in support of a conclusion. If one of those reasons is found to be false, the other reasons continue to support the conclu- sion, though to a lesser degree. If an argument based on statistics shows that a particular conclusion is extremely likely to be true, the result of a problem with the argument may be that the conclusion should be accepted as only fairly likely. The argument may still give good reasons to accept the conclusion.

Fields that rely heavily on statistical arguments often have some threshold that is typically required in order for results to be publishable. In the social sciences, this is typically 90% or 95%. However, studies that do not quite meet the threshold can still be instructive and pro- vide evidence for their conclusions. If we discover a flaw that reduces our confidence in an argument, in many cases the argument may still be strong enough to meet a threshold.

As an example, consider a tweet made by President Barack Obama regarding climate change.

Although the tweet does not spell out the argument fully, it seems to have the following structure:

A study concluded that 97% of scientists agree that climate change is real, man-made, and dangerous. Therefore, 97% of scientists really do agree that climate change is real, man- made, and dangerous. Therefore, climate change is real, man-made, and dangerous.

Given the politically charged nature of the discussion of climate change, it is not surprising that the president’s argument and the study it referred to received considerable criticism. (You can read the study at http://iopscience.iop.org/1748–9326/8/2/024024/pdf/1748 –9326_8_2_024024.pdf.) Looking at the effect some of those criticisms have on the argument is a good way to see how inductive arguments can be more robust than deductive ones.

One criticism of Obama’s claim is that the study he referenced did not say anything about whether climate change was dangerous, only about whether it was real and man-made. How does this affect the argument? Strictly speaking, it makes the first premise false. But notice that even so, the argument can still give good evidence that climate change is real and

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Section 6.2 Choosing Between Induction and Deduction

man-made. Since climate change, by its nature, has a strong potential to be dangerous, the argument is weakened but still may give strong evidence for its conclusion.

A deeper criticism notes that the study did not find out what all scientists thought; it just looked at those scientists who expressed an opinion in their published work or in response to a voluntary survey. This is a significant criticism, for it may expose a bias in the sampling method (as discussed in Chapters 5, 7, and 8). Even granting the criticism, the argument can retain some strength. The fact that 97% of scientists who expressed an opinion on the issue said that climate change is real and man-made is still some reason to think that it is real and man-made. Of course, some scientists may have chosen not to voice an opposing opinion for reasons that have nothing to do with their beliefs about climate change; they may have simply wanted to keep their views private, for example. Taking all of this into account, we get the fol- lowing argument:

A study found that 97% of scientists who stated their opinion said that cli- mate change is real and man-made. Therefore, 97% of scientists agree that climate change is real and man-made. Climate change, if real, is dangerous. Therefore, climate change is real, man-made, and dangerous.

This is not nearly as strong as the original argument, but it has not collapsed entirely in the way a purely deductive argument would. There is, of course, much more that could be said about this argument, both in terms of criticizing the study and in terms of responding to those criticisms and bringing in other considerations. The point here is merely to highlight the dif- ference between deductive and inductive arguments, not to settle issues in climate science or public policy.

Persuasiveness A final point in favor of inductive reasoning is that it can often be more persuasive than deduc- tive reasoning. The persuasiveness of an argument is based on how likely it is to convince someone of the truth of its conclusion. Consider the following classic argument:

All Greeks are mortal. Socrates was a Greek. Therefore, Socrates was mortal.

Is this a good argument? From the standpoint of logic, it is a perfect argument: It is deduc- tively valid, and its premises are true, so it is sound (therefore, its conclusion must be true). However, can you persuade anyone with this argument?

Imagine someone wondering whether Socrates was mortal. Could you use this argument to convince him or her that Socrates was mortal? Probably not. The argument is so simple and

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Section 6.2 Choosing Between Induction and Deduction

so obviously valid that anyone who accepts the premises likely already accepts the conclu- sion. So if someone is wondering about the conclusion, it is unlikely that he or she will be persuaded by these premises. He or she may, for example, remember that some legendary Greeks, such as Hercules, were granted immortality and wonder whether Socrates was one of these. The deductive approach, therefore, is unlikely to win anyone over to the conclusion here. On the other hand, consider a very similar inductive argument.

Of all the real and mythical Greeks, only a few were considered to be immortal. Socrates was a Greek. Therefore, it is extremely unlikely that Socrates was immortal.

Again, the reasoning is very simple. However, in this case, we can imagine someone who had been wondering about Socrates’s mortality being at least somewhat persuaded that he was mortal. More will likely need to be said to fully persuade her or him, but this simple argument may have at least some persuasive power where its deductive version likely does not.

Of course, deductive arguments can be persuasive, but they generally need to be more com- plicated or subtle in order to be so. Persuasion requires that a person change his or her mind to some degree. In a deductive argument, when the connection between premises and conclu- sion is too obvious, the argument is unlikely to persuade because the truth of the premises will be no more obvious than the truth of the conclusion. Therefore, even if the argument is valid, someone who questions the truth of the conclusion will often be unlikely to accept the truth of the premises, so she or he may be unpersuaded by the argument. Suppose, for example, that we wanted to convince someone that the sun will rise tomorrow morning. The deductive argument may look like this:

The sun will always rise in the morning. Therefore, the sun will rise tomorrow morning.

One problem with this argument, as with the Socrates argument, is that its premise seems to assume the truth of the conclusion (and therefore commits the fallacy of begging the ques- tion, as discussed in Chapter 7), making the argument unpersuasive. Additionally, however, the premise might not even be true. What if, billions of years from now, the earth is swallowed up into the sun after it expands to become a red giant? At that time, the whole concept of morning may be out the window. If this is true then the first premise may be technically false. That means that the argument is unsound and therefore fairly worthless deductively.

The inductive version, however, does not lose much strength at all after we learn of this trou- bling information:

The sun has risen in the morning every day for millions of years. Therefore, the sun will rise again tomorrow morning.

This argument remains extremely strong (and persuasive) regardless of what will happen billions of years in the future.

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Section 6.3 Combining Induction and Deduction

Practice Problems 6.2

1. Which form of reasoning is taking place in this example?

The sun has risen every day of my life. The sun rose today. Therefore, the sun will rise tomorrow.

a. inductive b. deductive

2. Inductive arguments __________. a. can retain strength even with false premises b. collapse when a premise is shown to be false c. are equivalent to deductive arguments d. strive to be valid

3. Deductive arguments are often __________. a. less persuasive than inductive arguments b. more persuasive than inductive arguments c. weaker than inductive arguments d. less valid than inductive arguments

4. Inductive arguments are sometimes used because __________. a. the available evidence does not allow for a deductive argument b. they are more likely to be sound than deductive ones c. they are always strong d. they never have false premises

6.3 Combining Induction and Deduction You may have noticed that most of the examples we have explored have been fairly short and simple. Real-life arguments tend to be much longer and more complicated. They also tend to mix inductive and deductive elements. To see how this might work, let us revisit an example from the previous section.

All Greeks are mortal. Socrates was Greek. Therefore, Socrates was mortal.

As we noted, this simple argument is valid but unlikely to convince anyone. So suppose now that someone questioned the premises, asking what reasons there are for thinking that all Greeks are mortal or that Socrates was Greek. How might we respond?

We might begin by noting that, although we cannot check each and every Greek to be sure he or she is mortal, there are no documented cases of any Greek, or any other human, living more

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Section 6.3 Combining Induction and Deduction

than 200 years. In contrast, every case that we can document is a case in which the person dies at some point. So, although we cannot absolutely prove that all Greeks are mortal, we have good reason to believe it. We might put our argument in standard form as follows:

We know the mortality of a huge number of Greeks. In each of these cases, the Greek is mortal. Therefore, all Greeks are mortal.

This is an inductive argument. Even though it is theoretically possible that the conclusion might still be false, the premises provide a strong reason to accept the conclusion. We can now combine the two arguments into a single, larger argument:

We know the mortality of a huge number of Greeks. In each of these cases, the Greek is mortal. Therefore, all Greeks are mortal. Socrates was Greek. Therefore, Socrates was mortal.

This argument has two parts. The first argument, leading to the subconclusion that all Greeks are mortal, is inductive. The second argument (whose conclusion is “Socrates was mortal”) is deductive. What about the overall reasoning presented for the conclusion that Socrates was mortal (combining both arguments); is it inductive or deductive?

The crucial issue is whether the prem- ises guarantee the truth of the conclu- sion. Because the basic premise used to arrive at the conclusion is that all of the Greeks whose mortality we know are mortal, the overall reasoning is inductive. This is how it generally works. As noted earlier, when an argu- ment has both inductive and deductive components, the overall argument is generally inductive. There are occa- sional exceptions to this general rule, so in particular cases, you still have to check whether the premises guarantee the conclusion. But, almost always, the longer argument will be inductive.

Fran/Cartoonstock

Sometimes a simple deductive argument needs to be combined with a persuasive inductive argument to convince others to accept it.

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Section 6.4 Reasoning About Science: The Hypothetico–Deductive Method

A similar thing happens when we combine inductive arguments of different strength. In gen- eral, an argument is only as strong as its weakest part. You can think of each inference in an argument as being like a link in a chain. A chain is only as strong as its weakest link.

6.4 Reasoning About Science: The Hypothetico– Deductive Method Science is one of the most successful endeavors of the modern world, and arguments play a central role in it. Science uses both deductive and inductive reasoning extensively. Scientific reasoning is a broad field in itself—and this chapter will only touch on the basics—but dis- cussing scientific reasoning will provide good examples of how to apply what we have learned about inductive and deductive arguments.

At some point, you may have learned or heard of the scientific method, which often refers to how scientists systematically form, test, and modify hypotheses. It turns out that there is not a single method that is universally used by all scientists.

In a sense, science is the ultimate critical thinking experiment. Scientists use a wide variety of reasoning techniques and are constantly examining those techniques to make sure that the conclusions drawn are justified by the premises—that is exactly what a good critical thinker should do in any subject. The next two sections will explore two such methods—the hypothetico–deductive method and inferences to the best explanation—and discover ways that they can improve our understanding of the types of reasoning used in much of science.

The hypothetico–deductive method consists of four steps:

1. Formulate a hypothesis. 2. Deduce a consequence from the hypothesis. 3. Test whether the consequence occurs. 4. Reject the hypothesis if the consequence does not occur.

Although these four steps are not sufficient to explain all scientific reasoning, they still remain a core part of much discussion of how science works. You may recognize them as part of the scientific method that you likely learned about in school. Let us take a look at each step in turn.

Practice Problem 6.3

1. When an argument contains both inductive and deductive elements, the entire argu- ment is considered deductive. a. true b. false

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Section 6.4 Reasoning About Science: The Hypothetico–Deductive Method

Step 1: Formulate a Hypothesis A hypothesis is a conjecture about how some part of the world works. Although the phrase “educated guess” is often used, it can give the impression that a hypothesis is simply guessed without much effort. In reality, scientific hypotheses are formulated on the basis of a back- ground of quite a bit of knowledge and experience; a good scientific hypothesis often comes after years of prior investigation, thought, and research about the issue at hand.

You may have heard the expression “necessity is the mother of invention.” Often, hypotheses are formulated in response to a problem that needs to be solved. Suppose you are unsatisfied with the performance of your car and would like better fuel economy. Rather than buy a new car, you try to figure out how to improve the one you have. You guess that you might be able to improve your car’s fuel economy by using a higher grade of gas. Your guess is not just random; it is based on what you already know or believe about how cars work. Your hypothesis is that higher grade gas will improve your fuel economy.

Of course, science is not really concerned with your car all by itself. Science is concerned with general principles. A scientist would reword your hypothesis in terms of a general rule, something like, “Increasing fuel octane increases fuel economy in automobiles.” The hypothetico–deductive method can work with either kind of hypothesis, but the general hypothesis is more interesting scientifically.

Step 2: Deduce a Consequence From the Hypothesis Your hypothesis from step 1 should have predictive value: Things should be different in some noticeable way, depending on whether the hypothesis is true or false. Our hypothesis is that increasing fuel octane improves fuel economy. If this general fact is true, then it is true for your car. So from our general hypothesis we can deduce the consequence that your car will get more miles per gallon if it is running on higher octane fuel.

It is often but not always the case that the prediction is a more specific case of the hypothesis. In such cases it is possible to infer the prediction deductively from the general hypothesis. The argument may go as follows:

Hypothesis: All things of type A have characteristic B.

Consequence (the prediction): Therefore, this specific thing of type A will have characteristic B.

Since the argument is deductively valid, there is a strong connection between the hypothesis and the prediction. However, not all predictions can be deductively inferred. In such cases we can get close to the hypothetico–deductive method by using a strong inductive inference instead. For example, suppose the argument went as follows:

Hypothesis: 95% of things of type A have characteristic B.

Consequence: Therefore, a specific thing of type A will probably have charac- teristic B.

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Section 6.4 Reasoning About Science: The Hypothetico–Deductive Method

In such cases the connection between the hypothesis and the prediction is less strong. The stronger the connection that can be established, the better for the reliability of the test. Essen- tially, you are making an argument for the conditional statement “If H, then C,” where H is your hypothesis and C is a consequence of the hypothesis. The more solid the connection is between H and C, the stronger the overall argument will be.

In this specific case, “If H, then C” translates to “If increasing fuel octane increases fuel econ- omy in all cars, then using higher octane fuel in your car will increase its fuel economy.” The truth of this conditional is deductively certain.

We can now test the truth of the hypothesis by testing the truth of the consequence.

Step 3: Test Whether the Consequence Occurs Your prediction (the consequence) is that your car will get better fuel economy if you use a higher grade of fuel. How will you test this? You may think this is obvious: Just put better gas in the car and record your fuel economy for a period before and after changing the type of gas you use. However, there are many other factors to consider. How long should the period of time be? Fuel economy varies depending on the kind of driving you do and many other factors. You need to choose a length of time for which you can be reasonably confident the driving conditions are similar on average. You also need to account for the fact that the first tank of better gas you put in will be mixed with some of the lower grade gas that is still in your tank. The more you can address these and other issues, the more certain you can be that your conclusion is correct.

In this step, you are constructing an inductive argument from the outcome of your test as to whether your car actually did get better fuel economy. The arguments in this step are induc- tive because there is always some possibility that you have not adequately addressed all of the relevant issues. If you do notice better fuel economy, it is always possible that the increase in economy is due to some factor other than the one you are tracking. The possibility may be very small, but it is enough to make this kind of argument inductive rather than deductive.

Step 4: Reject the Hypothesis If the Consequence Does Not Occur We now compare the results to the prediction and find out if the prediction came true. If your test finds that your car’s fuel economy does not improve when you use higher octane fuel, then you know your prediction was wrong.

Does this mean that your hypothesis, H, was wrong? That depends on the strength of the con- nection between H and C. If the inference from H to C is deductively certain, then we know for sure that, if H is true, then C must be true also. Therefore, if C is false, it follows logically that H must be false as well.

In our specific case, if your car does not get better fuel economy by switching to higher octane fuel, then we know for sure that it is not true that all cars get better fuel economy by doing so. However, if the inference from H to C is inductive, then the connection between H and C is less than totally certain. So if we find that C is false, we are not absolutely sure that the hypothesis, H, is false.

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Section 6.4 Reasoning About Science: The Hypothetico–Deductive Method

For example, suppose that the hypothesis is that cars that use higher octane fuel will have a higher tendency to get better fuel mileage. In that case if your car does not get higher gas mileage, then you still cannot infer for certain that the hypothesis is false. To test that hypothesis adequately, you would have to do a large study with many cars. Such a study would be much more complicated, but it could provide very strong evidence that the hypoth- esis is false.

It is important to note that although the falsity of the prediction can dem- onstrate that the hypothesis is false, the truth of the prediction does not prove that the hypothesis is true. If you find that your car does get better fuel economy when you switch gas, you cannot conclude that your hypothesis is true.

Why? There may be other factors at play for which you have not ade- quately accounted. Suppose that at the same time you switch fuel grade, you also get a tune-up and new tires and start driving a completely different route to work. Any one of these things might be the cause of the improved gas mileage; you cannot conclude that it is due to the change in fuel (for this rea- son, when conducting experiments it is best to change only one variable at a time and carefully control the rest). In

other words, in the hypothetico–deductive method, failed tests can show that a hypothesis is wrong, but tests that succeed do not show that the hypothesis was correct.

This logic is known as falsification; it can be demonstrated clearly by looking at the structure of the argument. When a test yields a negative result, the hypothetico–deductive method sets up the following argument:

If H, then C. Not C. Therefore, not H.

You may recognize this argument form as modus tollens, or denying the consequent, which was discussed in the chapter on propositional logic (Chapter 4). This argument form is a valid, deductive form. Therefore, if both of these premises are true, then we can be certain that the conclusion is true as well; namely, that our hypothesis, H, is not true. In the specific case at hand, if your test shows that higher octane fuel does not increase your mileage, then we can be sure that it is not true that it improves mileage in all vehicles (though it may improve it in some).

IPGGutenbergUKLtd/iStock/Thinkstock

At best, the fuel economy hypothesis will be a strong inductive argument because there is a chance that something other than higher octane gas is improving fuel economy. The more you can address relevant issues that may impact your test results, the stronger your conclusions will be.

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Section 6.4 Reasoning About Science: The Hypothetico–Deductive Method

Contrast this with the argument form that results when your fuel economy yields a positive result:

If H, then C. C. Therefore, H.

This argument is not valid. In fact, you may recognize this argument form as the invalid deduc- tive form called affirming the consequent (see Chapter 4). It is possible that the two premises are true, but the conclusion false. Perhaps, for example, the improvement in fuel economy was caused by a change in tires or different driving conditions instead. So the hypothetico –deductive method can be used only to reject a hypothesis, not to confirm it. This fact has led many to see the primary role of science to be the falsification of hypotheses. Philosopher Karl Popper is a central source for this view (see A Closer Look: Karl Popper and Falsification in Science).

A Closer Look: Karl Popper and Falsification in Science Karl Popper, one of the most influential philosophers of sci- ence to emerge from the early 20th century, is perhaps best known for rejecting the idea that scientific theories could be proved by simply finding confirming evidence—the prevail- ing philosophy at the time. Instead, Popper emphasized that claims must be testable and falsifiable in order to be consid- ered scientific.

A claim is testable if we can devise a way of seeing if it is true or not. We can test, for instance, that pure water will freeze at 0°C at sea level; we cannot currently test the claim that the oceans in another galaxy taste like root beer. We have no realistic way to determine the truth or falsity of the second claim.

A claim is said to be falsifiable if we know how one could show it to be false. For instance, “there are no wild kangaroos in Georgia” is a falsifiable claim; if one went to Georgia and found some wild kangaroos, then it would have been shown to be false. But what if someone claimed that there are ghosts in Georgia but that they are imperceptible (unseeable, unfeel- able, unhearable, etc.)? Could one ever show that this claim is false? Since such a claim could not conceivably be shown to be false, it is said to be unfalsifiable. While being unfalsifiable might sound like a good thing, according to Popper it is not, because it means that the claim is unscientific.

Following Popper, most scientists today operate with the assumption that any scientific hypothesis must be testable and must be the kind of claim that one could possibly show to be false. So if a claim turns out not to be conceivably falsifiable, the claim is not really scientific—and some philosophers have gone so far as to regard such claims as meaningless (Thornton, 2014).

Keystone/Getty Images

Karl Popper, a 20th- century philosopher of science, put forth the idea that unfalsifiable claims are unscientific.

(continued)

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Section 6.4 Reasoning About Science: The Hypothetico–Deductive Method

As an example, suppose a friend claims that “everything works out for the best.” Then suppose that you have the worst month of your life, and you go back to your friend and say that the claim is false: Not everything is for the best. Your friend might then reply that in fact it was for the best because you learned from the experience. Such a statement may make you feel better, but it runs afoul of Popper’s rule. Can you imagine any circumstance that your friend would not claim is for the best? Since your friend would probably say that it was for the best no mat- ter what happens, your friend’s claim is unfalsifiable and therefore unscientific.

In logic, claims that are interpreted so that they come out true no matter what happens are called self-sealing propositions. They are understood as being internally protected against any objections. People who state such claims may feel that they are saying something deeply meaningful, but according to Popper’s rule, since the claim could never be falsified no matter what, it does not really tell us anything at all.

Other examples of self-sealing propositions occur within philosophy itself. There is a philo- sophical theory known as psychological egoism, for example, which teaches that everything everyone does is completely selfish. Most people respond to this claim by coming up with examples of unselfish acts: giving to the needy, spending time helping others, and even dying to save someone’s life. The psychological egoist predictably responds to all such examples by stating that people who do such things really just do them in order to feel better about them- selves. It appears that the word selfish is being interpreted so that everything everyone does will automatically be considered selfish by definition. It is therefore a self-sealing claim (Rachels, 1999). According to Popper’s method, since this claim will always come out true no mat- ter what, it is unfalsifiable and unscientific. Such claims are always true but are actually empty because they tell us nothing about the world. They can even be said to be “too true to be good.”

Popper’s explorations of scientific hypotheses and what it means to confirm or disconfirm such hypotheses have been very influential among both scientists and philosophers of scien- tists. Scientists do their best to avoid making claims that are not falsifiable.

A Closer Look: Karl Popper and Falsification in Science (continued)

If the hypothetico-deductive method cannot be used to confirm a hypothesis, how can this test give evidence for the truth of the claim? By failing to falsify the claim. Though the hypo- thetico–deductive method does not ever specifically prove the hypothesis true, if research- ers try their hardest to refute a claim but it keeps passing the test (not being refuted), then there can grow a substantial amount of inductive evidence for the truth of the claim. If you repeatedly test many cars and control for other variables, and if every time cars are filled with higher octane gas their fuel economy increases, you may have strong inductive evidence that the hypothesis might be true (in which case you may make an inference to the best explana- tion, which will be discussed in Section 6.5).

Experiments that would have the highest chance of refuting the claim if it were false thus provide the strongest inductive evidence that it may be true. For example, suppose we want to test the claim that all swans are white. If we only look for swans at places in which they are known to be white, then we are not providing a strong test for the claim. The best thing to do (short of observing every swan in the whole world) is to try as hard as we can to refute the claim, to find a swan that is not white. If our best methods of looking for nonwhite swans still fail to refute the claim, then there is a growing likelihood that perhaps all swans are indeed white.

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Section 6.4 Reasoning About Science: The Hypothetico–Deductive Method

Similarly, if we want to test to see if a certain type of medicine cures a certain type of dis- ease, we test the product by giving the medicine to a wide variety of patients with the dis- ease, including those with the least likelihood of being cured by the medicine. Only by trying as hard as we can to refute the claim can we get the strongest evidence about whether all instances of the disease are treatable with the medicine in question.

Notice that the hypothetico–deductive method involves a combination of inductive and deductive reasoning. Step 1 typically involves inductive reasoning as we formulate a hypoth- esis against the background of our current beliefs and knowledge. Step 2 typically provides a deductive argument for the premise “If H, then C.” Step 3 provides an inductive argument for whether C is or is not true. Finally, if the prediction is falsified, then the conclusion—that H is false—is derived by a deductive inference (using the deductively valid modus tollens form). If, on the other hand, the best attempts to prove C to be false fail to do so, then there is growing evidence that H might be true.

Therefore, our overall argument has both inductive and deductive elements. It is valuable to know that, although the methodology of science involves research and experimentation that goes well beyond the scope of pure logic, we can use logic to understand and clarify the basic principles of scientific reasoning.

Practice Problems 6.4

1. A hypothesis is __________. a. something that is a mere guess b. something that is often arrived at after a lot of research c. an unnecessary component of the scientific method d. something that is already solved

2. In a scientific experiment, __________. a. the truth of the prediction guarantees that the hypothesis was correct b. the truth of the prediction negates the possibility of the hypothesis being correct c. the truth of the prediction can have different levels of probability in relation to

the hypothesis being correct d. the truth of the prediction is of little importance

3. The argument form that is set up when a test yields negative results is __________. a. disjunctive syllogism b. modus ponens c. hypothetical syllogism d. modus tollens

4. A claim is testable if __________. a. we know how one could show it to be false b. we know how one could show it to be true c. we cannot determine a way to prove it false d. we can determine a way to see if it is true or false

(continued)

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Section 6.5 Inference to the Best Explanation

5. Which of the following claims is not falsifiable? a. The moon is made of cheese. b. There is an invisible alien in my garage. c. Octane ratings in gasoline influence fuel economy. d. The Willis Tower is the tallest building in the world.

Practice Problems 6.4 (continued)

6.5 Inference to the Best Explanation You may feel that if you were very careful about testing your fuel economy, you would be entitled to conclude that the change in fuel grade really did have an effect. Unfortunately, as we have seen, the hypothetico–deductive method does not support this inference. The best you can say is that changing fuel might have an effect; that you have not been able to show that it does not have an effect. The method does, however, lend inductive support to which- ever hypothesis withstands the falsification test better than any other. One way of articulating this type of support is with an inference pattern known as inference to the best explanation.

As the name suggests, inference to the best explanation draws a conclusion based on what would best explain one’s observations. It is an extremely important form of inference that we use every day of our lives. This type of inference is often called abductive reasoning, a term pioneered by American logician Charles Sanders Peirce (Douven, 2011).

Suppose that you are in your backyard gazing at the stars. Suddenly, you see some flashing lights hovering above you in the sky. You do not hear any sound, so it does not appear that the lights are coming from a helicopter. What do you think it is? What happens next is abductive reasoning: Your brain searches among all kinds of possibilities to attempt to come up with the most likely explanation.

One possibility is that it is an alien spacecraft coming to get you (one could joke that this is why it is called abductive reasoning). Another possibility is that it is some kind of military vessel or a weather balloon. A more extreme hypothesis is that you are actually dreaming the whole thing.

Notice that what you are inclined to believe depends on your existing beliefs. If you already think that alien spaceships come to Earth all the time, then you may arrive at that conclusion with a high degree of certainty (you may even shout, “Take me with you!”). However, if you are somewhat skeptical of those kinds of theories, then you will try hard to find any other explanation. Therefore, the strength of a particular inference to the best explanation can be measured only in relation to the rest of the things that we already believe.

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Section 6.5 Inference to the Best Explanation

This type of inference does not occur only in unusual circumstances like the one described. In fact, we make infer- ences to the best explanation all the time. Returning to our fuel economy example from the previous section, suppose that you test a higher octane fuel and notice that your car gets bet- ter gas mileage. It is possible that the mileage change is due to the change in fuel. However, as noted there, it is possible that there is another expla- nation. Perhaps you are not driving in stop-and-go traffic as much. Perhaps you are driving with less weight in the car. The careful use of inference to the best explanation can help us to discern what is the most likely among many possibilities (for more examples, see A Closer Look: Is Abductive Reasoning Everywhere?).

If you look at the range of possible explanations and find one of them is more likely than any of the others, inference to the best explanation allows you to conclude that this explanation is likely to be the correct one. If you are driving the same way, to the same places, and with the same weight in your car as before, it seems fairly likely that it was the change in fuel that caused the improvement in fuel economy (if you have studied Mill’s methods in Chapter 5, you should recognize this as the method of difference). Inference to the best explanation is the engine that powers many inductive techniques.

The great fictional detective Sherlock Holmes, for example, is fond of claiming that he uses deductive reasoning. Chapter 2 suggested that Holmes instead uses inductive reasoning. However, since Holmes comes up with the most reasonable explanation of observed phe- nomena, like blood on a coat, for example, he is actually doing abductive reasoning. There is some dispute about whether inference to the best explanation is inductive or whether it is an entirely different kind of argument that is neither inductive nor deductive. For our purposes, it is treated as inductive.

Image Asset Management/SuperStock

Sherlock Holmes often used abductive reasoning, not deductive reasoning, to solve his mysteries.

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Section 6.5 Inference to the Best Explanation

A Closer Look: Is Abductive Reasoning Everywhere? Some see inference to the best explanation as the most common type of inductive inference. A few of the inferences we have discussed in this book, for example, can potentially be cast as examples of inferences to the best explanation.

For example, appeals to authority (discussed in Chapter 5) can be seen as implicitly using inference to the best explanation (Harman, 1965). If you accept something as true because someone said it was, then you can be described as seeing the truth of the claim as the best explanation for why he or she said it. If we have good reason to think that the person was deluded or lying, then we are less certain of this conclusion because there are other likely explanations of why the person said it.

Furthermore, it is possible to see what we do when we interpret people’s words as a kind of inference to the best explanation of what they probably mean (Hobbs, 2004). If your neighbor says, “You are so funny,” for instance, we might use the context and tone to decide what he means by “funny” and why he is saying it (and whether he is being sarcastic). His comment can be seen as either rude or flattering, depending on what explanation we give for why he said it and what he meant.

Even the classic inductive inference pattern of inductive generalization can possibly be seen as implicitly involving a kind of inference to the best explanation: The best explanation of why our sample population showed that 90% of students have laptops is probably that 90% of all students have laptops. If there is good evidence that our sample was biased, then there would be a good competing explanation of our data.

Finally, much of scientific inference may be seen as trying to provide the best explanation for our observations (McMullin, 1992). Many hypotheses are attempts to explain observed phe- nomena. Testing them in such cases could then be seen as being done in the service of seeking the best explanation of why certain things are the way they are.

Take a look at the following examples of everyday inferences and see if they seem to involve arriving at the conclusion because it seems to offer the most likely explanation of the truth of the premise:

• “John is smiling; he must be happy.” • “My phone says that Julie is calling, so it is probably Julie.” • “I see a brown Labrador across the street; my neighbor’s dog must have gotten out.” • “This movie has great reviews; it must be good.” • “The sky is getting brighter; it must be morning.” • “I see shoes that look like mine by the door; I apparently left my shoes there.” • “She still hasn’t called back yet; she probably doesn’t like me.” • “It smells good; someone is cooking a nice dinner.” • “My congressperson voted against this bill I support; she must have been afraid of

offending her wealthy donors.” • “The test showed that the isotopes in the rock surrounding newly excavated bones had

decayed X amount; therefore, the animals from which the bones came must have been here about 150 million years ago.”

These examples, and many others, suggest to some that inference to the explanation may be the most common form of reasoning that we use (Douven, 2011). Do you agree? Whether you agree with these expanded views on the role of inference or not, it clearly makes an enormous contribution to how we understand the world around us.

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Section 6.5 Inference to the Best Explanation

Form Inferences to the best explanation generally involve the following pattern of reasoning:

X has been observed to be true. Y would provide an explanation of why X is true. No other explanation for X is as likely as Y. Therefore, Y is probably true.

One strange thing about inferences to the best explanation is that they are often expressed in the form of a common fallacy, as follows:

If P is the case, then Q would also be true. Q is true. Therefore, P is probably true.

This pattern is the logical form of a deductive fallacy known as affirming the consequent (discussed in Chapter 4). Therefore, we sometimes have to use the principle of charity to determine whether the person is attempting to provide an inference to the best explanation or making a simple deductive error. The principle of charity will be discussed in detail in Chapter 9; however, for our purposes here, you can think of it as giving your opponent and his or her argument the benefit of the doubt.

For example, the ancient Greek philosopher Aristotle reasoned as follows: “The world must be spherical, for the night sky looks different in the northern and southern regions, and that would be the case if the earth were spherical” (as cited in Wolf, 2004). His argument appears to have this structure:

If the earth is spherical, then the night sky would look different in the north- ern and southern regions. The night sky does look different in the northern and southern regions. Therefore, the earth is spherical.

It is not likely that Aristotle, the founding father of formal logic, would have made a mistake as silly as to affirm the consequent. It is far more likely that he was using inference to the best explanation. It is logically possible that there are other explanations for southern stars moving higher in the sky as one moves south, but it seems far more likely that it is due to the shape of the earth. Aristotle was just practicing strong abductive reasoning thousands of years before Columbus sailed the ocean blue (even Columbus would have had to use this type of reasoning, for he would have had to infer why he did not sail off the edge).

In more recent times, astronomers are still using inference to the best explanation to learn about the heavens. Let us consider the case of discovering planets outside our solar system, known as “exoplanets.” There are many methods employed to discover planets orbiting other stars. One of them, the radial velocity method, uses small changes in the frequency of light a

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Section 6.5 Inference to the Best Explanation

star emits. A star with a large planet orbiting it will wobble a little bit as the planet pulls on the star. That wobble will result in a pattern of changes in the frequency of light coming from the star. When astronomers see this pattern, they conclude that there is a planet orbiting the star. We can more fully explicate this reasoning in the following way:

That star’s light changes in a specific pattern. Something must explain the changes. A large planet orbiting the star would explain the changes. No other explanation is as likely as the explanation provided by the large planet. Therefore, that star probably has a large planet orbiting it.

The basic idea is that if there must be an explanation, and one of the available explanations is better than all the others, then that explanation is the one that is most likely to be true. The key issue here is that the explanation inferred in the conclusion has to be the best explana- tion available. If another explanation is as good—or better—then the inference is not nearly as strong.

Virtue of Simplicity Another way to think about inferences to the best explanation is that they choose the simplest explanation from among otherwise equal explanations. In other words, if two theories make the same prediction, the one that gives the simplest explanation is usually the best one. This standard for comparing scientific theories is known as Occam’s razor, because it was origi- nally posited by William of Ockham in the 14th century (Gibbs & Hiroshi, 1997).

A great example of this principle is Galileo’s demonstration that the sun, not the earth, is at the center of the solar system. Galileo’s theory provided the simplest explanation of observa- tions about the planets. His heliocentric model, for example, provides a simpler explanation for the phases of Venus and why some of the planets appear to move backward (retrograde motion) than does the geocentric model. Geocentric astronomers tried to explain both of these with the idea that the planets sometimes make little loops (called epicycles) within their orbits (Gronwall, 2006). While it is certainly conceivable that they do make little loops, it seems to make the theory unnecessarily complex, because it requires a type of motion with no independent explanation of why it occurs, whereas Galileo’s theory does not require such extra assumptions.

Therefore, putting the sun at the center allows one to explain observed phenomena in the most simple manner possible, without making ad hoc assumptions (like epicycles) that today seem absurd. Galileo’s theory was ultimately correct, and he demonstrated it with strong inductive (more specifically, abductive) reasoning. (For another example of Occam’s razor at work, see A Closer Look: Abductive Reasoning and the Matrix.)

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Section 6.5 Inference to the Best Explanation

A Closer Look: Abductive Reasoning and the Matrix One of the great questions from the history of philosophy is, “How do we know that the world exists outside of us as we perceive it?” We see a tree and we infer that it exists, but do we actu- ally know for sure that it exists? The argument seems to go as follows:

I see a tree. Therefore, a tree exists.

This inference, however, is invalid; it is possible for the premise to be true and the conclusion false. For example, we could be dreaming. Perhaps we think that the testimony of our other senses will make the argument valid:

I see a tree, I hear a tree, I feel a tree, and I smell a tree. Therefore, a tree exists.

However, this argument is still invalid; it is pos- sible that we could be dreaming all of those things as well. Some people state that senses like smell do not exist within dreams, but how do we know that is true? Perhaps we only dreamed that someone said that! In any case, even that would not rescue our argument, for there is an even stronger way to make the premise true and the conclusion false: What if your brain is actually in a vat somewhere attached to a computer, and a scientist is directly controlling all of your perceptions? (Or think of the 1999 movie The Matrix, in which humans are living in a simulated reality created by machines.)

One individual who struggled with these types of questions (though there were no computers back then) was a French philosopher named René Des- cartes. He sought a deductive proof that the world outside of us is real, despite these types of disturbing possibilities (Descartes, 1641/1993). He eventually came up with one of philoso- phy’s most famous arguments, “I think, therefore, I am” (or, more precisely, “I am thinking, therefore, I exist”), and from there attempted to prove that the world must exist outside of him.

Many philosophers feel that Descartes did a great job of raising difficult questions, but most feel that he failed in his attempt to find deductive proof of the world outside of our minds. Other philosophers, including David Hume, despaired of the possibility of a proof that we know that there is a world outside of us and became skeptics: They decided that absolute knowledge of a world outside of us is impossible (Hume, 1902).

However, perhaps the problem is not the failure of the particular arguments but the type of reasoning employed. Perhaps the solution is not deductive at all but rather abductive. It is not that it is logically impossible that tables and chairs and trees (and even other people) do not really exist; it is just that their actual existence provides the best explanation of our experi- ences. Consider these competing explanations of our experiences:

• We are dreaming this whole thing. • We are hallucinating all of this.

©Warner Bros./Courtesy Everett Collection

In The Matrix, we learn that our world is simulated by machines, and although we can see X, hear X, and feel X, X does not exist.

(continued)

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Section 6.5 Inference to the Best Explanation

• Our brains are in a vat being controlled by a scientist. • Light waves are bouncing off the molecules on the surface of the tree and entering our

eyeballs, where they are turned into electrical impulses that travel along neurons into our brains, somehow causing us to have the perception of a tree.

It may seem at first glance that the final option is the most complex and so should be rejected. However, let us take a closer look. The first two options do not offer much of an explanation for the details of our experience. They do not tell us why we are seeing a tree rather than some- thing else or nothing at all. The third option seems to assume that there is a real world some- where from which these experiences are generated (that is, the lab with the scientist in it). The full explanation of how things work in that world presumably must involve some complex laws of physics as well. There is no obvious reason to think that such an account would require fewer assumptions than an account of the world as we see it. Hence, all things considered, if our goal is to create a full explanation of reality, the final option seems to give the best account of why we are seeing the tree. It explains our observations without needless extra assumptions.

Therefore, if knowledge is assumed only to be deductive, then perhaps we do not know (with absolute deductive certainty) that there is a world outside of us. However, when we consider abductive knowledge, our evidence for the existence of the world as we see it may be rather strong.

A Closer Look: Abductive Reasoning and the Matrix (continued)

How to Assess an Explanation There are many factors that influence the strength of an inference to the best explanation. However, when testing inferences to the best explanation for strength, these questions are good to keep in mind:

• Does it agree well with the rest of human knowledge? Suggesting that your room- mate’s car is gone because it floated away, for example, is not a very credible story because it would violate the laws of physics.

• Does it provide the simplest explanation of the observed phenomena? According to Occam’s razor, we want to explain why things happen without unnecessary complexity.

• Does it explain all relevant observations? We cannot simply ignore contradicting data because it contradicts our theory; we have to be able to explain why we see what we see.

• Is it noncircular? Some explanations merely lead us in a circle. Stating that it is raining because water is falling from the sky, for example, does not give us any new information about what causes the water to fall.

• Is it testable? Suggesting that invisible elves stole the car does not allow for empirical confirmation. An explanation is stronger if its elements are potentially observable.

• Does it help us explain other phenomena as well? The best scientific theories do not just explain one thing but allow us to understand a whole range of related phenom- ena. This principle is called fecundity. Galileo’s explanation of the orbits of the plan- ets is an example of a fecund theory because it explains several things all at once.

An explanation that has all of these virtues is likely to be better than one that does not.

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Section 6.5 Inference to the Best Explanation

A Limitation One limitation of inference to the best explanation is that it depends on our coming up with the correct explanation as one of the candidates. If we do not think of the correct explana- tion when trying to imagine possible explanation, then inference to the best explanation can steer us wrong. This can happen with any inductive argument, of course; inductive arguments always carry some possibility that the conclusion may be false even if the premises are true. However, this limitation is a particular danger with inference to the best explanation because it relies on our being able to imagine the true explanation.

This is one reason that it is essential to always keep an open mind when using this technique. Further information may introduce new explanations or change which explanation is best. Being open to further information is important for all inductive inferences, but especially so for those involving inference to the best explanation.

Practice Problems 6.5

1. This philosopher coined the term abductive reasoning. a. Karl Popper b. Charles Sanders Peirce c. Aristotle d. G. W. F. Hegel

2. Sherlock Holmes is often said to be engaging in this form of reasoning, even though from a logical perspective he wasn’t. a. deductive b. inductive c. abductive d. productive

3. In a specific city that happens to be a popular tourist destination, the number of residents going to the emergency rooms for asthma attacks increases in the summer. When the winter comes and tourism decreases, the number of asthma attacks goes down. What is the most probable inference to be drawn in this situation? a. The locals are allergic to tourists. b. Summer is the time that most people generally have asthma attacks. c. The increased tourism leads to higher levels of air pollution due to traffic. d. The tourists pollute the ocean with trash that then causes the locals to get sick.

4. A couple goes to dinner and shares an appetizer, entrée, and dessert. Only one of the two gets sick. She drank a glass of wine, and her husband drank a beer. What is the most probable inference to be drawn in this situation? a. The wine was the cause of the sickness. b. The beer protected the man from the sickness. c. The appetizer affected the woman but not the man. d. The wine was rotten.

(continued)

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Section 6.5 Inference to the Best Explanation

5. You are watching a magic performance, and there is a woman who appears to be floating in space. The magician passes a ring over her to give the impression that she is floating. What explanation fits best with Occam’s razor? a. The woman is actually floating off the ground. b. The magician is a great magician. c. There is some sort of unseen physical object holding the woman.

6. You get a stomachache after eating out at a restaurant. What explanation fits best with Occam’s razor? a. You contracted Ebola and are in the beginning phases of symptoms. b. Someone poisoned the food that you ate. c. Something was wrong with the food you ate.

7. In order to determine how a disease was spread in humans, researchers placed two groups of people into two rooms. Both rooms were exactly alike, and no people touched each other while in the rooms. However, researchers placed someone who was infected with the disease in one room. They found that those who were in the room with the infected person got sick, whereas those who were not with an infected person remained well. What explanation fits best with Occam’s razor? a. The disease is spread through direct physical contact. b. The disease is spread by airborne transmission. c. The people in the first room were already sick as well.

8. There is a dent in your car door when you come out of the grocery store. What expla- nation fits best with Occam’s razor? a. Some other patron of the store hit your car with their car. b. A child kicked your door when walking into the store. c. Bad things tend to happen only to you in these types of situations.

9. A student submits a paper that has an 80% matching rate when submitted to Tur- nitin. There are multiple sites that align exactly with the content of the paper. What explanation fits best with Occam’s razor? a. The student didn’t know it was wrong to copy things word for word without

citing. b. The student knowingly took material that he did not write and used it as his

own. c. Someone else copied the student’s work.

10. You are a man, and you jokingly take a pregnancy test. The test comes up positive. What explanation fits best with Occam’s razor? a. You are pregnant. b. The test is correct. c. The test is defective.

11. A bomb goes off in a supermarket in London. A terrorist group takes credit for the bombing. What explanation fits best with Occam’s razor? a. The British government is trying to cover up the bombing by blaming a terrorist

group. b. The terrorist group is the cause of the bombing. c. The U.S. government actually bombed the market to get the British to help them

fight terrorist groups.

Practice Problems 6.5 (continued)

(continued)

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Section 6.5 Inference to the Best Explanation

12. You have friends and extended family over for Thanksgiving dinner. There are kids running through the house. You check the turkey and find that it is overcooked because the temperature on the oven is too high. What explanation fits best with Occam’s razor? a. The oven increased the temperature on its own. b. Someone turned up the heat to sabotage your turkey. c. You bumped the knob when you were putting something into the oven.

13. Researchers recently mapped the genome of a human skeleton that was 45,000 years old. They found long fragments of Neanderthal DNA integrated into this human genome. What explanation fits best with Occam’s razor? a. Humans and Neanderthals interbred at some point prior to the life of this hu-

man. b. The scientists used a faulty method in establishing the genetic sequence. c. This was actually a Neanderthal skeleton.

14. There is a recent downturn in employment and the economy. A politically far-leaning radio host claims that the downturn in the economy is the direct result of the presi- dent’s actions. What explanation fits best with Occam’s razor? a. The downturn in employment is due to many factors, and more research is in

order. b. The downturn in employment is due to the president’s actions. c. The downturn in employment is really no one’s fault.

15. In order for an explanation to be adequate, one should remember that __________. a. it should agree with other human knowledge b. it should include the highest level of complexity c. it should assume the thing it is trying to prove d. there are outlying situations that contradict the explanation

16. The fecundity of an explanation refers to its __________. a. breadth of explanatory power b. inability to provide an understanding of a phenomenon c. lack of connection to what is being examined d. ability to bear children

17. Why might one choose to use an inductive argument rather than a deductive argument? a. One possible explanation must be the correct one. b. The argument relates to something that is probabilistic rather than absolute. c. An inductive argument makes the argument valid. d. One should always use inductive arguments when possible.

18. This is the method by which one can make a valid argument invalid. a. adding false supporting premises b. demonstrating that the argument is valid c. adding true supporting premises d. valid arguments cannot be made invalid

(continued)

Practice Problems 6.5 (continued)

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Section 6.5 Inference to the Best Explanation

19. This form of inductive argument moves from the general to the specific. a. generalizations b. statistical syllogisms c. hypothetical syllogism d. modus tollens

Questions 20–24 relate to the following passage:

If I had gone to the theater, then I would have seen the new film about aliens. I didn’t go to the theater though, so I didn’t see the movie. I think that films about aliens and supernatural events are able to teach people a lot about what the future might hold in the realm of tech- nology. Things like cell phones and space travel were only dreams in old movies, and now they actually exist. Science fiction can also demonstrate new futures in which people are more accepting of those that are different from them. The different species of characters in these films all working together and interacting with one another in harmony displays the unity of different people without explicitly making race or ethnicity an issue, thereby bringing people into these forms of thought without turning those away who do not want to explicitly confront these issues.

20. How many arguments are in this passage? a. 0 b. 1 c. 2 d. 3

21. How many deductive arguments are in this passage? a. 0 b. 1 c. 2 d. 3

22. How many inductive arguments are in this passage? a. 0 b. 1 c. 2 d. 3

23. Which of the following are conclusions in the passage? Select all that apply. a. If I had gone to the theater, then I would have seen the new film about aliens. b. I didn’t go to the theater. c. Films about aliens and supernatural events are able to teach people a lot about

what the future might hold in the realm of technology. d. The different species of characters in these films all working together and

interacting with one another in harmony displays the unity of different people without explicitly making race or ethnicity an issue.

24. Which change to the deductive argument would make it valid? Select all that apply. a. Changing the first sentence to “If I would have gone to the theater, I would not

have seen the new film about aliens.” b. Changing the second sentence to “I didn’t see the new film about aliens.” c. Changing the conclusion to “Alien movies are at the theater.” d. Changing the second sentence to “I didn’t see the movie, so I didn’t go to the theater.”

Practice Problems 6.5 (continued)

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Summary and Resources

Summary and Resources

Chapter Summary Although induction and deduction are treated differently in the field of logic, they are fre- quently combined in arguments. Arguments with both deductive and inductive components are generally considered to be inductive as a whole, but the important thing is to recognize when deduction and induction are being used within the argument. Arguments that com- bine inductive and deductive elements can take advantage of the strengths of each. They can retain the robustness and persuasiveness of inductive arguments while using the stronger connections of deductive arguments where these are available.

Science is one discipline in which we can see inductive and deductive arguments play out in this fashion. The hypothetico–deductive method is one of the central logical tools of science. It uses a deductive form to draw a conclusion from inductively supported premises. The hypothetico–deductive method excels at disconfirming or falsifying hypotheses but cannot be used to confirm hypotheses directly.

Inference to the best explanation, however, does provide evidence supporting the truth of a hypothesis if it provides the best explanation of our observations and withstands our best attempts at refutation. A key limitation of this method is that it depends on our being able to come up with the correct explanation as a possibility in the first place. Nevertheless, it is a powerful form of inference that is used all the time, not only in science but in our daily lives.

Critical Thinking Questions

1. You have probably encountered numerous conspiracy theories on the Internet and in popular media. One such theory is that 9/11 was actually plotted and orches- trated by the U.S. government. What is the relationship between conspiracy theories and inference to the best possible explanation? In this example, do you think that this is a better explanation than the most popular one? Why or why not?

2. What are some methods you can use to determine whether or not information represents the best possible explanation of events? How can you evaluate sources of information to determine whether or not they should be trusted?

3. Descartes claimed that it might be the case that humans are totally deceived about all aspects of their existence. He went so far as to claim that God could be evil and could be making it so that human perception is completely wrong about everything. However, he also claimed that there is one thing that cannot be doubted: So long as he is thinking, it is impossible for him to doubt that it is he who is thinking. Hence, so long as he thinks, he exists. Do you think that this argument establishes the inherent existence of the thinking being? Why or why not?

4. Have you ever been persuaded by an argument that ended up leading you to a false conclusion? If so, what happened, and what could you have done differently to pre- vent yourself from believing a false conclusion?

5. How can you incorporate elements of the hypothetico–deductive method into your own problem solving? Are there methods here that can be used to analyze situations in your personal and professional life? What can we learn about the search for truth from the methods that scientists use to enhance knowledge?

har85668_06_c06_207-238.indd 236 4/9/15 11:38 AM

Summary and Resources

abductive reasoning See inference to the best explanation.

falsifiable Describes a claim that is conceiv- ably possible to prove false. That does not mean that it is false; only that prior to test- ing, it is possible that it could have been.

falsification The effort to disprove a claim (typically by finding a counterexample to it).

hypothesis A conjecture about how some part of the world works.

hypothetico–deductive method The method of creating a hypothesis and then attempting to falsify it through experimentation.

inference to the best explanation The process of inferring something to be true because it is the most likely explanation of some observations. Also known as abductive reasoning.

Occam’s razor The principle that, when seeking an explanation for some phenom- ena, the simpler the explanation the better.

self-sealing propositions Claims that can- not be proved false because they are inter- preted in a way that protects them against any possible counterexample.

Web Resources https://www.youtube.com/watch?v=RauTW8F-PMM Watch Ashford professor Justin Harrison lecture on the difference between inductive and deductive arguments.

https://www.youtube.com/watch?v=VXW5mLE5Y2g Shmoop offers an animated video on the difference between induction and deduction.

http://www.ac4d.com/2012/06/03/abductive-reasoning-in-airport-security-and-profiling Design expert Jon Kolko applies abductive reasoning to airport security in this blog post.

Key Terms

Answers to Practice Problems Practice Problems 6.1

1. d 2. a

3. b 4. b

Practice Problems 6.2

1. a 2. a

3. a 4. a

Practice Problem 6.3

1. b

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Summary and Resources

Practice Problems 6.4

1. b 2. c 3. d

4. d 5. b

Practice Problems 6.5

1. b 2. a 3. c 4. a 5. c 6. c 7. b 8. a 9. b

10. c 11. b 12. c

13. a 14. a 15. a 16. a 17. b 18. d 19. b 20. d 21. b 22. c 23. c 24. d

har85668_06_c06_207-238.indd 238 4/9/15 11:38 AM

Categories

## two dogs pull horizontally on ropes attached to a post

Embry-Riddle Aeronautical University Department of Physical Sciences

Home Work # 4 & 5 PS 103 � Technical Physics�I

Due Date: Oct 3, 2014 (Friday)

Name:

Date: September 23, 2014 (Tuesday)

Semester: Fall-2014

Section:

Total point: 20

Important:

• Home work is due in the beginning of the class on the date mentioned above.

• Please note that providing answers without showing any working will not qualify as correct. So to get full points show EACH AND EVERY STEP.

• Please answer all questions neat and clean in as much detail as you can.

• All the conventions followed in the homework are same as that of lectures.

Question# 1:- You throw a ball vertically upward from the roof of a tall building. The ball leaves your hand at a point even with the roof railing with an upward speed of 15.0 m/s; the ball is then in free fall. On its way back down, it just misses the railing. Find

a) the ball’s position and velocity 1.00 s, 2.00 s, 3.00 s, and 4.00 s after leaving your hand;

b) the ball’s velocity when it is 5.00 m above the railing;

c) the maximum height reached;

d) the ball’s acceleration when it is at its maximum height.

e) At what time after being released has the ball fallen 5.00 m below the roof railing? and what will it’s speed be at that time?

f) At what time after being released has the ball fallen 2.00 m below the roof railing? and what will it’s speed be at that time?

Question# 2:- The boat in Figure 1 is heading due north as it crosses a wide river with a velocity of 10.0 km/h relative to the water. The river has a uniform velocity of 5.00 km/h due east. Determine the magnitude and direction of the boat’s velocity with respect to an observer on the riverbank.

Figure 1: Problem-2

1

Embry-Riddle Aeronautical University

Question# 3:- A batter hits a baseball so that it leaves the bat at speed v0 = 37.0 m/s at an angle ↵0 = 53.1�.

a) Find the position of the ball and its velocity (magnitude and direction) at t = 2.00 s.

b) Find the time when the ball reaches the high- est point of its flight, and its height h at this time.

c) Find the horizontal range R that is, the hor- izontal distance from the starting point to where the ball hits the ground. Figure 2: Problem-3

Question# 4:- Two tanks are engaged in a training exercise on level ground. The first tank fires a paint-filled training round with a muzzle speed of 250 m/s at 10.0� above the horizontal while advancing toward the second tank with a speed of 15.0 m/s relative to the ground. The second tank is retreating at 35.0 m/s relative to the ground, but is hit by the shell. You can ignore air resistance and assume the shell hits at the same height above ground from which it was fired. Find the distance between the tanks

a) when the round was first fired and

b) at the time of impact.

Question# 5:- Workmen are trying to free an SUV stuck in the mud. To extricate the vehicle, they use three horizontal ropes, producing the force vectors shown Figure 3.

a) Find the x� and y�components of each of the three pulls.

b) Use the components to find the magnitude and direction of the resultant of the three pulls. Figure 3: Problem-5

Question# 6:- Two horses are pulling a barge with mass 2.00⇥103 kg along a canal, as shown in Figure 4. The cable connected to the first horse makes an angle of ✓1 = 30.0� with respect to the direction of the canal, while the cable connected to the second horse makes an angle of ✓1 = 30.0�. Find the initial acceleration of the barge, starting at rest, if each horse exerts a force of magnitude 6.00 ⇥ 102 N on the barge. Ignore forces of resistance on the barge.

Figure 4: Problem-6

Question# 7:- Two dogs pull horizontally on ropes attached to a post; the angle between the ropes is 60.0�. If dog A exerts a force of 270 N and dog B exerts a force of 300 N, find the magnitude of the resultant force and the angle it makes with dog A’s rope.

2

Embry-Riddle Aeronautical University

Question# 8:- A 68.5-kg skater moving initially at 2.40 m/s on rough horizontal ice comes to rest uniformly in 3.52 s due to friction from the ice. What force does friction exert on the skater?

Question# 9:- You walk into an elevator, step onto a scale, and push the “up” button. You also recall that your normal weight is 625 N. Start answering each of the following questions by drawing a freebody diagram.

a) If the elevator has an acceleration of magnitude 2.50 m/s2, what does the scale read?

b) If you start holding a 3.85-kg package by a light vertical string, what will be the tension in this string once the elevator begins accelerating?

Question# 10:- A box rests on a frozen pond, which serves as a frictionless horizontal surface. If a fisherman applies a horizontal force with magnitude 48.0 N to the box and produces an acceleration of magnitude 3.00 m/s2, what is the mass of the box?

Question# 11:- Boxes A and B are in contact on a hor- izontal, frictionless surface, as shown in Figure 5. Box A has mass 20.0 kg and box B has mass 5.0 kg. A horizontal force of 100 N is exerted on box A. What is the magnitude of the force that box A exerts on box B? Figure 5: Problem-11

Question# 12:- Two objects of mass m1 and m2, with m2 > m1, are connected by a light, inextensible cord and hung over a frictionless pulley, as in Ac- tive Figure 6. Both cord and pulley have negligible mass. Find the magnitude of the acceleration of the system and the tension

Figure 6: Problem-12

Question# 13:- A 150-N bird feeder is supported by three cables as shown in Figure 7. Find the tension in each cable.

Figure 7: Problem-13

Question# 14:- An object with mass m1 = 5.00 kg rests on a frictionless horizontal table and is con- nected to a cable that passes over a pulley and is then fastened to a hanging object with mass m2 = 10.0 kg, as shown in Figure 8. Find

a) the acceleration of each object and

b) the tension in the cable. Figure 8: Problem-14

Categories

## american and japanese workers can each produce 4 cars a year

CHAPTER 3 Interdependence and the Gains from Trade

Consider your typical day. You wake up in the morning and pour yourself juice from oranges grown in Florida and coffee from beans grown in Brazil. Over breakfast, you watch a news program broadcast from New York on your television made in China. You get dressed in clothes made of cotton grown in Georgia and sewn in factories in Thailand. You drive to class in a car made of parts manufactured in more than a dozen countries around the world. Then you open up your economics textbook written by an author living in Massachusetts, published by a company located in Ohio, and printed on paper made from trees grown in Oregon.

Every day, you rely on many people, most of whom you have never met, to provide you with the goods and services that you enjoy. Such interdependence is possible because people trade with one another. Those people providing you with goods and services are not acting out of generosity. Nor is some government agency directing them to satisfy your desires. Instead, people provide you and other consumers with the goods and services they produce because they get something in return.

In subsequent chapters, we examine how an economy coordinates the activities of millions of people with varying tastes and abilities. As a starting point for this analysis, in this chapter we consider the reasons for economic interdependence. One of the Ten Principles of Economicshighlighted in Chapter 1 is that trade can make everyone better off. We now examine this principle more closely. What exactly do people gain when they trade with one another? Why do people choose to become interdependent?

The answers to these questions are key to understanding the modern global economy. Most countries today import from abroad many of the goods and services they consume, and they export to foreign customers many of the goods and services they produce. The analysis in this chapter explains interdependence not only among individuals but also among nations. As we will see, the gains from trade are much the same whether you are buying a haircut from your local barber or a T-shirt made by a worker on the other side of the globe.

3-1 A Parable for the Modern Economy

To understand why people choose to depend on others for goods and services and how this choice improves their lives, let’s look at a simple economy. Imagine that there are two goods in the world: meat and potatoes. And there are two people in the world—a cattle rancher named Rose and a potato farmer named Frank—each of whom would like to eat both meat and potatoes.

The gains from trade are most obvious if Rose can produce only meat and Frank can produce only potatoes. In one scenario, Frank and Rose could choose to have nothing to do with each other. But after several months of eating beef roasted, boiled, broiled, and grilled, Rose might decide that self-sufficiency is not all it’s cracked up to be. Frank, who has been eating potatoes mashed, fried, baked, and scalloped, would likely agree. It is easy to see that trade would allow them to enjoy greater variety: Each could then have a steak with a baked potato or a burger with fries.

Although this scene illustrates most simply how everyone can benefit from trade, the gains would be similar if Frank and Rose were each capable of producing the other good, but only at great cost. Suppose, for example, that Rose is able to grow potatoes but her land is not very well suited for it. Similarly, suppose that Frank is able to raise cattle and produce meat but he is not very good at it. In this case, Frank and Rose can each benefit by specializing in what he or she does best and then trading with the other person.

The gains from trade are less obvious, however, when one person is better at producing everygood. For example, suppose that Rose is better at raising cattle and better at growing potatoes than Frank. In this case, should Rose choose to remain self-sufficient? Or is there still reason for her to trade with Frank? To answer this question, we need to look more closely at the factors that affect such a decision.

3-1a Production Possibilities

Suppose that Frank and Rose each work 8 hours per day and can devote this time to growing potatoes, raising cattle, or a combination of the two. The table in  Figure 1  shows the amount of time each person requires to produce 1 ounce of each good. Frank can produce an ounce of potatoes in 15 minutes and an ounce of meat in 60 minutes. Rose, who is more productive in both activities, can produce an ounce of potatoes in 10 minutes and an ounce of meat in 20 minutes. The last two columns in the table show the amounts of meat or potatoes Frank and Rose can produce if they devote all 8 hours to producing only that good.

FIGURE 1 The Production Possibilities Frontier

Panel (a) shows the production opportunities available to Frank the farmer and Rose the rancher. Panel (b) shows the combinations of meat and potatoes that Frank can produce. Panel (c) shows the combinations of meat and potatoes that Rose can produce. Both production possibilities frontiers are derived assuming that Frank and Rose each work 8 hours per day. If there is no trade, each person’s production possibilities frontier is also his or her consumption possibilities frontier.

Panel (b) of  Figure 1  illustrates the amounts of meat and potatoes that Frank can produce. If Frank devotes all 8 hours of his time to potatoes, he produces 32 ounces of potatoes (measured on the horizontal axis) and no meat. If he devotes all his time to meat, he produces 8 ounces of meat (measured on the vertical axis) and no potatoes. If Frank divides his time equally between the two activities, spending 4 hours on each, he produces 16 ounces of potatoes and 4 ounces of meat. The figure shows these three possible outcomes and all others in between.

This graph is Frank’s production possibilities frontier. As we discussed in  Chapter 2 , a production possibilities frontier shows the various mixes of output that an economy can produce. It illustrates one of the Ten Principles of Economics in Chapter 1: People face trade-offs. Here Frank faces a trade-off between producing meat and producing potatoes.

You may recall that the production possibilities frontier in  Chapter 2  was drawn bowed out. In that case, the rate at which society could trade one good for the other depended on the amounts that were being produced. Here, however, Frank’s technology for producing meat and potatoes (as summarized in Figure 1) allows him to switch between the two goods at a constant rate. Whenever Frank spends 1 hour less producing meat and 1 hour more producing potatoes, he reduces his output of meat by 1 ounce and raises his output of potatoes by 4 ounces—and this is true regardless of how much he is already producing. As a result, the production possibilities frontier is a straight line.

Panel (c) of  Figure 1  shows the production possibilities frontier for Rose. If Rose devotes all 8 hours of her time to potatoes, she produces 48 ounces of potatoes and no meat. If she devotes all her time to meat, she produces 24 ounces of meat and no potatoes. If Rose divides her time equally, spending 4 hours on each activity, she produces 24 ounces of potatoes and 12 ounces of meat. Once again, the production possibilities frontier shows all the possible outcomes.

If Frank and Rose choose to be self-sufficient rather than trade with each other, then each consumes exactly what he or she produces. In this case, the production possibilities frontier is also the consumption possibilities frontier. That is, without trade, Figure 1 shows the possible combinations of meat and potatoes that Frank and Rose can each produce and then consume.

These production possibilities frontiers are useful in showing the trade-offs that Frank and Rose face, but they do not tell us what Frank and Rose will actually choose to do. To determine their choices, we need to know the tastes of Frank and Rose. Let’s suppose they choose the combinations identified by points A and B in Figure 1. Based on his production opportunities and food preferences, Frank decides to produce and consume 16 ounces of potatoes and 4 ounces of meat, while Rose decides to produce and consume 24 ounces of potatoes and 12 ounces of meat.

3-1b Specialization and Trade

After several years of eating combination B, Rose gets an idea and goes to talk to Frank:

· ROSE: Frank, my friend, have I got a deal for you! I know how to improve life for both of us. I think you should stop producing meat altogether and devote all your time to growing potatoes. According to my calculations, if you work 8 hours a day growing potatoes, you’ll produce 32 ounces of potatoes. If you give me 15 of those 32 ounces, I’ll give you 5 ounces of meat in return. In the end, you’ll get to eat 17 ounces of potatoes and 5 ounces of meat every day, instead of the 16 ounces of potatoes and 4 ounces of meat you now get. If you go along with my plan, you’ll have more of both foods. [To illustrate her point, Rose shows Frank panel (a) of Figure 2.]

· FRANK: (sounding skeptical) That seems like a good deal for me. But I don’t understand why you are offering it. If the deal is so good for me, it can’t be good for you too.

· ROSE: Oh, but it is! Suppose I spend 6 hours a day raising cattle and 2 hours growing potatoes. Then I can produce 18 ounces of meat and 12 ounces of potatoes. After I give you 5 ounces of my meat in exchange for 15 ounces of your potatoes, I’ll end up with 13 ounces of meat and 27 ounces of potatoes, instead of the 12 ounces of meat and 24 ounces of potatoes that I now get. So I will also consume more of both foods than I do now. [She points out panel (b) of  Figure 2 .]

· FRANK: I don’t know. . . . This sounds too good to be true.

· ROSE: It’s really not as complicated as it first seems. Here—I’ve summarized my proposal for you in a simple table. [Rose shows Frank a copy of the table at the bottom of Figure 2.]

· FRANK: (after pausing to study the table) These calculations seem correct, but I am puzzled. How can this deal make us both better off?

· ROSE: We can both benefit because trade allows each of us to specialize in doing what we do best. You will spend more time growing potatoes and less time raising cattle. I will spend more time raising cattle and less time growing potatoes. As a result of specialization and trade, each of us can consume more meat and more potatoes without working any more hours.

FIGURE 2 How Trade Expands the Set of Consumption Opportunities

The proposed trade between Frank the farmer and Rose the rancher offers each of them a combination of meat and potatoes that would be impossible in the absence of trade. In panel (a), Frank gets to consume at point A* rather than point A. In panel (b), Rose gets to consume at point B* rather than point B. Trade allows each to consume more meat and more potatoes.

Quick Quiz Draw an example of a production possibilities frontier for Robinson Crusoe, a shipwrecked sailor who spends his time gathering coconuts and catching fish. Does this frontier limit Crusoe’s consumption of coconuts and fish if he lives by himself? Does he face the same limits if he can trade with natives on the island?

3-2 Comparative Advantage: The Driving Force of Specialization

Rose’s explanation of the gains from trade, though correct, poses a puzzle: If Rose is better at both raising cattle and growing potatoes, how can Frank ever specialize in doing what he does best? Frank doesn’t seem to do anything best. To solve this puzzle, we need to look at the principle ofcomparative advantage.

As a first step in developing this principle, consider the following question: In our example, who can produce potatoes at a lower cost—Frank or Rose? There are two possible answers, and in these two answers lie the solution to our puzzle and the key to understanding the gains from trade.

One way to answer the question about the cost of producing potatoes is to compare the inputs required by the two producers. Economists use the term  absolute advantage  when comparing the productivity of one person, firm, or nation to that of another. The producer that requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good.

the ability to produce a good using fewer inputs than another producer

In our example, time is the only input, so we can determine absolute advantage by looking at how much time each type of production takes. Rose has an absolute advantage both in producing meat and in producing potatoes because she requires less time than Frank to produce a unit of either good. Rose needs to input only 20 minutes to produce an ounce of meat, whereas Frank needs 60 minutes. Similarly, Rose needs only 10 minutes to produce an ounce of potatoes, whereas Frank needs 15 minutes. Based on this information, we can conclude that Rose has the lower cost of producing potatoes, if we measure cost in terms of the quantity of inputs.

3-2b Opportunity Cost and Comparative Advantage

There is another way to look at the cost of producing potatoes. Rather than comparing inputs required, we can compare opportunity costs. Recall from  Chapter 1  that the  opportunity cost  of some item is what we give up to get that item. In our example, we assumed that Frank and Rose each spend 8 hours a day working. Time spent producing potatoes, therefore, takes away from time available for producing meat. When reallocating time between the two goods, Rose and Frank give up units of one good to produce units of the other, thereby moving along the production possibilities frontier. The opportunity cost measures the trade-off between the two goods that each producer faces.

opportunity cost

whatever must be given up to obtain some item

Let’s first consider Rose’s opportunity cost. According to the table in panel (a) of Figure 1, producing 1 ounce of potatoes takes 10 minutes of work. When Rose spends those 10 minutes producing potatoes, she spends 10 minutes less producing meat. Because Rose needs 20 minutes to produce 1 ounce of meat, 10 minutes of work would yield ½ ounce of meat. Hence, Rose’s opportunity cost of producing 1 ounce of potatoes is ½ ounce of meat.

TABLE 1 The Opportunity Cost of Meat and Potatoes

 Opportunity Cost of: 1 oz of Meat 1 oz of Potatoes Frank the farmer 4 oz potatoes ¼ oz meat Rose the rancher 2 oz potatoes ½ oz meat

Now consider Frank’s opportunity cost. Producing 1 ounce of potatoes takes him 15 minutes. Because he needs 60 minutes to produce 1 ounce of meat, 15 minutes of work would yield ¼ ounce of meat. Hence, Frank’s opportunity cost of 1 ounce of potatoes is ¼ ounce of meat.

Table 1  shows the opportunity costs of meat and potatoes for the two producers. Notice that the opportunity cost of meat is the inverse of the opportunity cost of potatoes. Because 1 ounce of potatoes costs Rose ½ ounce of meat, 1 ounce of meat costs Rose 2 ounces of potatoes. Similarly, because 1 ounce of potatoes costs Frank ¼ ounce of meat, 1 ounce of meat costs Frank 4 ounces of potatoes.

Economists use the term  comparative advantage  when describing the opportunity costs faced by two producers. The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X and is said to have a comparative advantage in producing it. In our example, Frank has a lower opportunity cost of producing potatoes than Rose: An ounce of potatoes costs Frank only ¼ ounce of meat, but it costs Rose ½ ounce of meat. Conversely, Rose has a lower opportunity cost of producing meat than Frank: An ounce of meat costs Rose 2 ounces of potatoes, but it costs Frank 4 ounces of potatoes. Thus, Frank has a comparative advantage in growing potatoes, and Rose has a comparative advantage in producing meat.

the ability to produce a good at a lower opportunity cost than another producer

Although it is possible for one person to have an absolute advantage in both goods (as Rose does in our example), it is impossible for one person to have a comparative advantage in both goods. Because the opportunity cost of one good is the inverse of the opportunity cost of the other, if a person’s opportunity cost of one good is relatively high, the opportunity cost of the other good must be relatively low. Comparative advantage reflects the relative opportunity cost. Unless two people have the same opportunity cost, one person will have a comparative advantage in one good, and the other person will have a comparative advantage in the other good.

The gains from specialization and trade are based not on absolute advantage but on comparative advantage. When each person specializes in producing the good for which he or she has a comparative advantage, total production in the economy rises. This increase in the size of the economic pie can be used to make everyone better off.

In our example, Frank spends more time growing potatoes, and Rose spends more time producing meat. As a result, the total production of potatoes rises from 40 to 44 ounces, and the total production of meat rises from 16 to 18 ounces. Frank and Rose share the benefits of this increased production.

We can also look at the gains from trade in terms of the price that each party pays the other. Because Frank and Rose have different opportunity costs, they can both get a bargain. That is, each of them benefits from trade by obtaining a good at a price that is lower than his or her opportunity cost of that good.

Consider the proposed deal from Frank’s viewpoint. Frank receives 5 ounces of meat in exchange for 15 ounces of potatoes. In other words, Frank buys each ounce of meat for a price of 3 ounces of potatoes. This price of meat is lower than his opportunity cost for an ounce of meat, which is 4 ounces of potatoes. Thus, Frank benefits from the deal because he gets to buy meat at a good price.

Now consider the deal from Rose’s viewpoint. Rose buys 15 ounces of potatoes for a price of 5 ounces of meat. That is, the price of potatoes is ⅓ ounce of meat. This price of potatoes is lower than her opportunity cost of an ounce of potatoes, which is ½ ounce of meat. Rose benefits because she gets to buy potatoes at a good price.

The story of Rose the rancher and Frank the farmer has a simple moral, which should now be clear: Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

3-2d The Price of the Trade

The principle of comparative advantage establishes that there are gains from specialization and trade, but it raises a couple of related questions: What determines the price at which trade takes place? How are the gains from trade shared between the trading parties? The precise answer to these questions is beyond the scope of this chapter, but we can state one general rule: For both parties to gain from trade, the price at which they trade must lie between the two opportunity costs.

In our example, Frank and Rose agreed to trade at a rate of 3 ounces of potatoes for each ounce of meat. This price is between Rose’s opportunity cost (2 ounces of potatoes per ounce of meat) and Frank’s opportunity cost (4 ounces of potatoes per ounce of meat). The price need not be exactly in the middle for both parties to gain, but it must be somewhere between 2 and 4.

To see why the price has to be in this range, consider what would happen if it were not. If the price of meat were below 2 ounces of potatoes, both Frank and Rose would want to buy meat, because the price would be below each of their opportunity costs. Similarly, if the price of meat were above 4 ounces of potatoes, both would want to sell meat, because the price would be above their opportunity costs. But there are only two members of this economy. They cannot both be buyers of meat, nor can they both be sellers. Someone has to take the other side of the deal.

A mutually advantageous trade can be struck at a price between 2 and 4. In this price range, Rose wants to sell meat to buy potatoes, and Frank wants to sell potatoes to buy meat. Each party can buy a good at a price that is lower than his or her opportunity cost. In the end, each person specializes in the good for which he or she has a comparative advantage and is, as a result, better off.

Quick Quiz Robinson Crusoe can gather 10 coconuts or catch 1 fish per hour. His friend Friday can gather 30 coconuts or catch 2 fish per hour. What is Crusoe’s opportunity cost of catching 1 fish? What is Friday’s? Who has an absolute advantage in catching fish? Who has a comparative advantage in catching fish?

FYI: The Legacy of Adam Smith and David Ricardo

Economists have long understood the gains from trade. Here is how the great economist Adam Smith put the argument:

· It is a maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbors, and to purchase with a part of its produce, or what is the same thing, with the price of part of it, whatever else they have occasion for.

David Ricardo

This quotation is from Smith’s 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations, which was a landmark in the analysis of trade and economic interdependence.

Smith’s book inspired David Ricardo, a millionaire stockbroker, to become an economist. In his 1817 book Principles of Political Economy and Taxation, Ricardo developed the principle of comparative advantage as we know it today. He considered an example with two goods (wine and cloth) and two countries (England and Portugal). He showed that both countries can gain by opening up trade and specializing based on comparative advantage.

Ricardo’s theory is the starting point of modern international economics, but his defense of free trade was not a mere academic exercise. Ricardo put his beliefs to work as a member of the British Parliament, where he opposed the Corn Laws, which restricted the import of grain.

The conclusions of Adam Smith and David Ricardo on the gains from trade have held up well over time. Although economists often disagree on questions of policy, they are united in their support of free trade. Moreover, the central argument for free trade has not changed much in the past two centuries. Even though the field of economics has broadened its scope and refined its theories since the time of Smith and Ricardo, economists’ opposition to trade restrictions is still based largely on the principle of comparative advantage.

3-3 Applications of Comparative Advantage

The principle of comparative advantage explains interdependence and the gains from trade. Because interdependence is so prevalent in the modern world, the principle of comparative advantage has many applications. Here are two examples, one fanciful and one of great practical importance.

3-3a Should Tom Brady Mow His Own Lawn?

Tom Brady spends a lot of time running around on grass. One of the most talented football players of all time, he can throw a pass with a speed and accuracy that most casual athletes can only dream of. Most likely, he is talented at other physical activities as well. For example, let’s imagine that Brady can mow his lawn faster than anyone else. But just because he can mow his lawn fast, does this mean he should?

To answer this question, we can use the concepts of opportunity cost and comparative advantage. Let’s say that Brady can mow his lawn in 2 hours. In that same 2 hours, he could film a television commercial and earn \$20,000. By contrast, Forrest Gump, the boy next door, can mow Brady’s lawn in 4 hours. In that same 4 hours, Gump could work at McDonald’s and earn \$40.

“They did a nice job mowing this grass.”

IN THE NEWS: Economics within a Marriage

An economist argues that you shouldn’t always unload the dishwasher just because you’re better than your partner at it.

You’re Dividing the Chores Wrong

By Emily Oster

No one likes doing chores. In happiness surveys, housework is ranked down there with commuting as activities that people enjoy the least. Maybe that’s why figuring out who does which chores usually prompts, at best, tense discussion in a household and, at worst, outright fighting.

If everyone is good at something different, assigning chores is easy. If your partner is great at grocery shopping and you are great at the laundry, you’re set. But this isn’t always—or even usually—the case. Often one person is better at everything. (And let’s be honest, often that person is the woman.) Better at the laundry, the grocery shopping, the cleaning, the cooking. But does that mean she should have to do everything?

Before my daughter was born, I both cooked and did the dishes. It wasn’t a big deal, it didn’t take too much time, and honestly I was a lot better at both than my husband. His cooking repertoire extended only to eggs and chili, and when I left him in charge of the dishwasher, I’d often find he had run it “full” with one pot and eight forks.

After we had a kid, we had more to do and less time to do it in. It seemed like it was time for some reassignments. But, of course, I was still better at doing both things. Did that mean I should do them both?

I could have appealed to the principle of fairness: We should each do half. I could have appealed to feminism—surveys show that women more often than not get the short end of the chore stick. In time-use data, women do about 44 minutes more housework than men (2 hours and 11 minutes versus 1 hour and 27 minutes). Men outwork women only in the areas of “lawn” and “exterior maintenance.” I could have suggested he do more chores to rectify this imbalance, to show our daughter, in the Free To Be You and Me style, that Mom and Dad are equal and that housework is fun if we do it together! I could have simply smashed around the pans in the dishwasher while sighing loudly in the hopes he would notice and offer to do it himself.

But luckily for me and my husband, I’m an economist, so I have more effective tools than passive aggression. And some basic economic principles provided the answer. We needed to divide the chores because it is simply not efficient for the best cook and dishwasher to do all the cooking and dishwashing. The economic principle at play here is increasing marginal cost. Basically, people get worse when they are tired. When I teach my students at the University of Chicago this principle, I explain it in the context of managing their employees. Imagine you have a good employee and a not-so-good one. Should you make the good employee do literally everything?

Usually, the answer is no. Why not? It’s likely that the not-so-good employee is better at 9 a.m. after a full night of sleep than the good employee is at 2 a.m. after a 17-hour workday. So you want to give at least a few tasks to your worse guy. The same principle applies in your household. Yes, you (or your spouse) might be better at everything. But anyone doing the laundry at 4 a.m. is likely to put the red towels in with the white T-shirts. Some task splitting is a good idea. How much depends on how fast people’s skills decay.

To “optimize” your family efficiency (every economist’s ultimate goal—and yours, too), you want to equalize effectiveness on the final task each person is doing. Your partner does the dishes, mows the lawn, and makes the grocery list. You do the cooking, laundry, shopping, cleaning, and paying the bills. This may seem imbalanced, but when you look at it, you see that by the time your partner gets to the grocery-list task, he is wearing thin and starting to nod off. It’s all he can do to figure out how much milk you need. In fact, he is just about as good at that as you are when you get around to paying the bills, even though that’s your fifth task.

If you then made your partner also do the cleaning—so it was an even four and four—the house would be a disaster, since he is already exhausted by his third chore while you are still doing fine. This system may well end up meaning one person does more, but it is unlikely to result in one person doing everything.

Once you’ve decided you need to divide up the chores in this way, how should you decide who does what? One option would be randomly assigning tasks; another would be having each person do some of everything. One spousal-advice website I read suggested you should divide tasks based on which ones you like the best. None of these are quite right. (In the last case, how would anyone ever end up with the job of cleaning the bathroom?)

To decide who does what, we need more economics. Specifically, the principle of comparative advantage. Economists usually talk about this in the context of trade. Imagine Finland is better than Sweden at making both reindeer hats and snowshoes. But they are much, much better at the hats and only a little better at the snowshoes. The overall world production is maximized when Finland makes hats and Sweden makes snowshoes.

We say that Finland has an absolute advantage in both things but a comparative advantage only in hats. This principle is part of the reason economists value free trade, but that’s for another column (and probably another author). But it’s also a guideline for how to trade tasks in your house. You want to assign each person the tasks on which he or she has a comparative advantage. It doesn’t matter that you have an absolute advantage in everything. If you are much, much better at the laundry and only a little better at cleaning the toilet, you should do the laundry and have your spouse get out the scrub brush. Just explain that it’s efficient!

In our case, it was easy. Other than using the grill—which I freely admit is the husband domain—I’m much, much better at cooking. And I was only moderately better at the dishes. So he got the job of cleaning up after meals, even though his dishwasher loading habits had already come under scrutiny. The good news is another economic principle I hadn’t even counted on was soon in play:learning by doing. As people do a task, they improve at it. Eighteen months into this new arrangement the dishwasher is almost a work of art: neat rows of dishes and everything carefully screened for “top-rack only” status. I, meanwhile, am forbidden from getting near the dishwasher. Apparently, there is a risk that I’ll “ruin it.”

Ms. Oster is a professor of economics at the University of Chicago.

Source: Slate, November 21, 2012. The article is found in the link:http://www.slate.com/articles/double_x/doublex/2012/11/dividing_the_chores_who_should_cook_and_who_should_clean.2.html

In this example, Brady has an absolute advantage in mowing lawns because he can do the work with a lower input of time. Yet because Brady’s opportunity cost of mowing the lawn is \$20,000 and Gump’s opportunity cost is only \$40, Gump has a comparative advantage in mowing lawns.

The gains from trade in this example are tremendous. Rather than mowing his own lawn, Brady should make the commercial and hire Gump to mow the lawn. As long as Brady pays Gump more than \$40 and less than \$20,000, both of them are better off.

3-3b Should the United States Trade with Other Countries?

Just as individuals can benefit from specialization and trade with one another, as Frank and Rose did, so can populations of people in different countries. Many of the goods that Americans enjoy are produced abroad, and many of the goods produced in the United States are sold abroad. Goods produced abroad and sold domestically are called  imports . Goods produced domestically and sold abroad are called  exports .

imports

goods produced abroad and sold domestically

exports

goods produced domestically and sold abroad

To see how countries can benefit from trade, suppose there are two countries, the United States and Japan, and two goods, food and cars. Imagine that the two countries produce cars equally well: An American worker and a Japanese worker can each produce one car per month. By contrast, because the United States has more and better land, it is better at producing food: A U.S. worker can produce 2 tons of food per month, whereas a Japanese worker can produce only 1 ton of food per month.

The principle of comparative advantage states that each good should be produced by the country that has the smaller opportunity cost of producing that good. Because the opportunity cost of a car is 2 tons of food in the United States but only 1 ton of food in Japan, Japan has a comparative advantage in producing cars. Japan should produce more cars than it wants for its own use and export some of them to the United States. Similarly, because the opportunity cost of a ton of food is 1 car in Japan but only ½ car in the United States, the United States has a comparative advantage in producing food. The United States should produce more food than it wants to consume and export some to Japan. Through specialization and trade, both countries can have more food and more cars.

In reality, of course, the issues involved in trade among nations are more complex than this example suggests. Most important among these issues is that each country has many citizens with different interests. International trade can make some individuals worse off, even as it makes the country as a whole better off. When the United States exports food and imports cars, the impact on an American farmer is not the same as the impact on an American autoworker. Yet, contrary to the opinions sometimes voiced by politicians and pundits, international trade is not like war, in which some countries win and others lose. Trade allows all countries to achieve greater prosperity.

Quick Quiz Suppose that a skilled brain surgeon also happens to be the world’s fastest typist. Should she do her own typing or hire a secretary? Explain.

3-4 Conclusion

You should now understand more fully the benefits of living in an interdependent economy. When Americans buy tube socks from China, when residents of Maine drink orange juice from Florida, and when a homeowner hires the kid next door to mow the lawn, the same economic forces are at work. The principle of comparative advantage shows that trade can make everyone better off.

Having seen why interdependence is desirable, you might naturally ask how it is possible. How do free societies coordinate the diverse activities of all the people involved in their economies? What ensures that goods and services will get from those who should be producing them to those who should be consuming them? In a world with only two people, such as Rose the rancher and Frank the farmer, the answer is simple: These two people can bargain and allocate resources between themselves. In the real world with billions of people, the answer is less obvious. We take up this issue in  Chapter 4 , where we see that free societies allocate resources through the market forces of supply and demand.

Summary

· • Each person consumes goods and services produced by many other people both in the United States and around the world. Interdependence and trade are desirable because they allow everyone to enjoy a greater quantity and variety of goods and services.

· • There are two ways to compare the ability of two people to produce a good. The person who can produce the good with the smaller quantity of inputs is said to have an absolute advantage in producing the good. The person who has the smaller opportunity cost of producing the good is said to have a comparative advantage. The gains from trade are based on comparative advantage, not absolute advantage.

· • Trade makes everyone better off because it allows people to specialize in those activities in which they have a comparative advantage.

· • The principle of comparative advantage applies to countries as well as to people. Economists use the principle of comparative advantage to advocate free trade among countries.

Key Concepts

absolute advantage p. 52

opportunity cost p. 52

comparative advantage p. 53

imports p. 57

exports p. 57

Questions for Review

· 1. Under what conditions is the production possibilities frontier linear rather than bowed out?

· 2. Explain how absolute advantage and comparative advantage differ.

· 3. Give an example in which one person has an absolute advantage in doing something but another person has a comparative advantage.

· 4. Is absolute advantage or comparative advantage more important for trade? Explain your reasoning using the example in your answer to Question 3.

· 5. If two parties trade based on comparative advantage and both gain, in what range must the price of the trade lie?

· 6. Why do economists oppose policies that restrict trade among nations?

Quick Check Multiple Choice

· 1. In an hour, David can wash 2 cars or mow 1 lawn, and Ron can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?

· a. David in washing, Ron in mowing.

· b. Ron in washing, David in mowing.

· c. David in washing, neither in mowing.

· d. Ron in washing, neither in mowing.

· 2. Once again, in an hour, David can wash 2 cars or mow 1 lawn, and Ron can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing?

· a. David in washing, Ron in mowing.

· b. Ron in washing, David in mowing.

· c. David in washing, neither in mowing.

· d. Ron in washing, neither in mowing.

· 3. When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,

· a. they both obtain consumption outside their production possibilities frontier.

· b. they both obtain consumption inside their production possibilities frontier.

· c. one individual consumes inside her production possibilities frontier, while the other consumes outside hers.

· d. each individual consumes a point on her own production possibilities frontier.

· 4. Which goods will a nation typically import?

· a. those goods in which the nation has an absolute advantage

· b. those goods in which the nation has a comparative advantage

· c. those goods in which other nations have an absolute advantage

· d. those goods in which other nations have a comparative advantage

· 5. Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor and producing a shirt takes 4 hours of labor. What will these nations trade?

· a. China will export aircraft, and the United States will export shirts.

· b. China will export shirts, and the United States will export aircraft.

· c. Both nations will export shirts.

· d. There are no gains from trade in this situation.

· 6. Mark can cook dinner in 30 minutes and wash the laundry in 20 minutes. His roommate takes half as long to do each task. How should the roommates allocate the work?

· a. Mark should do more of the cooking based on his comparative advantage.

· b. Mark should do more of the washing based on his comparative advantage.

· c. Mark should do more of the washing based on his absolute advantage.

· d. There are no gains from trade in this situation.

Problems and Applications

· 1. Maria can read 20 pages of economics in an hour. She can also read 50 pages of sociology in an hour. She spends 5 hours per day studying.

· a. Draw Maria’s production possibilities frontier for reading economics and sociology.

· b. What is Maria’s opportunity cost of reading 100 pages of sociology?

· 2. American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers.

· a. For this situation, construct a table analogous to the table in Figure 1.

· b. Graph the production possibilities frontiers for the American and Japanese economies.

· c. For the United States, what is the opportunity cost of a car? Of grain? For Japan, what is the opportunity cost of a car? Of grain? Put this information in a table analogous to Table 1.

· d. Which country has an absolute advantage in producing cars? In producing grain?

· e. Which country has a comparative advantage in producing cars? In producing grain?

· f. Without trade, half of each country’s workers produce cars and half produce grain. What quantities of cars and grain does each country produce?

· g. Starting from a position without trade, give an example in which trade makes each country better off.

· 3. Pat and Kris are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Pat takes 4 hours to brew a gallon of root beer and 2 hours to make a pizza. Kris takes 6 hours to brew a gallon of root beer and 4 hours to make a pizza.

· a. What is each roommate’s opportunity cost of making a pizza? Who has the absolute advantage in making pizza? Who has the comparative advantage in making pizza?

· b. If Pat and Kris trade foods with each other, who will trade away pizza in exchange for root beer?

· c. The price of pizza can be expressed in terms of gallons of root beer. What is the highest price at which pizza can be traded that would make both roommates better off? What is the lowest price? Explain.

· 4. Suppose that there are 10 million workers in Canada and that each of these workers can produce either 2 cars or 30 bushels of wheat in a year.

· a. What is the opportunity cost of producing a car in Canada? What is the opportunity cost of producing a bushel of wheat in Canada? Explain the relationship between the opportunity costs of the two goods.

· b. Draw Canada’s production possibilities frontier. If Canada chooses to consume 10 million cars, how much wheat can it consume without trade? Label this point on the production possibilities frontier.

· c. Now suppose that the United States offers to buy 10 million cars from Canada in exchange for 20 bushels of wheat per car. If Canada continues to consume 10 million cars, how much wheat does this deal allow Canada to consume? Label this point on your diagram. Should Canada accept the deal?

· 5. England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour.

· a. Which country has the absolute advantage in the production of each good? Which country has the comparative advantage?

· b. If England and Scotland decide to trade, which commodity will Scotland trade to England? Explain.

· c. If a Scottish worker could produce only 1 sweater per hour, would Scotland still gain from trade? Would England still gain from trade? Explain.

· 6. The following table describes the production possibilities of two cities in the country of Baseballia:

 Pairs of Red Socks per Worker per Hour Pairs of White Socks per Worker per Hour Boston 3 3 Chicago 2 1

· a. Without trade, what is the price of white socks (in terms of red socks) in Boston? What is the price in Chicago?

· b. Which city has an absolute advantage in the production of each color sock? Which city has a comparative advantage in the production of each color sock?

· c. If the cities trade with each other, which color sock will each export?

· d. What is the range of prices at which trade can occur?

· 7. A German worker takes 400 hours to produce a car and 2 hours to produce a case of wine. A French worker takes 600 hours to produce a car and X hours to produce a case of wine.

· a. For what values of X will gains from trade be possible? Explain.

· b. For what values of X will Germany export cars and import wine? Explain.

· 8. Suppose that in a year an American worker can produce 100 shirts or 20 computers and a Chinese worker can produce 100 shirts or 10 computers.

· a. For each country, graph the production possibilities frontier. Suppose that without trade the workers in each country spend half their time producing each good. Identify this point in your graphs.

· b. If these countries were open to trade, which country would export shirts? Give a specific numerical example and show it on your graphs. Which country would benefit from trade? Explain.

· c. Explain at what price of computers (in terms of shirts) the two countries might trade. d. Suppose that China catches up with American productivity so that a Chinese worker can produce 100 shirts or 20 computers. What pattern of trade would you predict now? How does this advance in Chinese productivity affect the economic wellbeing of the citizens of the two countries?

· 9. Are the following statements true or false? Explain in each case.

· a. “Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.”

· b. “Certain very talented people have a comparative advantage in everything they do.”

· c. “If a certain trade is good for one person, it can’t be good for the other one.”

· d. “If a certain trade is good for one person, it is always good for the other one.”

· e. “If trade is good for a country, it must be good for everyone in the country.”

Categories

## hipaa includes in its definition of “research,” activities related to …

Data are made anonymous by

-Destroying all identifiers connected to the data.

-Requiring all members of the research team to sign confidentiality agreements.

-Keeping the key linking names to responses in a secure location.

-Reporting data in aggregate form in publications resulting from the research.

In a longitudinal study that will follow children from kindergarten through high school and will collect information about illegal activities, which of the following confidentiality procedures would protect against compelled disclosure of individually identifiable information?

-Using data encryption for stored files.

-Securing a Certificate of Confidentiality.

-Waiving documentation of consent.

-Using pseudonyms in research reports.

When a focus group deals with a potentially sensitive topic, which of the following statements about providing confidentiality to focus group participants is correct?

-If group members know each other confidentiality is not an issue.

-Using pseudonyms in reports removes the concern about any confidences shared in the group.

-The researcher cannot control what participants repeat about others outside the group.

-If group participants sign confidentiality agreements, the researcher can guarantee confidentiality.

A researcher leaves a research file in her car while she attends a concert and her car is stolen. The file contains charts of aggregated numerical data from a research study with human subjects, but no other documents. The consent form said that no identifying information would be retained, and the researcher adhered to that component. Which of the following statements best characterizes what occurred?

There was neither a violation of privacy nor a breach of confidentiality

-The subjects’ privacy has been violated.

-Confidentiality of the data has been breached

-There was both a violation of privacy and a breach of confidentiality.

Which of the following constitutes both a breach of a confidentiality (the research data have been disclosed, counter to the agreement between researcher and subjects) and a violation of subjects’ privacy (the right of the individuals to be protected against intrusion into their personal lives or affairs)?

-A researcher asks cocaine users to provide names and contact information of other cocaine users who might qualify for a study.

-A faculty member makes identifiable data about sexual behavior available to graduate students, although the subjects were assured that the data would be de-identified.

-A researcher, who is a guest, audio-records conversations at a series of private dinner parties to assess gender roles, without informing participants.

-In order to eliminate the effect of observation on behavior, a researcher attends a support group and records interactions without informing the attendees.

An investigator is studying women recently admitted to a state prison. All potential subjects must have children under the age of five. Research subjects will be given a basket of toys to use at their children’s first visit that the children can then take home. In assessing this proposal, the IRB needs to determine that the toys are:

-Educational.

-Not an excessive incentive.

-Of high quality.

-Age appropriate.

An investigator is examining the quality of life for prisoners who are HIV positive using surveys followed by interview. The IRB must ensure that:

The survey instrument is standardized.

Confidentiality of the prisoners’ health status is maintained.

All prisoners receive HIV testing.

A medical doctor serves as co-investigator.

Which of the following statements about prison research is true?

Participation in research can be considered during parole hearings.

Researchers may study the effects of privilege upgrades awarded by the prison.

It is permissible for risks to be higher than those that would be accepted by non-prisoners.

The regulations prohibit compensating prisoners.

A graduate student wants to examine the effect of print media versus televised media on individuals’ position on several social issues. The superintendent of a local work release facility, a family friend, will allow the graduate student access to the prison population to help her quickly accrue subjects. The student’s IRB should:

Approve this project but submit it for federal review.

Approve this project since the risk appears to be no more than minimal.

Not approve this project because the prisoners are merely a population of convenience for the student.

Approve this project since the superintendent is the ultimate authority on what happens in his facility.

Which of the following statements most accurately describes the requirement for the documentation of minors’ assent to participate in research?

Parents must approve written documentation.

To protect minors documentation is always required.

Documentation is required unless waived by an IRB.

Federal regulations do not require the documentation of minors’ assent.

According to Subpart D, research with children may be eligible for exemption when:

The research involves the use of educational tests

The children will be interviewed by the researcher.

The research with children will involve participant observation with researcher interaction.

The children will be asked to complete a survey

A researcher asks an IRB to waive the requirement for parental permission for a study conducted in schools because the nature of the research requires participation of all the children present in classrooms on the day the research will take place. Assuming that the basic research design could be approved by the IRB and the school, which of the following requirements must be met before an IRB could waive parental permission?

Parents must be notified that the study is taking place.

The students must be offered an optional classroom activity.

An independent consultant must approve the waiver.

The research must pose no more than minimal risk.

A study that involves interviews of adults is eligible for expedited review. The researcher wants to add an adolescent population (aged 12 to 17) to the study and has designed a parental permission and assent process. No additional changes are planned. Which of the following statements about review of the revised protocol is accurate?

The research would only be eligible for expedited review if the adolescents are capable of understanding the same consent forms used for the adult population.

The research would only be eligible for expedited review if the adolescents have been declared to be emancipated minors.

Unless the nature of the questions would raise the level of risk to more than minimal for adolescents, the research would still qualify for expedited review.

The new research would need full review by a convened IRB because children are a protected population.

Parental notification, in lieu of active parental permission, is allowed when:

The researcher anticipates a low response rate.

An IRB has approved a waiver of the requirement for parental permission.

The researcher has conducted a similar study at another institution.

The superintendent of schools and the principals have approved the study.

According to Subpart D, which of the following research activities with children would qualify for an exemption?

Survey procedures

Observation of public behavior when the researcher participates in the activities being observed.

Interviews

Research about educational testing

The purpose of the Family Educational Rights and Privacy Act (FERPA) is to:

Ensure that surveys do not ask school children to provide sensitive information about their parents.

Provide parents certain rights over their children’s educational records.

Give school principals the right to discuss students’ behavioral problems with their parents.

Allow school counselors to access students’ grades.

Which federal regulation or law governs how researchers can obtain data about subjects’ disciplinary status in school from academic records?

The No Child Left Behind Act.

Subpart D of 45 CFR 46.

The Protection of Pupil Rights Amendment.

The Family Educational Rights and Privacy Act.

Which of the following is the LEAST important activity when protecting human subjects in international research?

Determining if the research might present unique risks to subjects given local socio-economic conditions.

Considering local customs, norms, and laws.

Assessing transportation conditions

Consulting with members of the community from which subjects will be recruited.

The age of majority in international research is determined by the

Legal drinking age where the research will take place.

Laws in the state where the researchers’ institution resides.

Laws, customs, and norms in the area in which the research will be conducted.

Which of the following activities constitutes engagement in research?

Providing potential subjects with written information about a study.

Obtaining informed consent and conducting research interviews.

Informing prospective subjects about the availability of research.

Obtaining subjects’ permission for researchers to contact them.

Researchers endeavoring to conduct an on-line study should consider that there are some potential risks of harm to subjects unique to Internet-based research. One of these risks is:

People assume pseudonymous on-line identities, such as an avatar in an MMORPG.

Online studies do not require the documentation of informed consent.

Recruiting, consenting and debriefing subjects takes place on-line, and may require little to no interaction with the subjects.

Individuals may post private identifiable information about themselves on-line without intending it to be public and available to researchers.

Which of the following on-line research strategies raises the most concerns regarding the ethical principle of respecting the autonomy of research subjects and the corresponding federal regulations requiring informed consent?

A linguist copies portions of postings on a political blog to document the use of expletives, abbreviations, and the use of irony in the postings.

A researcher posts a notice on an open on-line support group for interracial adoptees asking anyone who would be interested in being interviewed for her study to contact her.

A researcher observes the communications in an open support group without announcing her presence. She is interested in observing how long members participate and how the membership shifts over time.

A researcher proposes to join a moderated support group for cancer survivors posing as a survivor. She plans to insert comments to see how the members respond.

Consent to participate in research is an ongoing process. Which of the following strategies would help ensure that participation in a survey about a sensitive personal topic remains voluntary throughout a study?

Designing the survey so that subjects are not forced to answer one question before going to the next.

Giving examples in the consent process of the kinds of questions that will be asked.

Including the institution’s privacy policy on the survey site.

Providing a thorough debriefing at the end of the study.

To minimize potential risks of harm, a researcher conducting an on-line survey can:

Specify that all respondents must be legal adults.

Suggest that subjects print a copy of the informed consent form for their records.

Design the survey so that no direct or indirect identifiers are collected.

Which of the following examples of using the Internet to conduct research meets the federal definition of research with human subjects?

Downloading a publically available dataset that includes high school students’ academic achievement rates. The data are in aggregate and were derived from multiple school districts from different states.

Gathering data to supplement an oral history project about a local civil rights activist. The activist passed away while the researcher was in the process of conducting in-person interviews with the individual’s social network.

Conducting an on-line focus group with cancer survivors to determine familial support systems. The researcher also invites subjects’ significant others to be a part of the focus group.

Analyzing a website visitor report from several pro-anorexia blogs to determine the popularity of each blog. Access to the blogs is not restricted.

A covered entity may use or disclose PHI without an authorization, or documentation of a waiver or an alteration of authorization, for all of the following EXCEPT:

Use of decedents’ information, with certain representations by the researcher.

Data that does not cross state lines when disclosed by the covered entity.

Activities preparatory to research, with certain representations by the researcher.

Limited data set with an approved data use agreement.

Under HIPAA, a “disclosure accounting” is required:

for all human subjects research that uses PHI without an authorization from the data subject, except for limited data sets.

for all research where the data crosses state lines, otherwise state law applies.

for all human subjects research that uses PHI.

solely at the principle investigator’s discretion.

HIPAA protects a category of information known as protected health information (PHI). PHI includes:

identifiable health information that is created or held by covered entities, provided the data subject is a US citizen.

identifiable health information that is created or held by covered entities.

any identifiable health information.

Identifiable health information that is created or held by covered entities that operate across state lines.

When required, the information provided to the data subject in a HIPAA disclosure accounting …

must be more detailed for disclosures that involve fewer than 50 subject records.

is always the same, regardless of the number of records involved.

is limited to the information elements the data subject specifically requests.

is at the discretion of the organization, given its accounting policies.

HIPAA includes in its definition of “research,” activities related to …

anything a researcher does in a federally-supported laboratory.

development of generalizable knowledge.

quality assessment and improvement.

population health.

Vulnerable persons are those who are less able to protect themselves than other persons in a given situation. The Common Rule (45 CFR 46) has specific requirements for the following vulnerable populations, except:

Pregnant Women

Prisoners

Children

Workers

When workers are asked to participate in a research study, vulnerabilities related to the subject’s employment may include:

Unions may encourage employees to participate with the expectation that “entitlements” may follow from study results.

The research study’s finding could affect an employee’s pay, benefits or promotion potential.

The employer may encourage or deny participation of workers.

Employees may experience pressure from management to participate in the study because the employer perceives the study to be advantageous to the organization.

All of the above

Researcher access to confidential records adds to the vulnerability of workers who participate in workplace studies. Inappropriate release of identifiable private information could adversely affect a worker’s retention of a job, insurance or other employment related benefits. To avoid or minimize these risks, the study design must include adequate safeguards to protect the confidentiality of the information collected. A plan for the proper management of study data and records should clearly define:

Who will have access to the data.

If personal identifiers will be retained and used in the data analysis.

How the data will be collected and secured.

If the study results, if any, will be included in the employee’s personnel records.

All of the above

When a research project includes the collection of biological samples, all planned future uses of the samples, identifiers, and the data obtained from the samples, must be fully explained to the research subject.

True

False

The 1998 FDA regulations for requiring disclosure of significant financial interest reflect which threshold:

Any equity interest in a publicly held company that exceeds \$5,000

Any equity interest in a publicly held company that exceeds \$30,000

Any equity interest in a publicly held company that exceeds \$50,000

Any equity interest in a publicly held company that exceeds \$15,000

A situation in which financial or other personal considerations have the potential to compromise or bias professional judgment and objectivity is an example of:

Conflict of Interest

Fraud

Research Misconduct

Malfeasance

According to the DHHS 2011 updated of the PHS federal regulations, the threshold amount for reporting a significant financial interest (investigator and his/her spouse and dependents) is:

Greater than \$5,000 of ownership in any single public entity/company.

\$25,000 and 5% of ownership in any single entity/company.

Greater than \$2,000 or 2% of ownership in any single entity/company.

Greater than \$10,000 or 5% of ownership in any single entity/company.

The most important ethical concerns related to conflicts of interest in research are:

Maintaining a supply of volunteers for research studies and their active involvement in research

Ensuring the objectivity of research and the protection of human subjects

Protecting proprietary information and fidelity to contracts with sponsors

Establishing open dialog with sponsors and security of study records

A conflict of interest implies:

The elimination of bias.

The actual involvement of bias.

An awareness of bias.

The potential for bias.

Categories

## oregonstate instructure

Assignment #3 ‐ Financial Statement Geography and Ra�os Started: Jan 30 at 6:48pm

Quiz Instruc�ons

WHAT:  Use the PDFs and spreadsheet below to answer the questions.  You will need to use the “Quick Guide” often as a reference so I would recommend printing it.

Financial Statement Quick Guide.pdf         Ratio Grid.pdf          GoPro Income Statement and Balance Sheet.xlsx

WHY: Accounting information is critical for making business decisions.  Without an understanding of where this information is located (i.e. “geography”) and how to analyze this information (i.e. ratios, common sizing, etc.) it is very difficult to be an effective decision maker.  This assignment is designed to give you a basic understanding of where the information is, how to analyze it, and how to use it in decisions.

1 pts

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Question 1

Use the attached PDF “Ratio Grid” – name the company and the ratio used to answer the question

Which company(ies) are financing the majority of their assets with debt?

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Question 2

Use the attached PDF “Ratio Grid” – name the company and the ratio used to answer the question

Which company appears to be the most overvalued?

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1/30/2017 Quiz: Assignment #3 – Financial Statement Geography and Ratios

https://oregonstate.instructure.com/courses/1624130/quizzes/2362465/take 2/7

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Question 3

Use the data from the GoPro Income Statement and Balance Sheet file to answer the question.  Round to the hundredths place (i.e. 5.63):

What was GoPro’s receivables turnover ratio in 2015?  What was it for 2012?  In which year were they turning receivables into cash more quickly?

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Question 4

Use the data from the GoPro Income Statement and Balance Sheet file to answer the question.  Round to the hundredths place (i.e. 2.86):

What was GoPro’s current ratio as of 12/31/2015?  What was it as of 12/31/2012?  When were they more liquid?

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2 ptsQuestion 5

1/30/2017 Quiz: Assignment #3 – Financial Statement Geography and Ratios

https://oregonstate.instructure.com/courses/1624130/quizzes/2362465/take 3/7

HTML Editor

Use the data from the GoPro Income Statement and Balance Sheet file to answer the question.

A) What was GoPro’s Market Cap on 12/31/2015 based on 140,570,000 shares outstanding and a share price of \$9.15?  B) What was GoPro’s Earnings Per Share for 2015 based on 140,570,000 shares outstanding (format as currency e.g. \$1.59)?  C) Based on the calculations in A and B ­ what is GoPro’s P/E Ratio?  D) Is this P/E ratio high or low relative to the average for Fortune 500 companies?

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Question 6

Use the data from the GoPro Income Statement and Balance Sheet file to answer the question. Format as a % rounded to the tenths (i.e. 12.3%).

What was GoPro’s gross margin in 2015? What was it in 2012?  In which year were they more efficient at producing their product?

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Question 7

Use the data from the GoPro Income Statement and Balance Sheet file to answer the question.

How much did they pay in taxes in 2013?

1/30/2017 Quiz: Assignment #3 – Financial Statement Geography and Ratios

https://oregonstate.instructure.com/courses/1624130/quizzes/2362465/take 4/7

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Question 8

Use the data from the GoPro Income Statement and Balance Sheet file to answer the question.

A) How much did revenue increase/decrease from 2012 to 2015 in dollars?  B) What percentage increase/decrease is

that?

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Activity

Profitability

Liquidity

Leverage

If you were a vendor/supplier extending credit to a potential client for 30 days, which type of ratio would be most important to look at?

1/30/2017 Quiz: Assignment #3 – Financial Statement Geography and Ratios

https://oregonstate.instructure.com/courses/1624130/quizzes/2362465/take 5/7

1 ptsQuestion 10

Determine what trends are increasing or decreasing profits.

Make comparisons to the past and peers

Determine a company’s cash position.

Determine the company’s liquidity

If you were analyzing a company through income statement common sizing, what would this analysis let you do (check all those that apply)?

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Question 11

In the common sized income statement found below you will note XYZ Company’s revenue increased from 2015 to 2016, but net profits decreased.  Based on what you see, what was the primary cause?

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1/30/2017 Quiz: Assignment #3 – Financial Statement Geography and Ratios

https://oregonstate.instructure.com/courses/1624130/quizzes/2362465/take 6/7

1 ptsQuestion 12

The increase in revenue between 2013 and 2014.

The increase in cash and short term investments between 2013 and 2014

The increase in total equity between 2013 and 2014

The increase in liabilities between 2013 and 2014.

Use the data from the GoPro Income Statement and Balance Sheet file to answer the question.

Go Pro had an initial public offering on June 24, 2014.  Where does one see evidence of this in the financial statements

(check all those that apply)?

1 pts

How much did a company do in sales last year? [ Choose ]

How much debt does a company have?  [ Choose ]

How much money did a company “make” last

year? [ Choose ]

How much cash operations is generating?  [ Choose ]

How much a company owes its vendors?  [ Choose ]

Question 13

Which financial statement would be used to answer the following questions.

1 ptsQuestion 14

Look at the balance sheets for ABC, Inc. and XYZ, Inc below. Which company has a “stronger” balance sheet and why is it

stronger (points are based on your explanation for why it is stronger).

1/30/2017 Quiz: Assignment #3 – Financial Statement Geography and Ratios

https://oregonstate.instructure.com/courses/1624130/quizzes/2362465/take 7/7

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Categories

## the default accounting number format adds dollar signs and ____ decimal places to the data.

with Microsoft®

Office 2010 V O L U M E 1

PEARSON T O W N S E N D FERRETT HAIN VARGAS

with M ic roso f t

Office 2010 V O L U M E

T O W N S E N D I FERRETT I H A I N I VARGAS

Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River

Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

Library of Congress Cataloging-in-Publication Data Townsend, Kris. Skills for success with Office 2010 / by Kris Townsend.

p. cm. ISBN 978-0-13-703257-0 (alk. paper) 1. Microsoft Office. 2. Business—Computer programs. I, Title.

HF5548.4.M525T692 201 I 005.5—dc22 2010016531

Editor in Chief: Michael Payne AVP/Executive Acquisitions Editor: Stephanie Wall Product Development Manager: Eileen Bien Calabro Editorial Project Manager: Virginia Gitariglia Development Editor: Nancy Lamm Editorial Assistant: Nicole Sam AVP/Director of Online Programs, Media: Richard Keaveny AVP/Dircctor of Product Development, Media: Lisa Strife Editor—Digital Learning & Assessment: Paul Gentile Product Development Manager, Media: Calhi Projitko Media Project Manager, Editorial: Alana Coles Media Project Manager, Production: John Cassar Director of Marketing: Kate Valentine Senior Marketing Manager: Tori Olscn Alves Marketing Coordinator SI/<<I« Osterlitz

Marketing Assistant: Darshika Vyas Senior Managing Editor: Cynthia /.onneveld Associate Managing Editor: Camille Trentacoste Production Project Manager: Camille Trentacoste Senior Operations Supervisor: Natacha Moore Senior Art Director: Jonathan Boylan Art Director: Anthony Gemmellaro Text and Cover Designer: Anthony Gemmellaro Manager, Rights and Permissions: Ilessa Albader Supplements Development Editor: Vonda Keator Full-Service Project Management: MPS Content Services, a Macmiilan Company Composition: MPS Content Services, a Macmiilan Company Printer/Binder: Quad/Graphics Taunton Cover Printer: Lchigli/Phocnix Typeface: Minion 10.5/12.5

Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text. Microsoft’ and Windows* are registered trademarks of the Microsoft Corporation in the U.S.A. and other countries. Screen shots and icons reprinted with permission from the Microsoft Corporation. This book is not sponsored or endorsed by or affiliated with the Microsoft Corporation. Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall. All lights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, Upper Saddle River, New Jersey, 07458 Many of the designations by manufacturers and seller to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps.

Prentice Hall is an imprint of

P E A R S O N www.pearsonhighered.com

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1 S B N – I 0 : 0 – 1 3 – 7 0 3 2 5 7 – 9

I S B N – 1 3 : 9 7 8 – 0 – 1 3 – 7 0 3 2 5 7 – 0http://www.pearsonhighered.com

Contents in Brief

Common Features Chapter 1 Common Features ot Office 2010 2

More Skills 26

Word Chapter 1 Create Documents with Word 2010 30

More Skills 54 Chapter 2 Format and Organize Text 64

More Skills 88 Chapter 3 Work with Graphics, Tabs, and Tables 98

More Skills 122 Chapter 4 Apply Special Text, Paragraph and

Document Formats 132 More Skills 156

Excel Chapter 1 Create Workbooks with Excel 2010 166

More Skills 190

Chapter 2 Create Charts 200 More Skills 224

Chapter 3 Manage Multiple Worksheets 234 More Skills 258

Chapter 4 Use Excel Functions and Tables 268 More Skills 292

Access Chapter 1 Work with Databases and

Create Tables 302 More Skills 326

Chapter 2 M a n a g e Datasheets and Create Queries 336 More Skills 360

Chapter 3 Create Forms 370 More Skills 394

Chapter 4 Create Reports 404 More Skills 428

PowerPoint Chapter 1 Getting Started with PowerPoint 2010 438

More Skills 462 Chapter 2 Format a Presentation 472

More Skills 496 Chapter 3 Enhance Presentations with Graphics 506

More Skills 530 Chapter 4 Present Data Using Tables, Charts,

and Animation 540 More Skills 564

Integrated Projects Chapter 1 Integrating Word, Excel, A c c e s s ,

and PowerPoint 574 More Skills 598

Chapter 2 More Integrated Projects for Word, Excel, A c c e s s , and PowerPoint 610 More Skills 634

Glossary 646

Index 654

Contents in Brief iii

C o m m o n Fea tu res C h a p t e r 1 C o m m o n F e a t u r e s of Office 2 0 1 0 2

Skill 1 Start Word and Navigate the Word Window 6 Skill 2 Start Excel and PowerPoint and Work with

Multiple Windows 8 Skill 3 Save Files in New Folders 10 Skill 4 Print and Save Documents 12 Skill 5 Open Student Data Files and Save Copies

Using Save As 14 Skill 6 Type and Edit Text 16 Skill 7 Cut, Copy, and Paste Text 18 Skill 8 Format Text and Paragraphs 20 Skill 9 Use the Ribbon 22

Skill 10 Use Shortcut Menus and Dialog Boxes 24

More Skills More Skills 11 Capture Screens with the Snipping

Tool 26 More Skills 12 Use Microsoft Office Help 26 More Skills 13 Organize Files 26 More Skills 14 Save Documents to Windows Live 26

W o r d C h a p t e r 1 C r e a t e D o c u m e n t s with Word 2 0 1 0 3 0

Skill 1 Create New Documents and Enter Text 34 Skill 2 Edit Text and Use Keyboard Shortcuts 36 Skill 3 Select Text 38 Skill 4 Insert Text from Other Documents 40 Skill 5 Change Fonts, Font Sizes, and Font Styles 42 Skill 6 Insert and Work with Graphics 44 Skill 7 Check Spelling and Grammar 46 Skill 8 Use the Thesaurus and Set Proofing Options 48 Skill 9 Create Document Footers 50

Skill 10 Work with the Print Page and Save Documents in Other Formats 52

More Skills More Skills 11 Split and Arrange Windows 54 More Skills 12 Insert Symbols 54 More Skills 13 Use Collect and Paste to Create a

Document 54 More Skills 14 Insert Screen Shots into Documents 54

C h a p t e r 2 Format a n d O r g a n i z e Text 6 4 Skill 1 Set Document Margins 68 Skill 2 Align Text and Set Indents 70 Skill 3 Modify Line and Paragraph Spacing 72 Skill 4 Format Text Using Format Painter 74 Skill 5 Find and Replace Text 76 Skill 6 Create Bulleted and Numbered Lists 78 Skill 7 Insert and Format Headers and Footers 80 Skill 8 Insert and Modify Footnotes 82 Skill 9 Add Citations 84

Skill 10 Create Bibliographies 86

More Skills More Skills 11 Record AutoCorrect Entries 88 More Skills 12 Use AutoFormat to Create

Numbered Lists 88 More Skills 13 Format and Customize Lists 88 More Skills 14 Manage Document Properties 88

C h a p t e r 3 Work with G r a p h i c s , Tabs , a n d T a b l e s 9 8

Skill 1 Insert Pictures from Files 102 Skill 2 Resize and Move Pictures 104 Skill 3 Format Pictures Using Styles and

Artistic Effects 106 Skill 4 Set Tab Stops 108 Skill 5 Enter Text with Tab Stops 110 Skill 6 Apply Table Styles 112 Skill 7 Create Tables 114 Skill 8 Add Rows and Columns to Tables H6 Skill 9 Format Text in Table Cells 118

Skill 10 Format Tables 120

More Skills More Skills 11 Insert Text Boxes 122 More Skills 12 Format with WordArt 122 More Skills 13 Create Tables from Existing Lists 122 More Skills 14 Insert Drop Caps 122

C h a p t e r 4 A p p l y S p e c i a l T e x t , P a r a g r a p h , a n d D o c u m e n t F o r m a t s 1 3 2

Skill 1 Create Multiple-Column Text 136 Skill 2 Insert a Column Break 138 Skill 3 Apply and Format Text Effects 140 Skill 4 Use and Create Quick Styles 142 Skill 5 Add Borders and Shading to Paragraphs

and Pages 144 Skill 6 Insert and Format Clip Art Graphics 146 Skill 7 Insert SmartArt Graphics 148 Skill 8 Format SmartArt Graphics 150 Skill 9 Create Labels Using Mail Merge 152

Skill 10 Preview and Print Mail Merge Documents 154

More Skil ls More Skills 11 More Skills 12 More Skills 13 More Skills 14

Create Resumes from Templates 156 Create Outlines 156 Prepare Documents for Distribution 156 Preview and Save Documents as Web Pages 156

Exce l C h a p t e r 1 C r e a t e W o r k b o o k s w i t h

Exce l 2 0 1 0 Skill 1 Create and Save New Workbooks Skill 2 Enter Worksheet Data and Merge and

Center Titles Skill 3 Construct Addition and

Subtraction Formulas Skill 4 Construct Multiplication and

Division Formulas Skill 5 Adjust Column Widths and Apply Cell Styles Skill 6 Use the SUM Function Skill 7 Copy Formulas and Functions

Using the Fill Handle

1 6 6 170

Skill 8 Format, Edit, and Check the Spelling of Data 184 Skill 9 Create Footers and Change Page Settings 186

Skill 10 Display and Print Formulas and Scale Worksheets for Printing

More Skil ls More Skills 11

More Skills 12 More Skills 13 More Skills 14

Create New Workbooks from Templates Use Range Names in Formulas Change Themes Manage Document Properties

C h a p t e r 2 Skill 1 Skill 2

Skill 3 Skill 4 Skill 5 Skill 6 Skill 7

Skill 8

Skill 9 Skill 10

C r e a t e C h a r t s Open Existing Workbooks and Align Text Construct and Copy Formulas Containing Absolute Cell References Format Numbers Create Column Charts Format Column Charts Create Pie Charts and Chart Sheets Apply 3-D Effects and Rotate Pie Chart Slices Explode and Color Pie Slices, and Insert Text Boxes Update Charts and Insert WordArt Prepare Chart Sheets for Printing

More Ski l ls More Skills 11 More Skills 12 More Skills 13

Insert and Edit Comments Change Chart Types Copy Excel Data to Word Documents

More Skills 14 Fill Series Data into Worksheet Cells

188

190 190 190 190

2 0 0 204

206 208 210 212 214

216

218 220 222

224 224

224

224

172 C h a p t e r 3 M a n a g e M u l t i p l e W o r k s h e e t s 2 3 4

172 Skill 1 Work with Sheet Tabs 238

174 Skill 2 Enter and Format Dates 240 174 Skill 3 Clear Cell Contents and Formats 242

176 Skill 4 Move, Copy, Paste, and Paste Options 244

178 Skill 5 Work with Grouped Worksheets 246

180 Skill 6 Use Multiple Math Operators in a Formula 248 Skill 7 Format Grouped Worksheets 250

182 Skill 8 Insert and Move Worksheets 252

Skill 9 Construct Formulas That Refer to Cells in Other Worksheets 254

Skill 10 Create Clustered Bar Charts 256

More Skills More Skills 11 Create Organization Charts 258 More Skills 12 Create Line Charts 258 More Skills 13 Set and Clear Print Areas 258 More Skills 14 Insert Hyperlinks 258

C h a p t e r 4 U s e Exce l F u n c t i o n s a n d T a b l e s 2 6 8 Skill 1 Use the SUM and AVERAGE Functions 272 Skill 2 Use the MIN and MAX Functions 274 Skill 3 Move Ranges with Functions,

Add Borders, and Rotate Text 276 Skill 4 Use the IF Function 278 Skill 5 Apply Conditional Formatting with

Custom Formats, Data Bars, and Sparklines 280 Skill 6 Use Find and Replace and Insert

the NOW Function 282 Skill 7 Freeze and Unfreeze Panes 284 Skill 8 Create and Sort Excel Tables 286 Skill 9 Use the Search Filter in Excel Tables 288

Skill 10 Convert Tables to Ranges, Hide Rows and Columns, and Format Large Worksheets 290

More Skills More Skills 11 Apply Conditional Color Scales

with Top and Bottom Rules 292 More Skills 12 Use the Payment (PMT) Function 292 More Skills 13 Create PivotTable Reports 292 More Skills 14 Use Goal Seek 292

A c c e s s C h a p t e r 1 Work with D a t a b a s e s

a n d C r e a t e T a b l e s 3 0 2 Skill 1 Open and Organize Existing Databases 306 Skill 2 Enter and Edit Table Data 308 Skill 3 Create Forms and Enter Data 310 Skill 4 Filter Data in Queries 312 Skill 5 Create, Preview, and Print Reports 314 Skill 6 Create Databases and Tables 316

Skill 7 Change Data Types and Other Field Properties 318

Skill 8 Create Tables in Design View 320 Skill 9 Relate Tables 322

Skill 10 Enter Data in Related Tables 324

More Skills More Skills 11 Compact and Repair Databases 326 More Skills 12 Import Data from Excel 326 More Skills 13 Work with the Attachment Data

Type 326 More Skills 14 Work with the Hyperlink

and Yes/No Data Types 326

C h a p t e r 2 M a n a g e D a t a s h e e t s a n d C r e a t e Q u e r i e s 3 3 6

Skill 1 Find and Replace Data 340 Skill 2 Filter and Sort Datasheets 342 Skill 3 Use the Simple Query Wizard 344 Skill 4 Format Datasheets 346 Skill 5 Add Date and Time Criteria 348 Skill 6 Create Queries in Design View 350 Skill 7 Add Calculated Fields to Queries 352 Skill 8 Work with Logical Criteria 354 Skill 9 Add Wildcards to Query Criteria 356

Skill 10 Group and Total Queries 358

More Skills More Skills 11 Export Queries to Other Fie Formats 360 More Skills 12 Find Duplicate Records 360 More Skills 13 Find Unmatched Records 360 More Skills 14 Create Crosstab Queries 360

C h a p t e r 3 C r e a t e Forms 3 7 0 Skill 1 Use the Form Wizard 374 Skill 2 Format Forms in Layout View 376 Skill 3 Use Forms to Modify Data 378 Skill 4 Use the Blank Form Tool 380 Skill 5 Customize Form Layouts 382 Skill 6 Add Input Masks 384 Skill 7 Apply Conditional Formatting 386 Skill 8 Create One-to-Many Forms 388 Skill 9 Enter Data Using One-to-Many Forms 390

Skill 10 Create Forms from Queries 392

More Skills More Skills 11 Validate Fields 394 More Skills 12 Add Combo Boxes to Forms 394 More Skills 13 Create Multiple Item Forms 394 More Skills 14 Create Macros 394

C h a p t e r 4 C r e a t e R e p o r t s 4 0 4 Skill 1 Create Reports and Apply Themes 408 Skill 2 Modify Report Layouts 410 Skill 3 Prepare Reports for Printing 412 Skill 4 Use the Blank Report Tool 414 Skill 5 Group and Sort Reports 416 Skill 6 Format and Filter Reports 418 Skill 7 Create Label Reports 420 Skill 8 Use the Report Wizard 422 Skill 9 Modify Layouts in Design View 424

Skill 10 Add Totals and Labels to Reports 426

More Skills More Skills 11 Export Reports to Word 428 More Skills 12 Export Reports to HTML Documents 428 More Skills 13 Create Parameter Queries 428 More Skills 14 Create Reports for Parameter Queries 428

PowerPo in t C h a p t e r 1 G e t t i n g S t a r t e d w i t h

P o w e r P o i n t 2 0 1 0 4 3 8 Skill 1 Open, View, and Save Presentations 442 Skill 2 Edit and Replace Text in Normal View 444 Skill 3 Format Slide Text 446 Skill 4 Check Spelling and Use the Thesaurus 448 Skill 5 Insert Slides and Modify Slide Layouts 450 Skill 6 Insert and Format Pictures 452 Skill 7 Organize Slides Using Slide Sorter View 454 Skill 8 Apply Slide Transitions and View Slide Shows 456 Skill 9 Insert Headers and Footers

and Print Presentation Handouts 458 Skill 10 Add Notes Pages and Print Notes 460

More Skil ls More Skills 11 Type Text in the Outline Tab 462 More Skills 12 Use Keyboard Shortcuts 462

More Skills 13 Move and Delete Slides in Normal View 462

More Skills 14 Design Presentations for Audience and Location 462

C h a p t e r 2 F o r m a t a P r e s e n t a t i o n 4 7 2 Skill 1 Create New Presentations 476 Skill 2 Change Presentation Themes 478 Skill 3 Apply Font and Color Themes 480 Skill 4 Format Slide Backgrounds with Styles 482 Skill 5 Format Slide Backgrounds with Pictures

and Textures 484 Skill 6 Format Text with WordArt 486 Skill 7 Change Character Spacing and Font Color 488 Skill 8 Modify Bulleted and Numbered Lists 490 Skill 9 Move and Copy Text and Objects 492

Skill 10 Use Format Painter and Clear All Formatting Commands 494

More Skil ls More Skills 11 Edit Slide Master 496 More Skills 12 Save and Apply Presentation

Template 496 More Skills 13 Create Slides from Microsoft Word

Outline 496 More Skills 14 Design Presentations with Contrast 496

C h a p t e r 3 E n h a n c e P r e s e n t a t i o n s w i t h G r a p h i c s 5 0 6

Skill 1 Insert Slides from Other Presentations 510 Skill 2 Insert, Size, and Move Clip Art 512 Skill 3 Modify Picture Shapes, Borders, and Effects 514 Skill 4 Insert, Size, and Move Shapes 516 Ski l l5 Add Text to Shapes and Insert Text Boxes 518 Skill 6 Apply Gradient Fills and Group

and Align Graphics 520 Skill 7 Convert Text to SmartArt Graphics

and Add Shapes 522 Skill 8 Modify SmartArt Layouts, Colors, and Styles 524 Skill 9 Insert Video Files 526

Skill 10 Apply Video Styles and Adjust Videos 528

More Skil ls More Skills 11 Compress Pictures 530

More Skills 12 Save Groups as Picture Files 530 More Skills 13 Change Object Order 530 More Skills 14 Design Presentations Using

Appropriate Graphics 530

C h a p t e r 4 P r e s e n t D a t a U s i n g T a b l e s , C h a r t s , a n d A n i m a t i o n 5 4 0

Skill 1 Insert Tables 544 Skill 2 Modify Table Layouts 546 Skill 3 Apply Table Styles 548 Skill 4 Insert Column Charts 550 Skill 5 Edit and Format Charts 552 Skill 6 Insert Pie Charts 554 Skill 7 Apply Animation Entrance

and Emphasis Effects 556 Skill 8 Modify Animation Timing

and Use Animation Painter 558 Skill 9 Remove Animation and Modify Duration 560

Skill 10 Navigate Slide Shows 562

More Ski l ls More Skills 11 Prepare Presentations to be Viewed

Using Office PowerPoint Viewer 564 More Skills 12 Insert Hyperlinks in a Presentation 564 More Skills 13 Create Photo Albums 564 More Skills 14 Design Presentations with

Appropriate Animation 564

I n t e g r a t e d Pro jec ts C h a p t e r 1 I n t e g r a t i n g W o r d , E x c e l , A c c e s s ,

a n d P o w e r P o i n t 5 7 4 Skill 1 Move Text between Word Documents 578 Skill 2 Apply Heading Styles in Word 580 Skill 3 Create a PowerPoint Presentation

from a Word Document 582 Skill 4 Insert and Modify a Shape in PowerPoint 584 Skill 5 Import a Word Table into

an Excel Workbook 586 Skill 6 Insert a Shape from PowerPoint into Word

and Excel 588 Skill 7 Create and Work with an Excel Table 590

Skill 8 Link Data between Office Applications Using O L E

Skill 9 Create Envelopes Using Data from Access Skill 10 Create Name Tags Using Data in Excel

More Ski l ls More Skills 11 Insert Subtotals in Excel and

Link Data to a Word Document More Skills 12 Insert Slides from Another

Presentation More Skills 13 Move and Copy Excel Worksheets

and Consolidate Data More Skills 14 Compare Shared Excel Workbooks

C h a p t e r 2

Skill 1 Skill 2 Skill 3 Skill 4

Skill 5

Skill 6 Skill 7

Skill 8 Skill 9

M o r e I n t e g r a t e d P r o j e c t s f o r W o r d , E x c e l , A c c e s s , a n d P o w e r P o i n t Create an Access Append Query Export Data from Access into Excel Create an Excel PivotTable Report Create External References between Excel Workbooks Insert a SmartArt Organization Chart into PowerPoint Insert an Excel PivotTable into PowerPoint Insert a PowerPoint Outline in Word and Create a Cover Page and Table of Contents Link and Embed Data from Excel into Word Export Data from Access to an R T F File and Insert the File into Word Insert Objects from PowerPoint into Word Skill 10

kills More Skills 11 Create an Excel PivotChart

and Link the PivotChart to Word More Skills 12 Create a Hyperlink between

PowerPoint, Word, and Excel Files More Skills 13 Insert a Total Row in an Excel Table

and Link the Table to PowerPoint More Skills 14 Compare Word Documents

Glossary

592 594 596

598

598

598 598

6 1 0 614 616 618

620

622 624

626 628

630 632

634

634

634 634

646

Index 654

About the Authors Kris Townsend is an Information Systems instructor at Spokane Falls Community College in Spokane, Washington. Kris earned a bachelor’s degree in both Education and Business, and a master’s degree in Education. He has also worked as a public school teacher and as a systems analyst. Kris enjoys working with wood, snowboarding, and camping. He commutes to work by bike and enjoys long road rides in the Palouse country south of Spokane.

1

Robert L. Ferrett recently retired as the Director of the Center for Instructional Computing at Eastern Michigan University, where he provided computer training and support to faculty. He has authored or co-authored more than 70 books on Access, PowerPoint, Excel, Publisher, WordPerfect, Windows, and Word. He has been designing, developing, and delivering computer workshops for more than two decades.

Catherine Hain is an instructor at Central New Mexico Community College in Albuquerque, New Mexico. She teaches computer applications classes in the Business and Information Technology School, both in the classroom and through the distance learning office. Catherine holds a bachelor’s degree in Management and Marketing and a master’s degree in Business Administration.

f t Alicia Vargas is an Associate Professor of Business Information Technology at Pasadena City College in California. She holds a bachelor’s and a master’s degree in Business Education from California State University, Los Angeles and has authored numerous textbooks and training materials on Microsoft Word, Microsoft Excel, and Microsoft PowerPoint.

A Special Thank You Pearson Prentice Hall gratefully acknowledges the contribution made by Shelley Gaskin to the first edition publication of this series—Skills for Success with Office 2007. The series has truly benefited from her dedication toward developing a textbook that aims to help students and instructors.We thank her for her continued support of this series.

About the Authors ix

Contributors We’d like to thank the following people for their work on Skills for Success:

Instructor Resource Authors Erich Adickes Parkland College Sharon Behrens Northeast Wisconsin Technical College Julie Boyles Portland Community College Barbara Edington St. Francis College Ranida Harris Indiana University Southeast Beth Hendrick Lake Sumter Community College Susan Holland Southeast Community College—Nebraska Andrea Leinbach Harrisburg Area Community College Yvonne Leonard Coastal Carolina Community College

Technical Editors Lisa Bucki Kelly Carling Hilda W i r t h Federico Jacksonville University Tom Lightner Missouri State University Elizabeth Lockley Joyce Nielsen

Reviewers Darrell Abbey Cascadia Community College Bridget I . Archer Oakton Community College Laura Aagard Sierra College John Alcorcha MTI College Barry Andrews Miami Dade College Natalie Andrews Miami Dade College Wilma Andrews Virginia Commonwealth University School

of Business Bridget Archer Oakton Community College Tahir Aziz J. Sargeant Reynolds Greg Balinger Miami Dade College Terry Bass University of Massachusetts, Lowell Lisa Beach Santa Rosa Junior College Rocky Belcher Sinclair Community College Nannette Biby Miami Dade College David Billings Guilford Technical Community College Brenda K. Br i t t Fayetteville Technical Community College Alisa Brown Pulaski Technical College Eric Cameron Passaic Community College

x Contributors

Trina Maurer Anthony Nowakowski Ernest Gines Stacey Gee Hollins John Purcell Ann Rowlette Amanda Shelton Steve St. John Joyce Thompson Karen Wisniewski

Georgia Virtual Technical College Buffalo State College Tarrant County College—Southeast St. Louis Community College—Meramec Castleton State College Liberty University J. Sargeant Reynolds Tulsa Community College Lehigh Carbon Community College County College of Morris

Janet Pickard Linda Pogue Steve Rubin Eric Sabbah Jan Snyder Mara Zebest

Chattanooga State Tech Community College Northwest Arkansas Community College California State University—Monterey Bay

Gene Carbonaro Trey Cherry Kim Childs Pualine Chohonis Lennie Coper Tara Cipriano Paulette Comet

Gail W . Cope Susana Contreras de Finch Chris Corbin Janis Cox Tomi Crawford Martin Cronlund Jennifer Day Ralph DeArazoza Carol Decker Loorna DeDuluc Caroline Delcourt

Long Beach City College Edgecombe Community College Bethany University Miami Dade College Miami Dade College Gateway Technical College Community College of Baltimore

Coun ty—Ca to nsville Sinclair Community College College of Southern Nevada Miami Dade College Tri-County Technical College Miami Dade College Anne Arundel Community College Sinclair Community College Miami Dade College Montgomery College Miami Dade College Black Hawk College

Contributors continued

Michael Discello Kevin Duggan Barbara Edington Donna Ehrhart Hilda Wirth Federico Tushnelda Fernandez Arlene Flerchinger Hedy Fossenkemper Kent Foster Penny Foster-Shiver Arlene Franklin George Gabb Barbara Garrell Deb Geoghan Jessica Gilmore Victor Giol Melinda Glander Linda Glassburn Deb Gross Rachelle Hall Marie Hartlein Diane Hartman Betsy Headrick Patrick Healy

Lindsay Henning Kermelle Hensley Diana Hill Rachel Hinton Mary Carole Hollingsworth Stacey Gee Hollins Bill Holmes Steve Holtz Margaret M. Hvatum Joan Ivey Dr. Dianna D. Johnson Kay Johnston Warren T. Jones, Sr. Sally Kaskocsak Renuka Kumar Kathy McKee Hazel Kates Gerald Kearns

Pittsburgh Technical Institute Midlands Technical Community College St. Francis College Genesee Community College Jacksonville University Miami Dade College Chattanooga State Tech Community College Paradise Valley Community College Withrop University Anne Arundel Community College Bucks County Community College Miami Dade College Delaware County Community College Bucks County Community College Highline Community College Miami Dade College Northmetro Technical College Cuyahoga Community College, West Ohio State University Glendale Community College Montgomery County Community College Utah Valley State College Chattanooga State Northern Virginia Community

College—Woodbridge Yavapai College Columbus Technical College Chesapeake College Broome Community College GA Perimeter St. Louis Community College—Meramec Chandler-Gilbert Community College University of Minnesota Duluth St. Louis Community College Lanier Technical College North Metro Technical College Columbia Basin College University of Alabama at Birmingham Sinclair Community College Community College of Baltimore County North Metro Technical College Miami Dade College Forsyth Technical Community College

Charles Kellermann

John Kidd Chris Kinnard Kelli Kleindorfer Kurt Kominek Dianne Kotokoff Cynthia Krebs Jean Lacoste Gene Laugh rey David LeBron Kaiyang Liang Linda Lindaman Felix Lopez Nicki Maines Cindy Manning Patri Mays Norma McKenzie Lee McKinley Sandy McCormack Eric Meyer Kathryn Miller

Gloria A. Morgan Kathy Morris Linda Moulton Ryan Murphy Stephanie Murre Wolf Jackie Myers Dell Najera

Scott Nason Paula Neal Bethanne Newman Eloise Newsome

Karen Nunan Ellen Orr Carol Ottaway Denise Passero Americus Pavese James Gordon Patterson Cindra Phillips

Northern Virginia Community College—Woodbridge

Tarrant County Community College Miami Dade College American Institute of Business NE State Tech Community College Lanier Technical College Utah Valley University Virginia Tech Northern Oklahoma College Miami Dade College Miami Dade College Black Hawk College Miami Dade College Mesa Community College Big Sandy Community and Technical College Paradise Valley Community College El Paso Community College GA Perimeter Monroe Community College Miami Dade College Big Sandy Community and Technical College,

Pike Ville Campus Monroe Community College University of Alabama, Tuscaloosa Montgomery County Community College Sinclair Community College Moraine Park Technical College Sinclair Community College El Paso Community College, Valle Verde

Campus Rowan Cabarrus Community College Sinclair Community College Paradise Valley Community College Northern Virginia Community

College—Woodbridge Northeast State Technical Community College Seminole Community College Chemeketa Community College Fulton-Montgomery Community College Community College of Baltimore County Paradise Valley Community College Clark State CC

Contributors

Contributors continued

Janet Pickard Chattanooga State Tech Community College Diane Stark Phoenix College Floyd Pittman Miami Dade College Neil Stenlund Northern Virginia Community College Melissa Prinzing Sierra College Linda Stoudemayer Lamar Institute of Technology Pat Rahmlow Montgomery County Community College Pamela Stovall Forsyth Technical Community College Mary Rasley Lehigh Carbon Community College Linda Switzer Highline Community College Scott Rosen Santa Rosa Junior College Margaret Taylor College of Southern Nevada Ann Rowlette Liberty University Martha Taylor Sinclair Community College Kamaljeet Sanghera George Mason University Michael M. Taylor Seattle Central Community College June Scott County College of Morris Roseann Thomas Fayetteville Tech Community College Janet Sebesy Cuyahoga Community College Ingrid Thompson-Sellers GA Perimeter Jennifer Sedelmeyer Broome Community College Daniel Thomson Keiser University Kelly SellAnne Arundel Community College Astrid Hoy Todd Guilford Technical Community College Teresa Sept College of Southern Idaho Barb Tollinger Sinclair Community College Pat Serrano Scottsdale Community College Cathy Urbanski Chandler Gilbert Community College Amanda Shelton J. Sargeant Reynolds Sue Van Boven Paradise Valley Community College Gary Sibbits St. Louis Community College—Meramec Philip Vavalides Guildford Technical Community College Janet Siert Ellsworth Community College Pete Vetere Montgomery County Community College— Robert Sindt Johnson County Community College West Campus Karen Smith Technical College of the Lowcountry Asteria Villegas Monroe College Robert Smolenski Delaware County Community College Michael Walton Miami Dade College Robert Sindt Johnson County Community College Teri Weston Harford Community College Gary R. Smith Paradise Valley Community College Julie Wheeler Sinclair Community College Patricia Snyder Midlands Technical College Debbie Wood Western Piedmont Community College Pamela Sorensen Santa Rosa Junior College Thomas Yip Passaic Community College Eric Stadnik Santa Rosa Junior College Lindy Young Sierra Community College Mark Stanchfield Rochester Community and Technical College Matt Zullo Wake Technical Community College

xii Contributors

I n s t r u c t o r s – Y o u a s k e d for it s o h e r e it is!

A M i c r o s o f t ® O f f i c e t e x t b o o k t h a t r e c o g n i z e s h o w s t u d e n t s l e a r n t o d a y –

Skills for Success with Microsoft

1 Office 2010 Volume 1

10 X 8.5 F o r m a t – Easy for students to read and type at the same time by simply propping the book up on the desk in front of their monitor

Clear ly Out l ined Sk i l l s – Each skill is presented in a single two-page spread so that students can easily follow along

Numbered S t e p s and Bul le ted Tex t – Students don’t read long paragraphs or text, but they will read information presented concisely

Easy-to-Find S t u d e n t Da ta Fi les – Visual key shows students how to locate and interact with their data files

S t a r t H e r e – Students know exactly where to start and what their starting file will look like

C H A P T E R

G e t t i n g S t a r t e d w i t h W i n d o w s 7 » YOU BK WINDOW 7 ro «CRK M I »F-JF IOM?«L« LOF RUINR-V.*™ PFLNJMN MO»»T*N>WN

MDAU mi mm • J- : >O-L

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Your ilartlng » c r e « n will look Ilk* this: S K I L L !

chapter, you will be

S k i l l s L is t – A visual snapshot of what skills they will complete in the chapter

O u t c o m e – Shows students up front what their completed project will look like

You will tdvo your filoi a t :

T J H N M I M H7_S«II| ‘ ‘

S e q u e n t i a l P a g i n a t i o n – Saves you and your students time in locating topics and assignments I

VISUAL WALK-THROUGH XIII

Skills for Success l ock – Tells how much time students

need to complete the chapter

Introduct ion

• KM US TUNTNW *IR*I fie, 01 FGWRN INTO 4 «IR J .: -I—. IT…. I AIULT :;I N..I..: .:

• MIMIJ-»TT*IIHDR»«U««IJI;UIF.:M*NJFOU« |*:R-P<TKF* T > ffirt IN NUJX ITXFFL R»»I« IN RI«J

t Written for T o d a y ‘ s S t u d e n t s – skills are taught with numbered steps and bulleted text so students are less likely to skip valuable information T w o – P a g e S p r e a d s – Each skill is

presented on a two-page spread to help students keep up their momentum

* TITTR.TI bim irii mug], TU L>«

_ J

D a t a Files Are a S n a p – Students can now find their files easier than ever before with this visual map

C o l o r e d Text – Clearly shows what a student types

Hands-On – Students start actually working on their skills from Step 1

D o n e ! – Students always know when they’ve completed a skill

XIV VISUAL WALK-THROUGH

Skills for S u c c e s s

UorsSkJh © U M l d t o m i o C k g c n n f M

End-o f -Chapte r M a t e r i a l – Several levels of assessment so you can assign the material that best fits your students’ needs

M o r e S k i l l s – Additional skills included online

K e y T e r m s O n l i n e H e l p Sk i l ls

Midi .. – .! -.. I – :T.

O n l i n e P r o j e c t – Students practice using Microsoft Help online to help prepare them for using the applications on their own

H > u » i « i i HI

•.m • m •

Visual Walk-Through xv

Skills for S u c c e s s

Al l V i d e o s

a n d I n s t r u c t o r m a t e r i a l s

a v a i l a b l e o n t h e I R C D

Instructor Mater ia ls

I n s t r u c t o r ‘ s M a n u a l – Teaching tips and additional resources for each chapter

A s s i g n m e n t S h e e t s – Lists all the assignments for the chapter, you just add in the course information, due dates and points. Providing these to students ensures they will know what is due and when

S c r i p t e d L e c t u r e s – Classroom lectures prepared for you

A n n o t a t e d S o l u t i o n F i l e s – Coupled with the scoring rubrics, these create a grading and scoring system that makes grading so much easier for you

P o w e r P o i n t L e c t u r e s – PowerPoint presentations for each chapter

P r e p a r e d E x a m s – Exams for each chapter and for each application

S c o r i n g R u b r i c s – Can be used either by students to check their work or by you as a quick check-off for the items that need to be corrected

S y l l a b u s T e m p l a t e s – for 8-week, 12-week, and 16-week courses

T e s t B a n k – Includes a variety of test questions for each chapter

C o m p a n i o n W e b S i t e – Online content such as the More Skills Projects, Online Study Guide, Glossary, and Student Data Files are all at www.pearsonhighered.com/skills

xvi Visual Walk-Throughhttp://www.pearsonhighered.com/skills

with M ic roso f t

Office 2010 V O L U M E 1

C H A P T E R J Common Features of Office 2010 • The programs in Microsoft Office 2010—Word, Excel, PowerPoint, and Access—share common

tools that you use in a consistent, easy-to-learn manner.

• Common tasks include opening and saving files, entering and formatting text, and printing your work.

Your starting screen will look like this: SKILLS SKILLS 1 – 1 0 TRAINING Umt Insert Pjgt 1

C M M mailt – 1 1 – * 41 IT

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AaBtccJK AaBbCcIK A A B B G .-YABBCC

‘ Items’ “Mo:ca; . rtfacmgl H*jding2 ChtDQt

Past 1 ol I Wmdi 0

A t t h e e n d o f t h i s chapter , y o u w i l l be a b l e t o :

Skill 1 Start Word and Navigate the Word Window Skill 2 Start Excel and PowerPoint and Work with

Multiple Windows Skill 3 Save Files in New Folders Skill 4 Print and Save Documents Skill 5 Open Student Data Files and Save Copies

Using Save As Skill 6 Type and Edit Text Skill 7 Cut, Copy, and Paste Text Skill 8 Format Text and Paragraphs Skill 9 Use the Ribbon Skill 10 Use Shortcut Menus and Dialog Boxes

MORE SKILLS

More Skills 11 Capture Screens with the Snipping Tool More Skills 12 Use Microsoft Office Help More Skills 13 Organize Files More Skills 14 Save Documents to Windows Live

2 C O M M O N FEATURES OF OFFICE 2 0 1 0 | C O M M O N FEATURES C H A P T E R 1

Outcome Using the skills listed to the left will enable you to create documents similar to this:

Visit Aspen Falls! A s p e n F a l l s o v e r l o o k s t h e P a c i f i c O c e a n

a n d is s u r r o u n d e d b y m a n y v i n e y a r d s a n d

w i n e r i e s . O c e a n r e c r e a t i o n is a c c e s s e d

p r i m a r i l y a t D u r a n g o C o u n t y P a r k . T h e

A s p e n L a k e R e c r e a t i o n A r e a p r o v i d e s y e a r

r o u n d f r e s h w a t e r r e c r e a t i o n a n d is t h e

c i t y ‘ s l a r g e s t p a r k .

Local Attractions • W i n e C o u n t r y

o W i n e Tas t ing Tou rs

o Winer ies

• W o r d s w o r t h Fel lowship Museum of A r t

• Du rango C o u n t y M u s e u m of H is to ry

• Conven t ion Center

• A r t Galleries

• Gl ider T o u r s

Aspen Fallc Annual Events • Annua l Starving Artists Sidewalk Sale

• A n n u a l W i n e Festival

• C inco de Mayo

• Vintage Car S h o w

• Her i tage D a y Parade

• Harvest Days

• A m a t e u r Bike Races

• Farmer ‘s Market

• Aspen Lake Nature Cruises

• Aspen Falls T r ia th lon

• Tas te of Aspen Falls

• W i n t e r Blues Festival

Contact Y o u r N a m e for more informat ion.

Common Features of Office 2010

You will save your files as: Lastname_Firstname_cfO 1 _Visit 1 Lastname_Firstname_cfO l_Visit2 Lastname_Firstname_cf01_Visit3

Common Features Chapter 1 | Common Features of Office 2010 3

In t h i s c h a p t e r , y o u w i l l c r e a t e d o c u m e n t s f o r t h e A s p e n F a l l s C i t y

H a l l , w h i c h p r o v i d e s e s s e n t i a l s e r v i c e s f o r t h e c i t i z e n s a n d v i s i t o r s o f

A s p e n F a l l s , C a l i f o r n i a .

C o m m o n Features of Of f ice 2 0 1 0 • Microsoft Office is the most common software used to create and share

personal and business documents.

• Microsoft Office is a suite o f several programs—Word, PowerPoint, Excel, Access, and others—that each have a special purpose.

• Because of the consistent design and layout o f Microsoft Office, when you learn to use one Microsoft Office program, you can use most o f those skil ls when working wi th the other Microsoft Office programs.

• T h e files you create w i t h Microsoft Office need to be named and saved in locations where they can be easily found when you need them.

C o m m o n F e a t u r e s o f O f f i c e 2 0 1 0 | C o m m o n F e a t u r e s C h a p t e r 1

Time to complete all 10 skills – 50 to 90 minutes

Find your student data files here:

Student data files needed for this chapter:

« cf01_Visit

• cf01_Visit_Events

cfOl Visit River

C O M M O N FEATURES C H A P T E R 1 | C O M M O N FEATURES OF OFFICE 2 0 1 0 5

• The Word 2010 program can be launched by clicking the Start button, and then locating and clicking the Microsoft Word 2010 command.

• When you start Word, a new blank document displays in which you can type text.

1. In the lower left corner of the desktop, click the Start button © .

2 . In the lower left corner of the Start menu, click the All Programs command, and then compare your screen with Figure 1 . –

The Microsoft Office folder is located in the All Programs folder. If you have several programs installed on your computer, you may need to scroll to see the Microsoft Office folder.

3 . Click the Microsoft Office folder, and then compare your screen with Figure 2. –

Below the Microsoft Office folder, commands that open various Office 2010 programs display.

4 . From the Start menu, under the Microsoft Office folder, click Microsoft Word 2010, and then wait a few moments for the Microsoft Word window to display.

5 . If necessary, in the upper right corner of the Microsoft Word window, click the Maximize button B| .

• C o n t i n u e t o t h e n e x t p a g e t o c o m p l e t e t h e s

6 Common Features of Office 2010 | Common Features Chapter 1

OotxMvtntx

Ptttuin All Programs folder list

(your list will be different)

Microsoft Office folder

Start button Figure 1

Adobe Acrobat 70 Professional Q Adcbe Designer 7.0 C Dtftuft Program; 9. DesHoe Gadget Gallery tr Internet Eiplorer Cj Window; Anytime Upgrade | | Window! DVD 1 M B . i Window, Fu ind Son

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SKILL 1: Start Word and Navigate the Word Window

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On the Ribbon’s Home tab, in the Paragraph group, click the Show/Hide button H until it displays in gold indicating that it is active. Compare your screen with Figure 3 .

Above the blank Word document, the Quick Access Toolbar and Ribbon display. At the top of the Ribbon, a row of tab names display. Each Ribbon tab has buttons that you click to perform actions. The buttons are organized into groups that display their names along the bottom of the Ribbon.

In the document, the insertion point— a vertical line that indicates where text will be inserted when you start typing—flashes near the top left corner.

The Show/Hide button is a toggle button— a button used to turn a feature both on and off. The paragraph mark (f) indicates the end of a paragraph and will not print.

In the document, type your first and last names. As you type, notice that the insertion point and paragraph mark move to the right.

On the Home tab, in the Styles group, point to—but do not click—the Heading 1 thumbnail to show the Live Preview—a feature that displays the result of a formatting change if you select it.

Click the Heading 1 thumbnail to apply the formatting change as shown in Figure 4. If the Word Navigation Pane displays on the left side of the Word window, click its Close [*] button.

You have completed Skill 1 of 10

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Common Features Chapter 1 | Common Features of Office 2010 7

• When you open more than one Office program, each program displays in its own window.

• When you want to work with a program in a different window, you need to make it the active window.

1 . Click the Start button © , and then compare your screen with F i g u r e 1.

Your computer may be configured in such a way that you can open Office programs without opening the All Programs folder. The Office 2010 program commands may display as shortcuts in the Start menu’s pinned programs area or the recently used programs area. Your computer’s taskbar or desktop may also display icons that start each program.

2 . From the Start menu, locate and then click Microsoft Excel 2010. Depending on your computer, you may need to double-click—not single click—to launch Excel. Compare your screen with F i g u r e 2 . If necessary, click the Maximize – button mm\<

A new blank worksheet displays in a new window. The first cell—the box formed by the intersection of a row and column—is active as indicated by the thick, black border surrounding the cell. When you type in Excel, the text is entered into the active cell.

The Quick Access Toolbar displays above the spreadsheet. The Excel Ribbon has its own tabs and groups that you use to work with an Excel spreadsheet. Many of these tabs, groups, and buttons are similar to those found in Word.

On the taskbar, two buttons display—one for Word and one for Excel.

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3 . From the Start menu <PJ, locate and then click Microsoft PowerPoint 2010.

— Compare your screen with F i g u r e 3 . If necessary, Maximize N = M the Presentation 1 – Microsoft PowerPoint window.

A new, blank presentation opens in a new window. The PowerPoint window contains a slide in which you can type text. PowerPoint slides are designed to be displayed as you talk in front of a group of people.

4. In the upper right corner of the PowerPoint window, click the Close button fcgaj.

5. On the taskbar, click the Word button to make it the active window. With the insertion point flashing to the right of your name, press [Enter], and then type Skills for Success Common Features Chapter

6 . In the upper right corner of the Document 1 – Microsoft Word window, click the Minimize button

The Word window no longer displays, but its button is still available on the taskbar.

7 . With the Excel window active, in the first cell—cell A l — t y p e your first name. Press [Tab], and then type your last name.

Press (Enter), type =TODAY() and then press (Enter) to calculate the current date and to display it in the cell.

In the Excel window, click the Restore Down button |jSU and then compare your screen with F i g u r e 4.

The window remains open, but it no longer fills the entire screen. The Maximize button replaced the Restore Down button.

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• SKILL 3: Sav<

• A new document or spreadsheet is stored in the computer ‘s temporary memory (RAM) until you save it to your hard drive or USB flash drive.

1 . If you are saving your work on a USB flash drive, insert the USB flash drive into the computer now. If the Windows Explorer button [3 flashes on the taskbar, right-click the button, and then on the Jump List, click Close window.

2 . On the taskbar, click the Word button to make it the active window. On the Quick Access Toolbar, click the Save button [y].

For new documents, the first time you click the Save button, the Save As dialog box opens so that you can name the file.

3 . If you are to save your work on a USB drive, in the Navigation pane scroll down to display the list of drives, and then click your USB flash drive as shown in F i g u r e 1 . If you are saving your work to another location, in the Navigation pane, locate and then click that folder or drive.

4. On the Save As dialog box toolbar, click the New folder button, and then immedi­ ately type Common Features Chapter 1

5 . Press [En te r ] to accept the folder name, and then press [En te r ] again to open the new folder as shown in F i g u r e 2 .

The new folder is created and then opened in the Save As dialog box file list.

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6. In the Save As dialog box, click in the File name box one time to highlight all of the existing text.

7. With the text in the File name box still highlighted, type Lastname_Firstname_ cfOl_Visitl

– 8 . Compare your screen with F i g u r e 3 , and then click Save.

After the document is saved, the name of the file displays on the title bar at the top of the window.

9 . On the taskbar, click the Windows Explorer button \^\. In the folder window Navigation pane, open [ft] the drive on which you are saving your work, and then click the Common Features Chapter 1 folder. Verify that Lastname_Firstname_ cpl_Visitl displays in file list.

1 0 . On the taskbar, click the Excel button to make it the active window. On the Excel Quick Access Toolbar, click the Save button § ] .

1 1 . In the Save As dialog box Navigation pane, open 0 the drive where you are saving your work, and then click the Common Features Chapter 1 folder to display its file list.

The Word file may not display because the Save As box typically displays only files created by the program you are using. Here, only Excel files will typically display.

1 2 . Click in the File name box, replace the existing value with Lastname_Firstname_ cf01_Visit2 and then click the Save button.

1 3 . On the taskbar, click the Windows Explorer button, and then compare your screen with F i g u r e 4.

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1 . O n t h e t a s k b a r , c l i c k t h e Excel b u t t o n , a n d t h e n c l i c k t h e Maximize |Uey b u t t o n .

2 . O n t h e R i b b o n , c l i c k t h e View tab, a n d t h e n i n t h e Workbook Views group, c l i c k t h e Page Layout b u t t o n . C o m p a r e y o u r s c r e e n w i t h F i g u r e 1 .

The worksheet displays the cells, the margins, and the edges of the paper as they will be positioned when you print. The cell references—the numbers on the left side and the letters across the top of a spreadsheet that address each cell—will not print.

O n t h e R i b b o n , c l i c k t h e Page Layout tab. I n t h e Page Setup group, c l i c k t h e Margins b u t t o n , a n d t h e n i n t h e Margins g a l l e r y , c l i c k Wide.

C l i c k t h e File tab, a n d t h e n o n t h e l e f t s i d e o f t h e B a c k s t a g e , c l i c k Print. C o m p a r e y o u r s c r e e n w i t h F i g u r e 2.

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6. Check with your Course Assignment Sheet or Course Syllabus, or consult with your instructor to determine whether you are to print your work for this chapter. If you are to print your work, at the top left corner of the Print Settings section, click the Print button. If you printed the spreadsheet, retrieve the printout from the printer.

7. On the File tab, click Save.

Because you have already named the file, the Save As dialog box does not display.

O n the File tab, click Exit to close the spreadsheet and exit Excel.

In the Word document, verify that the insertion point is in the second line of text. If not, on the taskbar, click the Word button to make it the active window.

10. On the Home tab, in the Styles group, click the Heading 2 thumbnail. Compare your screen with Figure 3.

11. On the File tab, click Print to display the Print tab. If you are printing your work for this chapter, click the Print button, and then retrieve your printout from the printer.

12. On the File tab, click Exit, and then com- pare your screen with Figure 4.

When you close a window with changes that have not yet been saved, a message will remind you to save your work.

13. Read the displayed message, and then click Save.

• You hove completed Skill 4 of 10

Figure 4 C o m m o n F e a t u r e s C h a p t e r 1 | C o m m o n F e a t u r e s o f O f f i c e 2010 1 3

• This book often instructs you to open a student data file so that you do not need to start the project with a blank document.

• The student data files are located on the student CD that came with this book. Your instructor may have provided an alternate location.

• You use Save As to create a copy of the stu­ dent data file onto your own storage device.

1 . If necessary, insert the student CD that came with this text. If the AutoPlay dialog box displays, click Close U a 4 .

2 . Using the skills practiced earlier, start Microsoft Word 2010.

3 . In the Documentl – Microsoft Word window, click the File tab, and then click Open.

4 . In the Open dialog box Navigation pane, scroll down and then, if necessary, open \V\ Computer. In the list of drives, click the CD/DVD drive to display the contents of the student CD. If your instructor has provided a different location, navigate to that location instead of using the student CD.

5. In the file list, double-click the 01_ student_data_files folder, double-click the 01_common_features folder, and then double-click the chapter_01 folder. Compare your screen with F i g u r e 1 . –

6. In the file list, click cf01_Visit, and then click the Open button. Compare your screen with F i g u r e 2 .

If you opened the file from the student CD, the title bar indicates that the document is in read-only mode—a mode where you cannot save your changes.

Categories

## umuc bookstore

STAT 225 Section 6380

Summer 2015

Quiz #2

Please answer all 12 questions. The maximum score for each question is posted at the beginning of the question, and the maximum score for the quiz is 80 points. Make sure your answers are as complete as possible and show your work/argument. In particular, when there are calculations involved, you should show how you come up with your answers with necessary tables, if applicable. Answers that come straight from program software packages will not be accepted. The quiz is due by midnight, Sunday, June 28, Eastern Daylight Saving Time.

IMPORTANT: Per the direction of the Dean’s Office, you are requested to include a brief note at the beginning of your submitted quiz, confirming that your work is your own.

By typing my signature below, I pledge that this is my own work done in accordance with the UMUC Policy 150.25 – Academic Dishonesty and Plagiarism (http://www.umuc.edu/policies/academicpolicies/aa15025.cfm) on academic dishonesty and plagiarism. I have not received or given any unauthorized assistance on this assignment/examination.

_________________________

Electronic Signature

Your submitted quiz will be accepted only if you have included this statement.http://www.umuc.edu/policies/academicpolicies/aa15025.cfmhttp://www.umuc.edu/policies/academicpolicies/aa15025.cfm

1. (10 points) Once upon a time, I had a fast-food lunch with a mathematician colleague. I noticed a very strange behavior in him. I called it the Au-Burger Syndrome since it was discovered by me at a burger joint. Based on my unscientific survey, it is a rare but real malady inflicting 2% of mathematicians worldwide. Yours truly has recently discovered a screening test for this rare malady, and the finding has just been reported to the International Association of Insane Scientists (IAIS) for publication. Unfortunately, my esteemed colleagues who reviewed my submitted draft discovered that the reliability of this screening test is only 80%. What it means is that it gives a positive result, false positive, in 20% of the mathematicians tested even though they are not afflicted by this horribly-embarrassing malady.

I have found an unsuspecting victim, oops, I mean subject, down the street. This good old mathematician is tested positive! What is the probability that he is actually inflicted by this rare disabling malady?

2. (5 points) Most of us love Luzon mangoes, but hate buying those that are picked too early. Unfortunately, by waiting until the mangos are almost ripe to pick carries a risk of having 15% of the picked rot upon arrival at the packing facility. If the packing process is all done by machines without human inspection to pick out any rotten mangos, what would be the probability of having at most 2 rotten mangos packed in a box of 12?

3. (5 points) We have 7 boys and 3 girls in our church choir. There is an upcoming concert in the local town hall. Unfortunately, we can only have 5 youths in this performance. This performance team of 5 has to be picked randomly from the crew of 7 boys and 3 girls.

a. What is the probability that all 3 girls are picked in this team of 5? b. What is the probability that none of the girls are picked in this team of 5? c. What is the probability that 2 of the girls are picked in this team of 5?

4. (10 points) In this economically challenging time, yours truly, CEO of the Outrageous Products Enterprise, would like to make extra money to support his frequent filet-mignon-and- double-lobster-tail dinner habit. A promising enterprise is to mass-produce tourmaline wedding rings for brides. Based on my diligent research, I have found out that women’s ring size normally distributed with a mean of 6.0, and a standard deviation of 1.0. I am going to order 5000 tourmaline wedding rings from my reliable Siberian source. They will manufacture ring size from 4.0, 4.5, 5.0, 5.5, 6.0, 6.5, 7.0, 7.5, 8.0, 8.5, 9.0, and 9.5. How many wedding rings should I order for each of the ring size should I order 5000 rings altogether? (Note: It is natural to assume that if your ring size falls between two of the above standard manufacturing size, you will take the bigger of the two.)http://polaris.umuc.edu/%7Eaau/crying_baby.html

5. (5 points) A soda company want to stimulate sales in this economic climate by giving customers a chance to win a small prize for ever bottle of soda they buy. There is a 20% chance that a customer will find a picture of a dancing banana ( ) at the bottom of the cap upon opening up a bottle of soda. The customer can then redeem that bottle cap with this picture for a small prize. Now, if I buy a 6-pack of soda, what is the probability that I will win something, i.e., at least winning a single small prize?

6. (5 points) When constructing a confidence interval for a population with a simple random sample selected from a normally distributed population with unknown σ, the Student t- distribution should be used. If the standard normal distribution is correctly used instead, how would the confidence interval be affected?

7. (10 points) Below is a summary of the Quiz 1 for two sections of STAT 225 last spring. The questions and possible maximum scores are different in these two sections. We notice that Student A4 in Section A and Student B2 in Section B have the same numerical score.

Section A

Student Score

Section B

Student Score A1 70 B1 15 A2 42 B2 61 A3 53 B3 48 A4 61 B4 90 A5 22 B5 85 A6 87 B6 73 A7 59 B7 48

—– —— B8 39

How do these two students stand relative to their own classes? And, hence, which student performed better? Explain your answer.

8. (5 points) My brother wants to estimate the proportion of Canadians who own their house. What sample size should be obtained if he wants the estimate to be within 0.02 with 90% confidence if

a. he uses an estimate of 0.675 from the Canadian Census Bureau? b. he does not use any prior estimates? But in solving this problem, you are actually using a

form of “prior” estimate in the formula used. In this case, what is your “actual” prior estimate? Please explain.

9. (5 points) An amusement park is considering the construction of an artificial cave to attract visitors. The proposed cave can only accommodate 36 visitors at one time. In order to give everyone a realistic feeling of the cave experience, the entire length of the cave would be chosen such that guests can barely stand upright for 98% of the all the visitors.

The mean height of American men is 70 inches with a standard deviation of 2.5 inches. An amusement park consultant proposed a height of the cave based on the 36-guest-at-a-time capacity. Construction will commence very soon.

The park CEO has a second thought at the last minute, and asks yours truly if the proposed height is appropriate. What would be the proposed height of the amusement park consultant? And do you think that it is a good recommendation? If not, what should be the appropriate height? Why?

10. (5 points) A department store manager has decided that dress code is necessary for team coherence. Team members are required to wear either blue shirts or red shirts. There are 9 men and 7 women in the team. On a particular day, 5 men wore blue shirts and 4 other wore red shirts, whereas 4 women wore blue shirts and 3 others wore red shirt. Apply the Addition Rule to determine the probability of finding men or blue shirts in the team.

Please refer to the following information for Question 11 and 12.

It is an open secret that airlines overbook flights, but we have just learned that bookstores underbook (I might have invented this new term.) textbooks in the good old days that we had to purchase textbooks.

To make a long story short, once upon a time, our UMUC designated virtual bookstore, MBS Direct, routinely, as a matter of business practice, orders less textbooks than the amount requested by UMUC’s Registrar’s Office. That is what I have figured out……. Simply put, MBS Direct has to “eat” the books if they are not sold. Do you want to eat the books? You may want to cook the books before you eat them! Oops, I hope there is no account major in this class?

OK, let us cut to the chase….. MBS Direct believes that only 85% of our registered students will stay registered in a class long enough to purchase the required textbook. Let’s pick on our STAT 200 students. According to the Registrar’s Office, we have 600 students enrolled in STAT 200 this spring 2014.

11. (10 points) Suppose you are the CEO of MBS Direct, and you want to perform a probability analysis. What would be the number of STAT 200 textbook bundles you would order so that

you stay below 5% probability of having to back-order from Pearson Custom Publishing? (Note: Our Provost would be very angry when she hears that textbook bundles have to be back- ordered. In any case, we no longer need the service of MBS Direct as we are moving to 100% to free eResources. Auf Wiedersehen, MBS Direct……)

IMPORTANT: Yes, you may use technology for tacking Question 11 in this quiz.

12. (5 points) Is there an approximation method for Question 11? If so, please tackling Question 11 with the approximation method.

Categories

Categories

## multicountry competition refers to a market situation where

 multicountry competition refers to a market situation where
Categories

## how many major ideas should be present on each presentation aid?

Consider the Audience

• Analyzing the audience is central to the speechmaking process; consider your audience at every step of the way in preparing and presenting your speech. • Gather information about your audience by asking questions or surveying them more formally. • Summarize and analyze the information you have gathered.

Select and Narrow Your Topic

• Consider the audience: Who are your listeners and what do they expect? • Consider the occasion: What is the reason for the speech? • Consider your own interests and skills: What are your strengths?

• Decide whether your general speech purpose is to inform, to persuade, or

to entertain, or a combination of these goals. • Decide on your specific purpose:

What do you want your listeners to be able to do after you finish your speech? • Use your specific purpose to guide

you in connecting your message to your audience.

Develop Your Central Idea

• State your central idea for your speech in one sentence. • Your central idea should be a single idea

presented in clear, specific language. • Relate your central idea to your audience.

Generate Main Ideas

• Determine whether your central idea can be supported with logical divisions using a topical arrangement. • Determine whether your central idea can be supported with reasons the idea is true. • Determine whether your central idea can be supported with a series of steps.

Gather Supporting Material

• Remember that most of what you say consists of supporting material such

as stories, descriptions, definitions, analogies, statistics, and opinions.

• The best supporting material both clarifies your major ideas and holds your listeners’ attention. • Supporting material that is personal, concrete, and appealing to the listeners’

senses is often the most interesting.

• Remember the maxim: Tell us what you’re going to tell us (introduction); tell us (body); and tell us what you told us (conclusion). • Outline your main ideas by topic, chronologically, spatially, by cause and effect, or by problem and solution. • Use signposts to clarify the overall structure of your message.

• Prepare speaking notes and practice using them well in advance of your speaking date. • Rehearse your speech out loud, standing as you would stand while delivering your speech. • Practice with well-chosen visual aids that are big, simple, and appropriate for your audience.

• Look at individual listeners. • Use movement and gestures that fit your natural style of speaking.

Why Do You Need This New Edition? If you’re wondering why you should buy this new edition of Public Speaking: An Audience- Centered Approach, here are eight good reasons!

1. We’ve kept the best and improved the rest. The eighth edition of Public Speaking: An Audience-Centered Approach continues its unique focus on the importance of analyzing and considering the audience at every point in the speech- making process, but is now an easier-to-use and more effec- tive learning tool than ever.

2. We’ve streamlined the book to 16 chapters, so that every chapter can be covered during a standard semester. Chapter 1 now combines an introduction to public speaking with an overview of the audience-centered model. Chapter 6 now combines information on gathering supporting mate- rial with advice on how to integrate supporting material into a speech.

3. New end-of-chapter Study Guides are designed to help you retain and apply chapter concepts. Study Guides feature chapter summaries; “Using What You’ve Learned” questions posing realistic scenarios; “A Question of Ethics” to reinforce the importance of ethical speaking; and referrals to selected online resources that help you find resources to use in your own speeches.

4. More tables and Recap boxes summarize the content of nearly every major section in each chapter. These frequent reviews help you check understanding, study for exams, and rehearse material to aid retention.

5. The eighth edition continues our popular focus on control- ling speaking anxiety, developed through expanded and updated coverage of communication apprehension in Chapter 1 and reinforced with tips and reminders in “Confidently Connecting with Your Audience” features in the margins of every chapter.

6. New and expanded coverage of key communication theories and current research, including studies of anxiety styles in Chapter 1, introductions to social judgment theory in Chapter 14, and emotional response theory in Chapter 15, help you apply recent theories and findings.

7. Every chapter of the eighth edition boasts engaging fresh examples to help you connect concepts to your own life and interests, including new references to contemporary technology such as social media sites in Chapter 4 and iPads in Chapter 12.

8. New speeches, including Barack Obama’s inaugural speech, contribute to an impressive sample speech appendix that will inspire and instruct you as you work with your own material.

Public Speaking

8 Public SpeakingAN AUDIENCE-CENTERED APPROACH Steven A. Beebe Texas State University—San Marcos

Susan J. Beebe Texas State University—San Marcos

E D

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Allyn & Bacon Boston Columbus Indianapolis New York San Francisco Upper Saddle River

Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto

Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

Editor-in-Chief, Communication: Karon Bowers Development Editor: Sheralee Connors Editorial Assistant: Megan Sweeney Marketing Manager: Blair Tuckman Media Producer: Megan Higginbotham Project Manager: Anne Ricigliano Project Coordination, Text Design, and Electronic Page Makeup: Nesbitt Graphics, Inc. Cover Design Manager: Anne Nieglos Cover Designer: Joseph DePinho Cover Art: William Low Manufacturing Buyer: Mary Ann Gloriande Printer and Binder: Quad Graphics/Dubuque Cover Printer: Lehigh-Phoenix Color/Hagerstown

Library of Congress Cataloging-in-Publication Data Beebe, Steven A.

Public speaking : an audience-centered approach / Steven A. Beebe, Susan J. Beebe. — 8th ed. p. cm.

Includes bibliographical references and index. ISBN 978-0-205-78462-2 (alk. paper)

1. Public speaking. 2. Oral communication. I. Beebe, Susan J. II. Title. PN4129.15.B43 2012 808.5’1—dc22

2010054152

Copyright © 2012, 2009, 2006 by Pearson Education, Inc.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States. To obtain permission to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, 501 Boylston Street, Suite 900, Boston, MA 02116, fax: (617) 671-2290. For information regarding permissions, call (617) 671-2295 or e-mail: permissionsus@pearson.com.

1 2 3 4 5 6 7 8 9 10—QGD—14 13 12 11

ISBN-13: 978-0-205-78462-2 www.pearsonhighered.com ISBN-10: 0-205-78462-3

Dedicated to our parents, Russell and Muriel Beebe and Herb and Jane Dye

And to our children, Mark, Matthew, and Brittany Beebe

ix

1 Speaking with Confidence 3 2 Speaking Freely and Ethically 35 3 Listening to Speeches 49 4 Analyzing Your Audience 77 5 Developing Your Speech 111 6 Gathering and Using Supporting Material 133 7 Organizing Your Speech 161 8 Introducing and Concluding Your Speech 183 9 Outlining and Revising Your Speech 203

10 Using Words Well: Speaker Language and Style 217 11 Delivering Your Speech 235 12 Using Presentation Aids 265 13 Speaking to Inform 289 14 Understanding Principles of Persuasive Speaking 315 15 Using Persuasive Strategies 337 16 Speaking for Special Occasions and Purposes 373

Epilogue 390

Appendix A Speaking in Small Groups 392

Appendix B Speeches for Analysis and Discussion 400

Brief Contents

xi

Contents

Preface xxiii

Speaking with Confidence 3 Why Study Public Speaking? 4

Empowerment 4 ● Employment 4

The Communication Process 5 Communication as Action 5 ● Communication as Interaction 6 ● Communication as Transaction 7

The Rich Heritage of Public Speaking 7 LEARNING FROM GREAT SPEAKERS Martin Luther King Jr. 8

Improving Your Confidence as a Speaker 9

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SAMPLE OUTLINE 24

Gather Visual Supporting Material 25

Organize Your Speech 25

Select and Narrow Your Topic 20 Determine Your Purpose 21

Determine Your General Purpose 21 ● Determine Your Specific Purpose 21

Develop Your Central Idea 22 Generate the Main Ideas 22 Gather Supporting Material 23

Gather Interesting Supporting Material 23

Understand Your Nervousness 10 ● How to Build Your Confidence 13

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Begin with the End in Mind 17

An Overview of Audience-Centered Public Speaking 17 Consider Your Audience 19

Gather and Analyze Information about Your Audience 19 ● Consider the Culturally Diverse Backgrounds of Your Audience 19

Rehearse Your Speech 27

Deliver Your Speech 27

SAMPLE SPEECH 29

STUDY GUIDE 30

SPEECH WORKSHOP Improving Your Confidence as a Public Speaker 33

Speaking Freely and Ethically 35 Speaking Freely 37

Free Speech and the U.S. Constitution 37 ● Free Speech in the Twentieth Century 37 ● Free Speech in the Twenty-first Century 38

Speaking Ethically 39 Have a Clear, Responsible Goal 39

LEARNING FROM GREAT SPEAKERS Mohandas Gandhi 40

Use Sound Evidence and Reasoning 40 ● Be Sensitive to and Tolerant of Differences 41 ● Be Honest 41 ● Don’t Plagiarize 42

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Remember That You Will Look More Confident Than You May Feel 42

SAMPLE ORAL CITATION 44

Speaking Credibly 44

STUDY GUIDE 46

SPEECH WORKSHOP Avoiding Plagiarism 47

Listening to Speeches 49 Overcoming Barriers to Effective Listening 51

Managing Information Overload 52 ● Overcoming Personal Concerns 53 ● Reducing Outside Distractions 53 ● Overcoming Prejudice 54 ● Using Differences between Speech Rate and Thought Rate 54 ● Managing Receiver Apprehension 55

How to Become a Better Listener 55 Listen with Your Eyes as Well as Your Ears 56 ● Listen Mindfully 57

LEARNING FROM GREAT SPEAKERS César Chávez 58

Listen Skillfully 59 ● Listen Ethically 62

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Improving Listening and Critical Thinking Skills 63 Separate Facts from Inferences 63 ● Evaluate the Quality of Evidence 64 ● Evaluate the Underlying Logic and Reasoning 65

Analyzing and Evaluating Speeches 65 Understanding Criteria for Evaluating Speeches 66 ● Identifying and Analyzing Rhetorical Strategies 68 ● Giving Feedback to Others 69 ● Giving Feedback to Yourself 70

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Look for Positive Listener Support 71

STUDY GUIDE 72

SPEECH WORKSHOP Evaluating a Speaker’s Rhetorical Effectiveness 74

Look for Audience Member Similarities 81 ● Look for Audience Member Differences 82 ● Establish Common Ground with Your Audience 82

LEARNING FROM GREAT SPEAKERS Winston Churchill 83

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Learn as Much as You Can about Your Audience 83

Analyzing Your Audience before You Speak 84 Demographic Audience Analysis 84 ● Psychological Audience Analysis 94 ● Situational Audience Analysis 96

Adapting to Your Audience as You Speak 99

DEVELOPING YOUR SPEECH STEP BY STEP Consider Your Audience 99

Identifying Nonverbal Audience Cues 100 ● Responding to Nonverbal Cues 101 ● Strategies for Customizing Your Message to Your Audience 101

Analyzing Your Audience after You Speak 103 Nonverbal Responses 104 ● Verbal Responses 104 ● Survey Responses 104 ● Behavioral Responses 105

STUDY GUIDE 106

SPEECH WORKSHOP Developing Communication Strategies to Adapt to Your Audience 108

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Developing Your Speech 111 Select and Narrow Your Topic 112

Guidelines for Selecting a Topic 113

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Select an Interesting Topic 113

LEARNING FROM GREAT SPEAKERS Frederick Douglass 115

Strategies for Selecting a Topic 115 ● Narrowing the Topic 117

DEVELOPING YOUR SPEECH STEP BY STEP Select and Narrow Your Topic 117

Determine Your Purpose 118 General Purpose 118 ● Specific Purpose 119

DEVELOPING YOUR SPEECH STEP BY STEP Determine Your Purpose 121

Develop Your Central Idea 121 A Complete Declarative Sentence 122 ● Direct, Specific Language 122

DEVELOPING YOUR SPEECH STEP BY STEP Develop Your Central Idea 123 ● A Single Idea 123 ● An Audience-Centered Idea 123

Generate and Preview Your Main Ideas 124 Generating Your Main Ideas 124 ● Previewing Your Main Ideas 125

Meanwhile, Back at the Computer . . . 126

DEVELOPING YOUR SPEECH STEP BY STEP Generate Your Main Ideas 127

STUDY GUIDE 128

SPEECH WORKSHOP Strategies for Selecting a Speech Topic 130

Gathering and Using Supporting Material 133 Sources of Supporting Material 134

Personal Knowledge and Experience 134 ● The Internet 134 ● Online Databases 135 ● Traditional Library Holdings 137 ● Interviews 139

Research Strategies 141 Develop a Preliminary Bibliography 141 ● Locate Resources 142 ● Assess the Usefulness of Resources 142 ● Take Notes 143

DEVELOPING YOUR SPEECH STEP BY STEP Gather Supporting Material 143

Identify Possible Presentation Aids 144

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Types of Supporting Material 144 Illustrations 145

LEARNING FROM GREAT SPEAKERS Eleanor Roosevelt 146

Descriptions and Explanations 147 ● Definitions 148 ● Analogies 149 ● Statistics 150 ● Opinions 152

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Prepare Early 153

The Best Supporting Material 154

STUDY GUIDE 156

SPEECH WORKSHOP Identifying a Variety of Supporting Material for Your Speech 158

Organizing Your Speech 161 Organizing Your Main Ideas 163

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Organize Your Message 163

Organizing Ideas Topically 163 ● Ordering Ideas Chronologically 164 ● Arranging Ideas Spatially 166 ● Organizing Ideas to Show Cause and Effect 166

LEARNING FROM GREAT SPEAKERS Desmond Tutu 166

Organizing Ideas by Problem-Solution 167 ● Acknowledging Cultural Differences in Organization 169

Subdividing Your Main Ideas 170 Integrating Your Supporting Material 170

Prepare Your Supporting Material 170 ● Organize Your Supporting Material 171

DEVELOPING YOUR SPEECH STEP BY STEP Organize Your Speech 172

Incorporate Your Supporting Material into Your Speech 173

Developing Signposts 173

SAMPLE INTEGRATION OF SUPPORTING MATERIAL 173

Transitions 174 ● Previews 175 ● Summaries 176

Supplementing Signposts with Presentation Aids 177

STUDY GUIDE 178

SPEECH WORKSHOP Organizing Your Ideas 180

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Introducing and Concluding Your Speech 183 CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Be Familiar with Your

Introduction and Conclusion 184

Purposes of Introductions 184 Get the Audience’s Attention 184 ● Give the Audience a Reason to Listen 185 ● Introduce the Subject 185 ● Establish Your Credibility 186 ● Preview Your Main Ideas 186

Effective Introductions 187 Illustrations or Anecdotes 187 ● Startling Facts or Statistics 188 ● Quotations 188 ● Humor 189 ● Questions 190 ● References to Historical Events 191 ● References to Recent Events 192 ● Personal References 192 ● References to the Occasion 192 ● References to Preceding Speeches 193

Purposes of Conclusions 193 Summarize the Speech 193 ● Provide Closure 194

Effective Conclusions 195 Methods Also Used for Introductions 196 ● References to the Introduction 196 ● Inspirational Appeals or Challenges 196

LEARNING FROM GREAT SPEAKERS Patrick Henry 197

STUDY GUIDE 198

SPEECH WORKSHOP Developing the Introduction and Conclusion to Your Speech 200

Outlining and Revising Your Speech 203 Developing Your Preparation Outline 204

The Preparation Outline 204 ● Sample Preparation Outline 206

Revising Your Speech 207

SAMPLE PREPARATION OUTLINE 208

Developing Your Delivery Outline and Speaking Notes 209 The Delivery Outline 210

SAMPLE DELIVERY OUTLINE 210

Sample Delivery Outline 211 ● Speaking Notes 212

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Use Your Well-Prepared Speaking Notes When You Rehearse 212

LEARNING FROM GREAT SPEAKERS Mark Twain 213

STUDY GUIDE 214

SPEECH WORKSHOP Outlining Your Speech 215

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Using Words Well: Speaker Language and Style 217 Differentiating Oral and Written Language Styles 218 Using Words Effectively 219

Use Specific, Concrete Words 219 ● Use Simple Words 220 ● Use Words Correctly 220 ● Use Words Concisely 221

Adapting Your Language Style to Diverse Listeners 221 Use Language That Your Audience Can Understand 222 ● Use Appropriate Language 222 ● Use Unbiased Language 222

Crafting Memorable Word Structures 223 Creating Figurative Images 224 ● Creating Drama 225 ● Creating Cadence 225

LEARNING FROM GREAT SPEAKERS John F. Kennedy 228

Analyzing an Example of Memorable Word Structure 228

Using Memorable Word Structures Effectively 229

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Use Words to Manage Your Anxiety 229

STUDY GUIDE 230

SPEECH WORKSHOP Conducting a “Language Style Audit” of Your Speech 232

Delivering Your Speech 235 The Power of Speech Delivery 236

Listeners Expect Effective Delivery 236 ● Listeners Make Emotional Connections with You through Delivery 237 ● Listeners Believe What They See 238

Methods of Delivery 238 Manuscript Speaking 238 ● Memorized Speaking 239 ● Impromptu Speaking 240 ● Extemporaneous Speaking 241

Characteristics of Effective Delivery 242

LEARNING FROM GREAT SPEAKERS Marcus Tullius Cicero 242

Eye Contact 243 ● Gestures 243 ● Movement 246 ● Posture 247 ● Facial Expression 248 ● Vocal Delivery 248 ● Personal Appearance 253

Audience Diversity and Delivery 253

DON’T GET LOST IN TRANSLATION 255

Rehearsing Your Speech: Some Final Tips 256 CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Re-create the Speech Environment When You Rehearse 257

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DEVELOPING YOUR SPEECH STEP BY STEP Rehearse Your Speech 257

Delivering Your Speech 257

DEVELOPING YOUR SPEECH STEP BY STEP Deliver Your Speech 257

Responding to Questions 258

STUDY GUIDE 261

SPEECH WORKSHOP Improving Your Speech Delivery 263

Using Presentation Aids 265 The Value of Presentation Aids 266

LEARNING FROM GREAT SPEAKERS Ronald Reagan 267

Types of Presentation Aids 268 Three-Dimensional Presentation Aids 268 ● Two-Dimensional Presentation Aids 269 ● PowerPoint™ Presentation Aids 274 ● Tips for Using PowerPoint™ 275 ● Audiovisual Aids 277

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Practice with Your Presentation Aids to Boost Your Confidence 277

Guidelines for Developing Presentation Aids 279 Make Them Easy to See 279 ● Keep Them Simple 279 ● Select the Right Presentation Aid 280 ● Do Not Use Dangerous or Illegal Presentation Aids 280

Guidelines for Using Presentation Aids 280 Rehearse with Your Presentation Aids 281 ● Make Eye Contact with Your Audience, Not with Your Presentation Aids 281 ● Explain Your Presentation Aids 281 ● Do Not Pass Objects among Members of Your Audience 282 ● Use Animals with Caution 282 ● Use Handouts Effectively 282 ● Time the Use of Visuals to Control Your Audience’s Attention 283 ● Use Technology Effectively 284 ● Remember Murphy’s Law 284

STUDY GUIDE 285

SPEECH WORKSHOP A Checklist for Using Effective Presentation Aids 287

Speaking to Inform 289 Types of Informative Speeches 290

LEARNING FROM GREAT SPEAKERS Oprah Winfrey 291

Speeches about Objects 292 ● Speeches about Procedures 293 ● Speeches about People 294 ● Speeches about Events 295 ● Speeches about Ideas 295

Strategies to Enhance Audience Understanding 296 Speak with Clarity 296 ● Use Principles and Techniques of Adult Learning 297 ● Clarify Unfamiliar Ideas or Complex Processes 298 ● Appeal to a Variety of Learning Styles 299

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Strategies to Maintain Audience Interest 300 Motivate Your Audience to Listen to You 300 ● Tell a Story 301 ● Present Information That Relates to Your Listeners 301 ● Use the Unexpected 301

SAMPLE INFORMATIVE SPEECH 302

Strategies to Enhance Audience Recall 303 Build In Redundancy 303 ● Make Your Key Ideas Short and Simple 304 ● Pace Your Information Flow 304 ● Reinforce Key Ideas 304

Developing an Audience-Centered Informative Speech 305 Consider Your Audience 305 ● Select and Narrow Your Informational Topic 305 ● Determine Your Informative Purpose 306 ● Develop Your Central Idea 306 ● Generate Your Main Ideas 306

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Focus on Your Information Rather Than on Your Fear 307

Gather Your Supporting Materials 307 ● Organize Your Speech 307 ● Rehearse Your Presentation 307 ● Deliver Your Speech 307

STUDY GUIDE 309

SPEECH WORKSHOP Developing a Vivid Word Picture 311

Understanding Principles of Persuasive Speaking 315 Persuasion Defined 314

Changing or Reinforcing Audience Attitudes 314 ● Changing or Reinforcing Audience Beliefs 315 ● Changing or Reinforcing Audience Values 315 ● Changing or Reinforcing Audience Behaviors 316

How Persuasion Works 316 Aristotle’s Traditional Approach: Using Ethos, Logos, and Pathos to Persuade 316 ● ELM’S Contemporary Approach: Using a Direct or Indirect Path to Persuade 317

How to Motivate Listeners 319 Use Cognitive Dissonance 319 ● Use Listener Needs 322 ● Use Positive Motivation 324 ● Use Negative Motivation 324

How to Develop Your Persuasive Speech 326 Consider the Audience 326 ● Select and Narrow Your Persuasive Topic 327

LEARNING FROM GREAT SPEAKERS Elizabeth Cady Stanton 327

Determine Your Persuasive Purpose 328 ● Develop Your Central Idea and Main Ideas 328 ● Gather Supporting Material 331

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Breathe to Relax 332

Organize Your Persuasive Speech 332 ● Rehearse and Deliver Your Speech 332

STUDY GUIDE 333

SPEECH WORKSHOP Developing a Persuasive Speech 335

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Using Persuasive Strategies 337 Enhancing Your Credibility 338

Elements of Your Credibility 338 ● Phases of Your Credibility 339

Using Logic and Evidence to Persuade 340 Understanding Types of Reasoning 341 ● Persuading the Culturally Diverse Audience 345 ● Supporting Your Reasoning with Evidence 347 ● Using Evidence Effectively 348 ● Avoiding Faulty Reasoning 349

Using Emotion to Persuade 351

LEARNING FROM GREAT SPEAKERS Franklin Delano Roosevelt 351

Tips for Using Emotion to Persuade 352 ● Using Emotional Appeals: Ethical Issues 355

Strategies for Adapting Ideas to People and People to Ideas 356 Persuading the Receptive Audience 356 ● Persuading the Neutral Audience 357 ● Persuading the Unreceptive Audience 357

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Enhance Your Initial Credibility 358

Strategies for Organizing Persuasive Messages 359 Problem–Solution 360 ● Refutation 361 ● Cause and Effect 362 ● The Motivated Sequence 363

SAMPLE PERSUASIVE SPEECH 366

STUDY GUIDE 369

SPEECH WORKSHOP Adapting Ideas to People and People to Ideas 371

Speaking for Special Occasions and Purposes 373 Public Speaking in the Workplace 374

Group Presentations 374 ● Public-Relations Speeches 377

CONFIDENTLY CONNECTING WITH YOUR AUDIENCE Seek a Variety of Speaking Opportunities 378

Ceremonial Speaking 378 Introductions 378 ● Toasts 379 ● Award Presentations 379 ● Nominations 380 ● Acceptances 380 ● Keynote Addresses 381 ● Commencement Addresses 382 ● Commemorative Addresses and Tributes 382 ● Eulogies 383

After-Dinner Speaking: Using Humor Effectively 383

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LEARNING FROM GREAT SPEAKERS Dave Barry 384

Humorous Topics 384 ● Humorous Stories 385 ● Humorous Verbal Strategies 386 ● Humorous Nonverbal Strategies 387

STUDY GUIDE 388

SPEECH WORKSHOP Introducing a Speaker 389

Epilogue 390

Speaking in Small Groups 392 Solving Problems in Groups and Teams 393

1. Identify and Define the Problem 393 ● 2. Analyze the Problem 394 ● 3. Generate Possible Solutions 394 ● 4. Select the Best Solution 395 ● 5. Test and Implement the Solution 395

Participating in Small Groups 395 Come Prepared for Group Discussions 395 ● Do Not Suggest Solutions before Analyzing the Problem 396 ● Evaluate Evidence 396 ● Help Summarize the Group’s Progress 396 ● Listen and Respond Courteously to Others 396 ● Help Manage Conflict 396

Leading Small Groups 397 Leadership Responsibilities 397 ● Leadership Styles 398

Speeches for Analysis and Discussion 400 I Have a Dream, Martin Luther King Jr. 400 Delivering the Gift of Freedom to Future Generations (Inaugural Address), Barack Obama 402 Find Your Passion, and Find a Way to Get Paid to Follow It, Anne Lynam Goddard 406 Sticky Ideas: Low-Tech Solutions to a High-Tech Problem, Richard L. Weaver, II 410

Land of the Free Because of the Homeless, Shaunna Miller 414

Endnotes 417 Index 431

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The eighth edition of Public Speaking: An Audience-Centered Approach is writ-ten to be the primary text in a course intended to help students become bet-ter public speakers. We are delighted that since the first edition of the book was published two decades ago, educators and students of public speaking have found our book a distinctively useful resource to enhance public-speaking skills. We’ve worked to make our latest edition a preeminent resource for helping students enhance their speaking skills by adding new features and retaining the most success- ful elements of previous editions.

New to the Eighth Edition We’ve refined and updated the book you are holding in your hands to create a pow- erful and contemporary resource for helping speakers connect to their audience. We’ve added several new features and revised features that both instructors and stu- dents have praised.

Streamlined Organization In response to suggestions from instructors who use the book, we’ve consolidated re- lated topics to reduce the book to a total of 16 chapters, allowing instructors to in- clude every chapter during a standard semester. Chapter 1 now offers a preview of the audience-centered speaking model as well as introducing students to the history and value of public speaking and starting the process of building their confidence as public speakers. Chapter 6 now not only shows stu- dents how to gather sup- porting material, but also immediately provides them advice and examples for ef- fective ways to integrate their supporting materials into a speech.

Preface

Learn, compare,

collect the

facts! . . . Always

have the courage to

say to yourself—

I am ignorant.

—IVAN PETROVICH PAVLOV

132

Sources of Supporting Material Personal Knowledge and

Experience The Internet Online Databases Traditional Library Holdings Interviews

Research Strategies Develop a Preliminary Bibliography Locate Resources Assess the Usefulness of Resources

Take Notes Identify Possible Presentation Aids

Types of Supporting Material Illustrations Descriptions and Explanations Definitions Analogies Statistics Opinions

The Best Supporting Material

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6 Gathering and UsingSupporting Material

A pple pie is your specialty. Your family and friends relish your flaky crust,spicy filling, and crunchy crumb topping. Fortunately, not only do you havea never-fail recipe and technique, but you also know where to go for the best ingredients. Fette’s Orchard has the tangiest pie apples in town. For your crust,

you use only Premier shortening, which you buy at Meyer’s Specialty Market. Your

crumb topping requires both stone-ground whole-wheat flour and fresh creamery

butter, available on Tuesdays at the farmer’s market on the courthouse square.

Chapter 6 covers the speech-development step highlighted in Figure 6.1 on

page 134: Gather Supporting Material. Just as making your apple pie requires

that you know where to find specific ingredients, creating a successful speech re-

quires a knowledge of the sources, research strategies, and types of supporting

material that speechmakers typically use.

After studying this chapter you should be able to do the following:

1. List five potential sources of supporting material for a speech.

2. Explain five strategies for a logical research process.

3. List and describe six types of supporting material.

4. List and explain six criteria for determining the best supporting material to use in a speech.

O B

JE C

T IV

E S

133

Alexandra Exter (1882–1949), Sketch for a Scenic Design, ca. 1924, gouache on paper. Photo: M. E. Smith/Private Collection. © DeA Picture Library/Art Resource, N. Y.

xxiii

xxiv Preface

Updated Features In the eighth edition, we have added more marginal Recap boxes and tables to summarize the content of nearly every major section in each chapter. Students can use the Recaps and tables to check their understanding, review for exams, and to reference key advice as they prepare their speeches.

New End-of-Chapter Study Guides We’ve provided a new, consolidated Study Guide at the end of each chapter. This practical feature helps students to review and check their understanding of chapter topics. The Study Guide summarizes the content of each major section of the chapter; restates the chapter’s best ideas for being an audience-centered speaker; poses discussion- sparking scenarios that show how chapter concepts might apply in real speaking and ethical situations; and points readers in the direction of relevant online resources that they can use as speakers.

Purposes of Introductions It is important to begin and end your speech in a way that is memorable and that also provides the repetition audiences need. A good introduction gets the audience’s attention, gives the audience a reason to listen, intro- duces your subject, establishes your credibility, and pre- views your main ideas.

Introducing your subject and previewing the body of your speech can be accomplished by includ- ing your central idea and preview statement in the introduction.

Categories

## why did the texas constitution establish a plural executive

Government and Politics in the Lone Star State

Tenth Edition

Chapter 6

The Texas Executive

Learning Objectives

6.1 Trace the evolution of the Texas governor from a strong unified executive to a plural executive.

6.2 Assess what qualifies an individual to serve as governor, common career patterns that have led to the governorship, and select benefits of the office.

6.3 Explain the legislative, budgetary, appointive, judicial, and military powers of the Texas governor.

6.4 Evaluate the informal resources of the Texas governor for advancing public policy and political objectives.

6.5 Differentiate the leadership styles of recent Texas governors.

6.6 Describe the duties and responsibilities of the other offices of the executive branch in Texas.

A Historical Perspective on the Executive Function in Texas (1 of 4)

Governors Enjoyed Stronger Constitutional Powers from 1836 to 1866.

Elected offices of comptroller and state treasurer added in 1861

Granted line-item veto powers in 1866

1869 Constitution

Influenced by Jacksonian democracy

Created a plural executive

A Historical Perspective on the Executive Function in Texas (2 of 4)

Expanded Powers in the Twentieth Century

Salary could be raised by the legislature (1954)

Term of office expanded to four years (1972)

Given removal power over persons appointed to boards and commissions (1980)

A Historical Perspective on the Executive Function in Texas (3 of 4)

The Constitutional Framework for the Plural Executive

Article 1, Section 4 of the Constitution of 1876 created the executive branch.

In Texas, the governor appoints more than 200 policy-setting boards over state agencies and universities, but the boards appoint the individuals responsible for day-to-day administration.

A Historical Perspective on the Executive Function in Texas (4 of 4)

The Potential for Conflict in the Plural Executive

Members of the plural executive

Operate independently of the governor

Can claim their own electoral mandates

May clash with the governor over policies

Potential for conflict increases in a two-party state

Makes it difficult to pursue coordinated policies

Does serve to constrain the power of the governor

Journal 6.1

Do you think Texas should replace its plural executive with an executive structure similar to that of the president, where the lieutenant governor would be elected as a team with the governor and the governor would have a cabinet composed of appointed agency heads?

Historical Overview of the Men and Women Who Have Served as Governor (1 of 3)

Qualifications and Backgrounds of Texas Governors

Constitutional requirements

At least thirty years old, U.S. citizen, and resident of Texas for five years

Past governors

Most have been Democrats (not recently), wealthy, educated, middle-aged, white male Protestants.

Many have previous public service.

Historical Overview of the Men and Women Who Have Served as Governor (2 of 3)

Impeachment and Incapacitation

Impeachment

Charges brought by the House of Representatives

Removal follows a trial and conviction in the Senate.

Texas does not have a voter-initiated recall process.

The lieutenant governor replaces the governor if the office is vacated.

Historical Overview of the Men and Women Who Have Served as Governor (3 of 3)

The Salary and “Perks” of the Governor’s Office

In 2015, the governor of Texas was paid a salary of \$150,000 a year.

Perks of the governor’s office

Mansion and staff

State-owned planes and cars

Security detail

Travel expenses

The Powers of the Governor (1 of 5)

Legislative Powers

State of the State address

Establish a policy agenda

Special sessions

Last for up to thirty days each

Governor controls the agenda.

Veto power

Overridden by a two-thirds vote in the House and Senate

Can veto bills up to twenty days after the close of a legislative session

State of the State Address

Governor Greg Abbott delivered his first State of the State Address in which he outlined his legislative priorities to a joint session of the Texas Legislature in February of 2015. The governor and other state dignitaries are seen here applauding veterans during his address.

12

Table 6-2 Comparison of the Formal/Institutional Powers of the Governors (1 of 2)

 Strong (4.0 and above) Strong (4.0 and above) Strong (4.0 and above) Strong (4.0 and above) Alaska (4.1) Maryland (4.1) New York (4.3) Utah (4.2) Hawaii (4.1) Massachusetts (4.3) Pennsylvania (4.0) West Virginia (4.1) Strong (3.5–3.9) Moderately Moderately Strong (3.5–3.9) Moderately Strong (3.5–3.9) Moderately Strong (3.5–3.9) Arizona (3.8) Idaho (3.5) Minnesota (3.9) Oregon (3.5) California (3.5) Illinois (3.8) Nebraska (3.8) Tennessee (3.9) Colorado (3.9) Iowa (3.7) New Jersey (3.8) Washington (3.6) Connecticut (3.9) Kansas (3.7) North Dakota (3.9) Wisconsin (3.7) Delaware (3.7) Kentucky (3.5) Ohio (3.9) Wyoming (3.8) Florida (3.6) Michigan (3.9)

SOURCE: Based on Thad Beyle, “The Governors;” Multistate Associates Incorporated, “2014 Governors and Legislatures;” National Council of State Legislatures; and National Governors Association, “Governors Political Affiliations and Terms of Office.”

Meg (M) – where is table 6-1?

Table 6-2 Comparison of the Formal/Institutional Powers of the Governors (2 of 2)

 Moderate (3.0–3.4) Moderate (3.0–3.4) Moderate (3.0–3.4) Moderate (3.0–3.4) Alabama (3.2) Maine (3.1) New Hampshire (3.0) South Carolina (3.0) Georgia (3.2) Mississippi (3.3) New Mexico (3.3) South Dakota (3.0) Indiana (3.1) Missouri (3.1) Oklahoma (3.0) Texas (3.2) Louisiana (3.4) Montana (3.3) Rhode Island (3.3) Virginia (3.3) Weak (2.9 and below) Weak (2.9 and below) Weak (2.9 and below) Weak (2.9 and below) Arkansas (2.9) Nevada (2.8) North Carolina (2.9) Vermont (2.8)

SOURCE: Based on Thad Beyle, “The Governors;” Multistate Associates Incorporated, “2014 Governors and Legislatures;” National Council of State Legislatures; and National Governors Association, “Governors Political Affiliations and Terms of Office.”

Signing Ceremonies

Governors use a variety of public occasions to cultivate public support for their legislative programs, including signing ceremonies that are usually held in the governor’s Reception Room on the second floor of the Capitol. To bring special attention to the newly enacted legislation, Texas Governor Greg Abbott signed into law at Red’s Indoor Range in Pflugerville bills permitting Texans to carry concealed handguns on college campuses and openly carry them virtually everywhere in the state.

15

The Powers of the Governor (2 of 5)

Budgetary Powers

Weaker budgetary authority

Primary authority rests with the legislature and Legislative Budget Board.

The Texas governor has line-item veto over appropriations bills.

The Powers of the Governor (3 of 5)

Appointive Powers

Selects members to serve on more than 200 boards and commissions

Subject to Senate confirmation

Many serve six-year staggered terms.

Limited ability to remove appointees

Filling vacancies

State, district, appellate courts; U.S. Senate seats; and all statewide offices except the lieutenant governor

The Powers of the Governor (4 of 5)

Judicial Powers

Appoints members of the Board of Pardons and Paroles

Grants executive clemency

Thirty-day stay of execution

Commutation of a death sentence to life in prison

Full or conditional pardons

Responsible for ordering state officials to carry out extradition proceedings

The Powers of the Governor (5 of 5)

Military Powers

Acts as commander-in-chief of the state’s military forces

Appoints the adjutant general

Mobilizes the national guard to protect lives and property, and to keep the peace

Informal Resources of the Governor (1 of 4)

The Governor’s Staff

Organization reflects leadership styles.

Highly centralized or may seek greater contact with advisors

Affects the flow of information to the governor

Chosen for their media and public relations skills or policy expertise

Help develop policy agendas and legislative strategies

Function as the governor’s surrogates

Staff Can Really Make a Difference

A governor’s success is dependent, in part, on a competent staff capable of assisting the governor in meeting expanded responsibilities and increased expectations from the general public, the legislature, administrative agencies, the media, and interest groups. Governor-elect Greg Abbott, center left, is seen here in the Old Supreme Court Room in the Capitol introducing his key staff members prior to the 2015 legislative session.

21

Table 6-3 The Governor’s Leadership Resources

 Formal Constitutional Powers 1. Veto legislation 2. Exercise a line-item veto over the state budget 3. Call and set the agenda for special legislative sessions 4. Make recommendations on the budget 5. Propose emergency budgetary transfers when the legislature is not in session 6. Appoint hundreds of members of policymaking boards and commissions, subject to Senate confirmation 7. Remove his or her own appointees from boards, with Senate approval 8. Fill vacancies in U.S. Senate seats and certain elective state offices 9. Proclaim acts of executive clemency, including stays of execution, for convicted criminals 10. Mobilize the Texas National Guard to protect lives and property during natural disasters and other emergencies Informal Resources 1. Governor’s electoral mandate 2. A large staff to help develop and sell policy proposals 3. Ability to communicate to the public through the mass media 4. Public’s perception and opinions about the governor’s job performance 5. The governor’s political party and relationships with legislative leaders 6. Support and mobilization of interest groups

Informal Resources of the Governor (2 of 4)

The Governor and the Mass Media

Communicate policy objectives to the general public to mobilize public opinion

Strategies

Press conferences, news leaks, and trial balloons

Use of public opinion polls

Staging pseudo-events to emphasize issues

Use of radio and television

Informal Resources of the Governor (3 of 4)

The Governor and the Political Party

Historically

Governors built policy coalitions around factions within the Democratic Party.

Gained little power from serving as head of the party

Under the two-party system

Parties provide greater resources and support.

Republicans have sought the support of social conservatives within the party.

Informal Resources of the Governor (4 of 4)

The Governor and Interest Groups

Solicit endorsements and campaign contributions from groups

Pursue policy initiatives and legislation that benefit key support groups

Leadership Styles of Recent Texas Governors (1 of 4)

Ann Richards (1991–1995)

Activist stance

Populist policy agenda called for a “new Texas”

Pragmatic approach to legislation, seeking compromise

Staff given greater responsibility to pursue policy objectives

Filled role as Texas’s chief ambassador

Leadership Styles of Recent Texas Governors (2 of 4)

George W. Bush (1995–2000)

Kept a low public profile in his first year

Often worked behind the scenes with legislators to reach compromise

Met frequently with Republican and conservative Democratic legislators

Faced opposition over school property tax reform and school vouchers

Leadership Styles of Recent Texas Governors (3 of 4)

Rick Perry (2000–2015 )

Gave no clear direction in first term

Vetoed a record eighty-two bills in 2001

Took advantage of Republican majority

Oversaw partisan redistricting battle

Rocky relationship with lawmakers

Washington “outsider”

The State’s Longest-Serving Governor

Governor Rick Perry was governor from 2000 to 2015, longer than any of his predecessors. His public career included a six-year stint as a state representative, eight years as the state’s agriculture commissioner, and almost two years as lieutenant governor prior to assuming the governorship when George Bush won the presidency in 2000.

29

Leadership Styles of Recent Texas Governors (4 of 4)

Greg Abbott (2015– )

Conservative record from time on Texas Supreme Court and as attorney general

More restrained than Perry at first

Mostly successful in first legislative session

Critical of federal government policies and advocate of efforts to curtail federal power

Other Offices of the Plural Executive (1 of 8)

Lieutenant Governor

Dan Patrick holds the office.

Primarily a legislative office with few administrative duties

Considered by some to be the most powerful state office

Presides over the Senate

Chairs the Legislative Budget Board

Succeeds the governor if the governor dies, is incapacitated, or is removed from office

Other Offices of the Plural Executive (2 of 8)

Attorney General

Ken Paxton holds the office.

Serves as the state’s chief legal officer

Represents the state in litigation

Enforces antitrust and consumer protection laws

Provides for child support collection

Creates advisory opinions on the legality of actions by state and local agencies or officials

Other Offices of the Plural Executive (3 of 8)

Comptroller of Public Accounts

Glenn Hegar holds the office.

Serves as the state’s tax administrator, accounting officer, and revenue estimator

Assumed the state treasurer’s duties in 1995

Provides a revenue estimate of state income to guide budget preparation

Must certify that the state budget falls within revenue projections

Other Offices of the Plural Executive (4 of 8)

Commissioner of the General Land Office

George P. Bush holds the office.

Manages state-owned lands and mineral rights

Revenues are earmarked for the Permanent University Fund and Permanent School Fund.

Responsible for the Veterans Land Program

Develops environmental programs

Plans for dealing with oil spills

Preventing soil erosion along Texas beaches

Don’t Mess with Texas!

Other Offices of the Plural Executive (5 of 8)

Commissioner of Agriculture

Sid Miller holds the office.

Statutory officer who regulates agriculture

Administers consumer protection laws

Weights and measures

Packaging and labeling

Marketing

Supports agricultural research and education programs

Other Offices of the Plural Executive (6 of 8)

Secretary of State

Carlos Cascos holds the office.

Appointed by the governor

Grants charters to corporations

Processes the extradition of prisoners

Administers state election laws

Reviews local and county election procedures

Develops statewide voter registration policy

Other Offices of the Plural Executive (7 of 8)

Elected Boards and Commissions

Three members; each one elected statewide to staggered six-year terms

Oversees railroad safety and oil, natural gas, and mining industries

Often used as a stepping stone to higher state office

Other Offices of the Plural Executive (8 of 8)

Elected Boards and Commissions

State Board of Education

Fifteen members, each one elected from a single-member district

Key responsibilities

Translating legislative mandates into public policy

Investment of money in the Permanent School Fund

Oversight of textbook selection and curriculum standards

Administration of the Texas Education Agency

Shared Writing 6.6

Consider the discussion in “Combs, Patterson Spar Over Ruling on State Incentives.” Policy conflicts within the plural executive are not limited to those between the governor and other statewide elected officials. For a variety of reasons, officials other than the governor have become involved in controversial issues, such as the use of state funding for Formula 1 racing. When conflict emerges between state officials of the plural executive, is the governor likely to become involved? What, if anything, might be the consequences of such conflicts between statewide elected officials?

Photo Credits

Page 166: Office of the Governor Greg Abbott; 168: Eric Gay/AP Images; 175: Eric Gay/AP Images; 176: Ralph Barrera/AP Images; 180: Dborah Cannon/AP Images; 182: Eric Gay/AP Images; 185: David Breslauer/AP Images; 187: Eric Gay/AP Images; 187: Harry Cabluck/AP Images; 190: Harry Cabluck/AP Images; 193: Eric Gay/AP Images; 196: The Railroad Commission of Texas; 198: Library of Congress Prints and Photographs Division [LC-DIG-ggbain-25234]

Categories

## mamdouh babi

Residency @ UC Northern Kentucky NKY CAMPUS – Florence, KY

June 29 – July 01, 2018

Dr. Mamdouh Babi

Friday, June 29, 2018

5:00pm – 6:00pm – Check in

6:00pm – 8:00pm – Network Security and Project Overview

8:00pm – 10:00pm – Project Research

Saturday, June 20, 2018

8:00am – 10:00am – Class start – Project Research continue

12:00pm – 1:00pm – Lunch

1:00pm – 3:00pm – Project Presentation G1 & G2

3:00pm – 5:00pm – Project Presentation G3 & G4

5:00pm – 6:00pm – Dinner

6:00pm – 8:00pm – Project Presentation G5 & G6

8:00pm – 10:00pm – Project Presentation G7& G8

Sunday, July 01, 2018

8:00am – 9:00am – Class Start – Discussion

9:00am – 10:00am – Project Presentation Cont.…

10:0am – 11:00am – Conclusion

11:00am – 12:00pm – Q/A

12:00pm – Checkout

Agenda

What is a Network

Network Types

LAN, WAN

Topology

Ring , Star , Bus

Network Risks

Vulnerability is a weak spot in your network that might be exploited by a security threat.

Computer Networking

Firewalls

firewall is a network security system that monitors and controls incoming and outgoing network traffic based on predetermined security rules.

Firewalls are often categorized as:

Network firewalls: filter traffic between two or more networks and run on network hardware.

Host-based firewalls: run on host computers and control network traffic in and out of those machines.

Network Security – Firewalls

Virtual Private Network (VPN):

extends a private network across a public network, and enables users to send and receive data across shared or public networks as if their computing devices were directly connected to the private network.

Applications running across the VPN may therefore benefit from the functionality, security, and management of the private network. *

*Mason, Andrew G. (2002). Cisco Secure Virtual Private Network. Cisco Press. p. 7.

Network Security – VPN

Project Development Life Cycle

The key model behind the network design process is known as the network development life cycle (NDLC)

Network Development Life Cycle

Project Analysis

Information gathering—scope, Requirement.

Design

Flow charts, Flow Diagram, Mock-up, etc…

Purchasing decisions—which switches, routers, firewalls, servers and so on are needed

Ordering equipment

Implementation

Configuring and installing the servers and network equipment, and testing connectivity and functionality

Testing

Monitoring

Management

Documentation

Creating your document, document your resources, etc..

Planning Network Projects

Think of your presentation as a verbal executive summary. Your presentation should be in the form of Power Point Presentation (PPP).

Your presentation should include a minimum of 15 slides (not including title slide).

Presentation

Remember, you are presenting the good knowledge of your work and should include the merit of your ideas and knowledge. In order to achieve these goals, at the end of the presentation your audience should:

Understand the initial requirement and why it is worth addressing.

Understand how you are addressing your project.

Know what features have you implemented.

Be confident of your knowledge.

Presentation

Your slides should include the following sections (everything you need is in the Telecommunications Case Assignment document):

Introduction: In this section, you will introduce the project and the objectives of the project including executive summary.

Requirement Analysis: In this section, you will discuss the requirement.

Design: You need diagrams, charts, pics, etc..

Presentation

Implementation: diagrams, charts, and possibly screen shots.

Testing (optional): You can present your data testing in this section.

Cost analysis: Estimated cost (you can use the internet to get pricing). Make sure to include labor cost in your analysis.

Conclusion: Summary, lesson learned, future work, etc..

Presentation

Miscellaneous:

You can assume that your audience has a similar level of technical background to yours, although they know nothing about your project.

Use this presentation as an opportunity to highlight the strengths of your project; i.e. make sure to point out any particularly unusual or creative features.

Presentation

Power Point Presentation (PPP) additional Instructions:

In order to be most effective, here are some general design guidelines:

Include visual items (diagrams, charts, screen shots).

Use larger font than you would use for a written paper (i.e. don’t use 12 point!).

Presentation

Acme Corporation is a new startup

wishes to sale:

their new phone to the public called Acmephone,

a more secure version of the phone to business organizations, called the Acmephone B+, and

highly secure version of the phone, called the Acmephone G+, to the government.

Network Security Project

Due to the fear of corporate espionage and government security requirements, there are many security concerns that must be addressed.

As a security professional, you have been employed to design a network infrastructure for their two campuses located in Atlanta and Cincinnati

Network Security Project

based upon the following specifications:

1. There needs to be a constant connection between the two locations that can carry at least 50 Mbps of data.

2. Each facility has three floors. The buildings are rectangular with each floor being 350’x350’.

3. There will be 200 network connections on each floor with an additional 100 network connections in the data centers located on the third floor of each building.

Network Security Project – Specifications

4. The primary data center will be located at the Atlanta location.

5. There will be a failover* data center at the Cincinnati location.

* Failover is a method of protecting computer systems from failure, in which standby equipment automatically takes over when the main system fails.

6. Each location should be protected from intrusions that are not limited to state change attacks.

7. The Atlanta location will house the two secure development teams. As such, it will need the most security. To further complicate the design, there will be database servers and the corporate Web servers housed at that location as well.

Network Security Project – Specifications

8. There will be database servers located at the Cincinnati site.

9. The servers must have redundancy.

10. The solution must have a plan to verify security measures.

Network Security Project – Specifications

Your job is to develop a network design to meet the requirements above.

1. You should submit a network drawing listing the network’s topology including any necessary hardware.

2. You should list any recommended cable.

3. You can recommend wiring closets wherever you need them.

Network Security Project

4. You should recommend ways to assure that you are not getting attacked.

5. You should build traps to stop attackers.

6. You should recommend any WAN or wireless technologies.

7. You should recommend any technology needed in the data center for high availability.

8. Justify your recommendations.

Network Security Project

Number of Pages – not limited

Use APA format

Project’s Document

Include the following sections:

Abstract: Describe the problem and the solution you presenting (few lines)

Introduction: In this section, you will introduce the project and the objectives of the project including executive summary.

Requirement Analysis: In this section, you will discuss the requirement

Design: You need diagrams, charts, pics, etc..

Implementation: diagrams, charts, and possibly screen shots

Testing (optional): You can present your data testing in this section

Cost analysis: Estimated cost (you can use the internet to get pricing). Make sure to include labor cost in your analysis.

Conclusion: Summary, lesson learned, future work, etc..

References

Project’s Document

1. Project documentation and

2. Power Point Presentation

to iLearn Bb by:

August 14, 2018 @ 11:59pm EST

Will not accepted after this date.

Project’s Document

Computer Networking

Network Security, Firewalls and VPNs

Project Development Life Cycle

Network Development Life Cycle

Requirement Analysis

Design

Implementation

Testing

Management

Documentation

Project – Case Study

Project – Case Study Presentation

Project – Case Study Documentation

Conclusion

Q/A

Categories

## in activity-based costing, nonmanufacturing costs are not assigned to products.

True / False Questions

 1 Activity-based management seeks to eliminate waste by allocating costs to products that waste resources.    True    False
 2 Direct labor-hours or direct labor cost should not be used as a measure of activity in an activity-based costing system.    True    False
 3 In activity-based costing, nonmanufacturing costs are not assigned to products.    True    False
 4 In traditional costing, some manufacturing costs may be excluded from product costs.    True    False
 5 Organization-sustaining overhead costs should be allocated to products just like unit-level and product-level activities.    True    False
 6 Activity-based costing uses a number of activity cost pools, each of which may have a different allocation base.    True    False
 7 In activity-based costing, organization-sustaining costs should be included in product costs for internal management reports that are used for decision-making.    True    False
 8 The practice of assigning the costs of idle capacity to products results in more stable unit product costs.    True    False
 9 In general, duration drivers are more accurate measures of the consumption of resources than transaction drivers.    True    False
 10 Activity-based costing is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect only variable costs.    True    False
 11 In traditional costing systems, manufacturing costs that are not caused by products are not assigned to products.    True    False
 12 When a company shifts from a traditional cost system in which manufacturing overhead is applied based on direct labor-hours to an activity-based costing system with batch-level and product-level costs, the unit product costs of low volume products typically decrease whereas the unit product costs of high volume products typically increase.    True    False
 13 The costs of idle capacity should be assigned to products in activity-based costing.    True    False
 14 In activity-based costing, some manufacturing costs can be excluded from product costs.    True    False 15 Batch-level activities are performed each time a unit is produced.    True    False
 Multiple Choice16.An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:   A. under activity-based costing the sum of all product costs does not equal the total costs of the company.B. under activity-based costing manufacturing costs are assigned to products.C. activity-based costing has not been approved by the United Nation’s International Accounting Board.D. activity-based costing results in less accurate costs than more traditional costing methods based on direct labor-hours or machine-hours.
 17 Assembling a product is an example of a(n):    A. Unit-level activity.B. Batch-level activity.C. Product-level activity.D. Organization-sustaining.
 18 If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone:   A. is a key aspect of the activity-based costing model.B. will systematically overcost high-volume products and undercost low-volume products.C. will systematically overcost low-volume products and undercost high-volume products.D. must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes.
 19 Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a _________ percentage of total product cost and where there is ___________ diversity among the various products that they produce.   A. low, littleB. low, considerableC. high, littleD. high, considerable
 20 Which of the following costs should not be included in product costs for internal management reports that are used for decision-making?   A. Costs of unit-level activities.B. Costs of batch-level activities.C. Costs of product-level activities.D. Costs of organization-sustaining activities.
 21 The plant manager’s salary is an example of a(n):    A. Unit-level activity.B. Batch-level activity.C. Product-level activity.D. Organization-sustaining activity.
 22 Setting up a machine to change from producing one product to another is an example of a(n):    A. Unit-level activity.B. Batch-level activity.C. Product-level activity.D. Organization-sustaining activity.
 23 Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory’s purchasing department?   A. Machine-hoursB. Direct labor-hoursC. Number of orders processedD. Cost of materials purchased
 24 The labor time required to assemble a product is an example of a(n):    A. Unit-level activity.B. Batch-level activity.C. Product-level activity.D. Organization-sustaining activity.
 25 Which of the following levels of costs should not be allocated to products for decision-making purposes?    A. Unit-level activities.B. Batch-level activities.C. Product-level activities.D. Organization-sustaining activities.
Categories

## identify the initial amount a and the growth factor b in the exponential function.

1. Identify the initial amount a and the growth factor b in the exponential function.

g(x)=14*2^x
a)a=14, b=x
b)a=14, b=2 <<<<
c)a=28, b=1
d)a=28, b=x

1. Identify the initial amount a and the growth factor b in the exponential function.

f(t)=1.4^t
a)a=1, b=0.4
b)a=1.4, b=0<<<<
c)a=1.4, b=t
d)a=1, b=1.4

3.Find the balance in the account after a given period.
\$4000 principal earning 6% compounded annually, after 5 years.

a)\$6,726.28
b)\$5,352.90<<<<
c)\$5,395.40
d)\$7,716.74

6.Identify the initial amount a and the growth factor b in the exponential function.

y=5*0.5^x

a)a=5, b=x
b)a=0.5, b=5
c)a=5, b=0.5<<<<<
d)a=0.5, b=x

1. State whether the equation represents exponential growth, exponential decay or neither.

y=5.8(3/7)^x
a) Exponential growth
b) Exponential decay<<<<<
c) Neither

2 1 3,477
Feb 16, 2016

# 7 ok

I’m surprised you blew it on #2; the others indicate good understanding.

What do you think b=0 would indicate?

0 6
posted by Steve
Feb 16, 2016
As soon as I posted this I realized I put the wrong one :/
Thank you for checking my work!

6 1
posted by Sage
Feb 16, 2016
1B 2D 3B 4B 5A 6C 7B 8B 9B 10D 11B 12C 100% Correct

48 1
posted by Zolita
Feb 22, 2017
zolita is right

14 1
posted by Kylie
Feb 25, 2017

Zolita is 100% right if you are in connections.

1. B.
2. D.
3. B.
4. B.
5. A.
6. C.
7. B.
8. B.
9. B.
10. D.
11. B.
12. C.

These answers are all correct in Pre-AP (and possibly on-level too) Algebra in connections academy.

25 0
Mar 1, 2017
i can confirm that zolita and answer king are correct!

7 1
posted by :))
Mar 27, 2017
Oui, AnswerKing and Zolita are correct!

2 1
posted by Velvet
Jan 23, 2018
yep! 12/12 100%!

3 1
posted by raychelz
Jan 24, 2018
Yes, the answers provided by Zolita and answerking are correct.

4 1
posted by non
Jan 29, 2018

OMG ZOLITA IS SOOOO CORRECT I GOT 12/12 DEFINETLT SUPER GREATFUL!

4 1
posted by HAHA
Jan 30, 2018
Thank you so much Zolitaaaaa

3 0
posted by croutons
Feb 3, 2018
Thanksss Zolita 100%:)

3 0
posted by Dat Farm Girl
Feb 7, 2018
hey anyone want to be freinds im in connections in washington connections sucks so i have no freinds if u want to talk my email is isaiahtubbs02@gmail. com

1 1
posted by isaiah_lange13
Feb 13, 2018

1. B.
2. D.
3. B.
4. B.
5. A.
6. C.
7. B.
8. B.
9. B.
10. D.
11. B.
12. C.
U3L7 Exponential Growth and Decay 1 2
posted by DingDong
Feb 20, 2018

Thanksss Zolita!!! 🙂

0 0
posted by that emo girl!
Feb 28, 2018
Thanks Zolita!

0 0
posted by I THE SMART
Oct 14, 2018
Lol still right 2019 thanks Zolita

2 1
posted by Anonymous
Jan 25, 2019
She is still right

1 1
posted by Ha Ha Ha
Feb 3, 2019
Thankk youuuuuuuuuuu

1 0
posted by Chenlings
Feb 13, 2019

Thanks zoilta

0 0
posted by xxsupreme_masterxx
Feb 13, 2019
Thanks DingDong and Zolta

0 0
posted by Kelly
Feb 14, 2019
@Zolita is correct!

0 0
posted by
Feb 18, 2019
yup zolita is =>

that was right get it?

0 0
posted by @n0nym0u\$
Mar 6, 2019

Categories

# How to Use SPSS from the GCU Server

SPSS is software used for statistical analysis. You will find this software on the DC Network. To access the SPSS program, follow these directions:

1. Access the DC Network at dc.gcu.edu

2. Enter the username and password used for accessing Loudcloud.

3. Click the Research/Dissertation tab.

4. On the left side of the page, you will see the heading, Research Resources. Click on the SPSS Statistical Analysis Software link.

6. Click the SPSS Server Documentation_PC link.

7. Follow the directions given in this document.

Categories

## khco3 molar mass

determine the moles of KHCO3 that reacted from the mass of KHCO3 used and its molar mass

Categories

## suppose you are evaluating a project with the expected future cash

Net Present Value and Other Investment Rules

When a company is deciding whether to invest in a new project, large sums of money can be at stake. For example, in October 2014, Badlands NGL announced plans to build a \$4 billion polyethylene plant in North Dakota, which was the largest private-sector investment made in that state’s history. Earlier in 2014, Samsung Electronics announced plans to build a \$14.7 billion chip facility in South Korea. The chip plant was expected to employ 150,000 workers when it was completed. But neither of these announcements came close to the Artic LNG project, which was being developed by ExxonMobil, ConocoPhillips, BP, pipeline company TransCanada, and the state of Alaska. The Artic LNG project would build a pipeline from Alaska’s North Slope to allow natural gas to be sent from the area.

The cost of the pipeline and plant to clean the gas of impurities was expected to be \$45 to \$65 billion. Decisions such as these, with price tags in the billions, are obviously major undertakings, and the risks and rewards must be carefully weighed. In this chapter, we discuss the basic tools used in making such decisions.

In Chapter 1, we show that increasing the value of a company’s stock is the goal of financial management. Thus, what we need to know is how to tell whether a particular investment will achieve that purpose or not. This chapter considers a variety of techniques financial analysts routinely use. More importantly, it shows how many of these techniques can be misleading, and it explains why the net present value approach is the right one.

5.1 Why Use Net Present Value?

Find out more about capital budgeting for small businesses at www.missouribusiness.net.

This chapter, as well as the next two, focuses on capital budgeting, the decision-making process for accepting or rejecting projects. This chapter develops the basic capital budgeting methods, leaving much of the practical application to subsequent chapters. But we don’t have to develop these methods from scratch. In Chapter 4, we pointed out that a dollar received in the future is worth less than a dollar received today. The reason, of course, is that today’s dollar can be reinvested, yielding a greater amount in the future. And we showed in Chapter 4 that the exact worth of a dollar to be received in the future is its present value. Furthermore, Section 4.1 suggested calculating the net present value of any project. That is, the section suggested calculating the difference between the sum of the present values of the project’s future cash flows and the initial cost of the project.

The net present value (NPV) method is the first one to be considered in this chapter. We begin by reviewing the approach with a simple example. Then, we ask why the method leads to good decisions.

PAGE 136EXAMPLE

5.1

Net Present Value  The Alpha Corporation is considering investing in a riskless project costing \$100. The project receives \$107 in one year and has no other cash flows. The riskless discount rate on comparable riskless investments is 2 percent.

The NPV of the project can easily be calculated as:

(5.1)

From Chapter 4, we know that the project should be accepted because its NPV is positive. This is true because the project generates \$107 of future cash flows from a \$100 investment whereas comparable investments only generate \$102.

The basic investment rule can be generalized to:

Accept a project if the NPV is greater than zero.

Reject a project if the NPV is less than zero.

We refer to this as the NPV rule.

Why does the NPV rule lead to good decisions? Consider the following two strategies available to the managers of Alpha Corporation:

1. Use \$100 of corporate cash to invest in the project. The \$107 will be paid as a dividend in one year.

2. Forgo the project and pay the \$100 of corporate cash to stockholders as a dividend today.

If Strategy 2 is employed, the stockholder might deposit the cash dividend in a bank for one year. With an interest rate of 2 percent, Strategy 2 would produce cash of \$102 (=\$100 X 1.02) at the end of the year. The stockholder would prefer Strategy 1 because Strategy 2 produces less than \$107 at the end of the year.

Our basic point is:

Accepting positive NPV projects benefits the stockholders.

How do we interpret the exact NPV of \$4.90? This is the increase in the value of the firm from the project. For example, imagine that the firm today has productive assets worth \$V and has \$100 of cash. If the firm forgoes the project, the value of the firm today would simply be:

\$V + \$100

If the firm accepts the project, the firm will receive \$107 in one year but will have no cash today. Thus, the firm’s value today would be:

The difference between these equations is just \$4.90, the net present value of Equation 5.1. Thus:

The value of the firm rises by the NPV of the project.

Note that the value of the firm is merely the sum of the values of the different projects, divisions, or other entities within the firm. This property, called value additivity, is quite important. It implies that the contribution of any project to a firm’s value is simply the Page 137NPV of the project. As we will see later, alternative methods discussed in this chapter do not generally have this nice property.

The NPV rule uses the correct discount rate.

One detail remains. We assumed that the project was riskless, a rather implausible assumption. Future cash flows of real-world projects are invariably risky. In other words, cash flows can only be estimated, rather than known. Imagine that the managers of Alpha expect the cash flow of the project to be \$107 next year. That is, the cash flow could be higher, say \$117, or lower, say \$97. With this slight change, the project is risky. Suppose the project is about as risky as the stock market as a whole, where the expected return this year is perhaps 10 percent. Then 10 percent becomes the discount rate, implying that the NPV of the project would be:

Because the NPV is negative, the project should be rejected. This makes sense: A stockholder of Alpha receiving a \$100 dividend today could invest it in the stock market, expecting a 10 percent return. Why accept a project with the same risk as the market but with an expected return of only 7 percent?

Calculating NPVs with a Spreadsheet

Spreadsheets are commonly used to calculate NPVs. Examining the use of spreadsheets in this context also allows us to issue an important warning. Consider the following:

In our spreadsheet example, notice that we have provided two answers. The first answer is wrong even though we used the spreadsheet’s NPV formula. What happened is that the “NPV” function in our spreadsheet is actually a PV function; unfortunately, one of the original spreadsheet programs many years ago got the definition wrong, and subsequent spreadsheets have copied it! Our second answer shows how to use the formula properly.

The example here illustrates the danger of blindly using calculators or computers without understanding what is going on; we shudder to think of how many capital budgeting decisions in the real world are based on incorrect use of this particular function.

Page 138Conceptually, the discount rate on a risky project is the return that one can expect to earn on a financial asset of comparable risk. This discount rate is often referred to as an opportunity cost because corporate investment in the project takes away the stockholder’s option to invest the dividend in other opportunities. Conceptually, we should look for the expected return of investments with similar risks available in the capital markets. The calculation of the discount rate is by no means impossible. We forgo the calculation in this chapter but present it in later chapters of the text.

Having shown that NPV is a sensible approach, how can we tell whether alternative methods are as good as NPV? The key to NPV is its three attributes:

1. NPV uses cash flows. Cash flows from a project can be used for other corporate purposes (such as dividend payments, other capital budgeting projects, or payments of corporate interest). By contrast, earnings are an artificial construct. Although earnings are useful to accountants, they should not be used in capital budgeting because they do not represent cash.

2. NPV uses all the cash flows of the project. Other approaches ignore cash flows beyond a particular date; beware of these approaches.

3. NPV discounts the cash flows properly. Other approaches may ignore the time value of money when handling cash flows. Beware of these approaches as well.

Calculating NPVs by hand can be tedious. A nearby Spreadsheet Applications box shows how to do it the easy way and also illustrates an important caveat calculator.

5.2 The Payback Period Method

DEFINING THE RULE

One of the most popular alternatives to NPV is payback. Here is how payback works: Consider a project with an initial investment of -\$50,000. Cash flows are \$30,000, \$20,000, and \$10,000 in the first three years, respectively. These flows are illustrated in Figure 5.1. A useful way of writing down investments like the preceding is with the notation:

(−\$50,000, \$30,000, \$20,000, \$10,000)

The minus sign in front of the \$50,000 reminds us that this is a cash outflow for the investor, and the commas between the different numbers indicate that they are received—or if they are cash outflows, that they are paid out—at different times. In this example we are Page 139assuming that the cash flows occur one year apart, with the first one occurring the moment we decide to take on the investment.

Figure 5.1  Cash Flows of an Investment Project

The firm receives cash flows of \$30,000 and \$20,000 in the first two years, which add up to the \$50,000 original investment. This means that the firm has recovered its investment within two years. In this case, two years is the payback period of the investment.

The  payback period rule  for making investment decisions is simple. A particular cutoff date, say two years, is selected. All investment projects that have payback periods of two years or less are accepted, and all of those that pay off in more than two years—if at all—are rejected.

PROBLEMS WITH THE PAYBACK METHOD

There are at least three problems with payback. To illustrate the first two problems, we consider the three projects in Table 5.1. All three projects have the same three-year payback period, so they should all be equally attractive—right?

Actually, they are not equally attractive, as can be seen by a comparison of different pairs of projects.

Problem 1: Timing of Cash Flows within the Payback Period  Let us compare Project A with Project B. In Years 1 through 3, the cash flows of Project A rise from \$20 to \$50, while the cash flows of Project B fall from \$50 to \$20. Because the large cash flow of \$50 comes earlier with Project B, its net present value must be higher. Nevertheless, we just saw that the payback periods of the two projects are identical. Thus, a problem with the payback method is that it does not consider the timing of the cash flows within the payback period. This example shows that the payback method is inferior to NPV because, as we pointed out earlier, the NPV method discounts the cash flows properly.

Problem 2: Payments after the Payback Period  Now consider Projects B and C, which have identical cash flows within the payback period. However, Project C is clearly preferred because it has a cash flow of \$100 in the fourth year. Thus, another problem with the payback method is that it ignores all cash flows occurring after the payback period. Because of the short-term orientation of the payback method, some valuable long-term projects are likely to be rejected. The NPV method does not have this flaw because, as we pointed out earlier, this method uses all the cash flows of the project.

Problem 3: Arbitrary Standard for Payback Period  We do not need to refer to Table 5.1 when considering a third problem with the payback method. Capital markets help us estimate the discount rate used in the NPV method. The riskless rate, perhaps proxied by the yield on a U.S. Treasury instrument, would be the appropriate rate for a riskless investment; a higher rate should be used for risky projects. Later chapters of this Page 140textbook show how to use historical returns in the capital markets to estimate the discount rate for a risky project. However, there is no comparable guide for choosing the payback cutoff date, so the choice is somewhat arbitrary.

Table 5.1 Expected Cash Flows for Projects A through C (\$)

 Year A B C 0 −\$100 −\$100 −\$100 1 20 50 50 2 30 30 30 3 50 20 20 4 60 60 \$100 Payback period (years) 3 3 3 NPV 21.5 26.3 53.6

To illustrate the payback period problems, consider Table 5.1. Suppose the expected return on comparable risky projects is 10 percent. Then we would use a discount rate of 10 percent for these projects. If so, the NPV would be \$21.5, \$26.3, and \$53.6 for A, B, and C respectively. When using the payback period, these projects are equal to one another (i.e. they each have a payback period of 3 years). However, when considering all cash flows, B has a higher NPV than A because of the timing of cash flows within the payback period. And C has the highest NPV because of the \$100 cash flow after the payback period.

MANAGERIAL PERSPECTIVE

The payback method is often used by large, sophisticated companies when making relatively small decisions. The decision to build a small warehouse, for example, or to pay for a tune-up for a truck is the sort of decision that is often made by lower-level management. Typically, a manager might reason that a tune-up would cost, say, \$200, and if it saved \$120 each year in reduced fuel costs, it would pay for itself in less than two years. On such a basis the decision would be made.

Although the treasurer of the company might not have made the decision in the same way, the company endorses such decision making. Why would upper management condone or even encourage such retrograde activity in its employees? One answer would be that it is easy to make decisions using payback. Multiply the tune-up decision into 50 such decisions a month, and the appeal of this simple method becomes clearer.

The payback method also has some desirable features for managerial control. Just as important as the investment decision itself is the company’s ability to evaluate the manager’s decision-making ability. Under the NPV method, a long time may pass before one decides whether a decision was correct. With the payback method we know in two years whether the manager’s assessment of the cash flows was correct.

It has also been suggested that firms with good investment opportunities but no available cash may justifiably use payback. For example, the payback method could be used by small, privately held firms with good growth prospects but limited access to the capital markets. Quick cash recovery increases the reinvestment possibilities for such firms.

Finally, practitioners often argue that standard academic criticisms of the payback method overstate any real-world problems with the method. For example, textbooks typically make fun of payback by positing a project with low cash inflows in the early years but a huge cash inflow right after the payback cutoff date. This project is likely to be rejected under the payback method, though its acceptance would, in truth, benefit the firm. Project C in our Table 5.1 is an example of such a project. Practitioners point out that the pattern of cash flows in these textbook examples is much too stylized to mirror the real world. In fact, a number of executives have told us that for the overwhelming majority of real-world projects, both payback and NPV lead to the same decision. In addition, these executives indicate that if an investment-like Project C were encountered in the real world, decision makers would almost certainly make ad hoc adjustments to the payback rule so that the project would be accepted.

Notwithstanding all of the preceding rationale, it is not surprising to discover that as the decisions grow in importance, which is to say when firms look at bigger projects, NPV becomes the order of the day. When questions of controlling and evaluating the manager become less important than making the right investment decision, payback is used less frequently. For big-ticket decisions, such as whether or not to buy a machine, build a factory, or acquire a company, the payback method is seldom used.Page 141

SUMMARY OF PAYBACK

The payback method differs from NPV and is therefore conceptually wrong. With its arbitrary cutoff date and its blindness to cash flows after that date, it can lead to some flagrantly foolish decisions if used too literally. Nevertheless, because of its simplicity, as well as its other mentioned advantages, companies often use it as a screen for making the myriad of minor investment decisions they continually face.

Although this means that you should be wary of trying to change approaches such as the payback method when you encounter them in companies, you should probably be careful not to accept the sloppy financial thinking they represent. After this course, you would do your company a disservice if you used payback instead of NPV when you had a choice.

5.3 The Discounted Payback Period Method

Aware of the pitfalls of payback, some decision makers use a variant called the  discounted payback period method . Under this approach, we first discount the cash flows. Then we ask how long it takes for the discounted cash flows to equal the initial investment.

For example, suppose that the discount rate is 10 percent and the cash flows on a project are given by:

(−\$100, \$50, \$50, \$20)

This investment has a payback period of two years because the investment is paid back in that time.

To compute the project’s discounted payback period, we first discount each of the cash flows at the 10 percent rate. These discounted cash flows are:

[−\$100, \$50/1.1, \$50/(1.1)2, \$20/(1.1)3] = (−\$100, \$45.45, \$41.32, \$15.03)

The discounted payback period of the original investment is simply the payback period for these discounted cash flows. The payback period for the discounted cash flows is slightly less than three years because the discounted cash flows over the three years are \$101.80 (=\$45.45 + 41.32 1 15.03). As long as the cash flows and discount rate are positive, the discounted payback period will never be smaller than the payback period because discounting reduces the value of the cash flows.

At first glance discounted payback may seem like an attractive alternative, but on closer inspection we see that it has some of the same major flaws as payback. Like payback, discounted payback first requires us to choose an arbitrary cutoff period, and then it ignores all cash flows after that date.

If we have already gone to the trouble of discounting the cash flows, we might just as well add up all the discounted cash flows and use NPV to make the decision. Although discounted payback looks a bit like NPV, it is just a poor compromise between the payback method and NPV.

5.4 The Internal Rate of Return

Now we come to the most important alternative to the NPV method: The internal rate of return, universally known as the IRR. The IRR is about as close as you can get to the NPV without actually being the NPV. The basic rationale behind the IRR method is that it provides a single number summarizing the merits of a project. That number does not depend on the interest rate prevailing in the capital market. That is why it is called the internal rate Page 142of return; the number is internal or intrinsic to the project and does not depend on anything except the cash flows of the project.

Figure 5.2  Cash Flows for a Simple Project

For example, consider the simple project (−\$100, \$110) in Figure 5.2. For a given rate, the net present value of this project can be described as:

where R is the discount rate. What must the discount rate be to make the NPV of the project equal to zero?

We begin by using an arbitrary discount rate of .08, which yields:

Because the NPV in this equation is positive, we now try a higher discount rate, such as .12. This yields:

Because the NPV in this equation is negative, we try lowering the discount rate to .10. This yields:

This trial-and-error procedure tells us that the NPV of the project is zero when R equals 10 percent.1 Thus, we say that 10 percent is the project’s  internal rate of return  (IRR). In general, the IRR is the rate that causes the NPV of the project to be zero. The implication of this exercise is very simple. The firm should be equally willing to accept or reject the project if the discount rate is 10 percent. The firm should accept the project if the discount rate is below 10 percent. The firm should reject the project if the discount rate is above 10 percent.

The general investment rule is clear:

Accept the project if the IRR is greater than the discount rate. Reject the project if the IRR is less than the discount rate.

Page 0143FIGURE 5.3  Cash Flows for a More Complex Project

We refer to this as the basic IRR rule. Now we can try the more complicated example (−\$200, \$100, \$100, \$100) in Figure 5.3.

As we did previously, let’s use trial and error to calculate the internal rate of return. We try 20 percent and 30 percent, yielding the following:

 Discount Rate NPV 20% \$10.65 30 −18.39

After much more trial and error, we find that the NPV of the project is zero when the discount rate is 23.38 percent. Thus, the IRR is 23.38 percent. With a 20 percent discount rate, the NPV is positive and we would accept it. However, if the discount rate were 30 percent, we would reject it.

Algebraically, IRR is the unknown in the following equation:2

Figure 5.4 illustrates what the IRR of a project means. The figure plots the NPV as a function of the discount rate. The curve crosses the horizontal axis at the IRR of 23.38 percent because this is where the NPV equals zero.

It should also be clear that the NPV is positive for discount rates below the IRR and negative for discount rates above the IRR. If we accept projects like this one when the discount rate is less than the IRR, we will be accepting positive NPV projects. Thus, the IRR rule coincides exactly with the NPV rule.

If this were all there were to it, the IRR rule would always coincide with the NPV rule. But the world of finance is not so kind. Unfortunately, the IRR rule and the NPV rule are consistent with each other only for examples like the one just discussed. Several problems with the IRR approach occur in more complicated situations, a topic to be examined in the next section.

The IRR in the previous example was computed through trial and error. This laborious process can be averted through spreadsheets. A nearby Spreadsheet Applications box shows how.

Page 0144Figure 5.4  Net Present Value (NPV) and Discount Rates for a More Complex Project

Calculating IRRs with a Spreadsheet

Because IRRs are so tedious to calculate by hand, financial calculators and, especially, spreadsheets are generally used. The procedures used by various financial calculators are too different for us to illustrate here, so we will focus on using a spreadsheet. As the following example illustrates, using a spreadsheet is very easy.

Page 0145

5.5 Problems with the IRR Approach

DEFINITION OF INDEPENDENT AND MUTUALLY EXCLUSIVE PROJECTS

An  independent project  is one whose acceptance or rejection is independent of the acceptance or rejection of other projects. For example, imagine that McDonald’s is considering putting a hamburger outlet on a remote island. Acceptance or rejection of this unit is likely to be unrelated to the acceptance or rejection of any other restaurant in its system. The remoteness of the outlet in question ensures that it will not pull sales away from other outlets.

Now consider the other extreme,  mutually exclusive investments . What does it mean for two projects, A and B, to be mutually exclusive? You can accept A or you can accept B or you can reject both of them, but you cannot accept both of them. For example, A might be a decision to build an apartment house on a corner lot that you own, and B might be a decision to build a movie theater on the same lot.

We now present two general problems with the IRR approach that affect both independent and mutually exclusive projects. Then we deal with two problems affecting mutually exclusive projects only.

TWO GENERAL PROBLEMS AFFECTING BOTH INDEPENDENT AND MUTUALLY EXCLUSIVE PROJECTS

We begin our discussion with Project A, which has the following cash flows:

(−\$100, \$130)

The IRR for Project A is 30 percent. Table 5.2 provides other relevant information about the project. The relationship between NPV and the discount rate is shown for this project in Figure 5.5. As you can see, the NPV declines as the discount rate rises.

Problem 1: Investing or Financing?  Now consider Project B, with cash flows of:

(\$100, −\$130)

These cash flows are exactly the reverse of the flows for Project A. In Project B, the firm receives funds first and then pays out funds later. While unusual, projects of this type do exist. For example, consider a corporation conducting a seminar where the participants pay in advance. Because large expenses are frequently incurred at the seminar date, cash inflows precede cash outflows.

Table 5.2 The Internal Rate of Return and Net Present Value

 Project A Project B Project C Dates: 0 1 2 0 1 2 0 1 2 Cash flows −\$100 \$130 \$100 −\$130 −\$100 \$230 −\$132 IRR 30% 30% 10% and 20% NPV @10% \$ 18.2 −\$ 18.2 0 Accept if market rate >30% <30% >10% but <20% Financing or investing Investing Financing Mixture

Page 0146FIGURE 5.5  Net Present Value and Discount Rates for Projects AB, and C

Consider our trial-and-error method to calculate IRR:

As with Project A, the internal rate of return is 30 percent. However, notice that the net present value is negative when the discount rate is below 30 percent. Conversely, the net present value is positive when the discount rate is above 30 percent. The decision rule is exactly the opposite of our previous result. For this type of project, the following rule applies:

Accept the project when the IRR is less than the discount rate. Reject the project when the IRR is greater than the discount rate.

This unusual decision rule follows from the graph of Project B in Figure 5.5. The curve is upward sloping, implying that NPV is positively related to the discount rate.

The graph makes intuitive sense. Suppose the firm wants to obtain \$100 immediately. It can either (1) accept Project B or (2) borrow \$100 from a bank. Thus, the project is actually a substitute for borrowing. In fact, because the IRR is 30 percent, taking on Project B is equivalent to borrowing at 30 percent. If the firm can borrow from a bank at, say, only 25 percent, it should reject the project. However, if a firm can borrow from a bank only at, say, 35 percent, it should accept the project. Thus Project B will be accepted if and only if the discount rate is above the IRR.3

This should be contrasted with Project A. If the firm has \$100 cash to invest, it can either (1) accept Project A or (2) lend \$100 to the bank. The project is actually a substitute for lending. In fact, because the IRR is 30 percent, taking on Project A is tantamount to lending at 30 percent. The firm should accept Project A if the lending rate is below 30 percent. Conversely, the firm should reject Project A if the lending rate is above 30 percent.

Page 147Because the firm initially pays out money with Project A but initially receives money with Project B, we refer to Project A as an investing type project and Project B as a financing type project. Investing type projects are the norm. Because the IRR rule is reversed for financing type projects, be careful when using it with this type of project.

Problem 2: Multiple Rates of Return  Suppose the cash flows from a project are:

(−\$100, \$230, −\$132)

Because this project has a negative cash flow, a positive cash flow, and another negative cash flow, we say that the project’s cash flows exhibit two changes of sign, or “flipflops.” Although this pattern of cash flows might look a bit strange at first, many projects require outflows of cash after some inflows. An example would be a strip-mining project. The first stage in such a project is the initial investment in excavating the mine. Profits from operating the mine are received in the second stage. The third stage involves a further investment to reclaim the land and satisfy the requirements of environmental protection legislation. Cash flows are negative at this stage.

Projects financed by lease arrangements may produce a similar pattern of cash flows. Leases often provide substantial tax subsidies, generating cash inflows after an initial investment. However, these subsidies decline over time, frequently leading to negative cash flows in later years. (The details of leasing will be discussed in a later chapter.)

It is easy to verify that this project has not one but two IRRs, 10 percent and 20 percent.4 In a case like this, the IRR does not make any sense. What IRR are we to use—10 percent or 20 percent? Because there is no good reason to use one over the other, IRR simply cannot be used here.

Why does this project have multiple rates of return? Project C generates multiple internal rates of return because both an inflow and an outflow occur after the initial investment. In general, these flip-flops or changes in sign produce multiple IRRs. In theory, a cash flow stream with K changes in sign can have up to K sensible internal rates of return (IRRs above -100 percent). Therefore, because Project C has two changes in sign, it can have as many as two IRRs. As we pointed out, projects whose cash flows change sign repeatedly can occur in the real world.

NPV Rule  Of course, we should not be too worried about multiple rates of return. After all, we can always fall back on the NPV rule. Figure 5.5 plots the NPV of Project C (-\$100, \$230, -\$132) as a function of the discount rate. As the figure shows, the NPV is zero at both 10 percent and 20 percent and negative outside the range. Thus, the NPV rule tells us to accept the project if the appropriate discount rate is between 10 percent and 20 percent. The project should be rejected if the discount rate lies outside this range.

Page 148Modified IRR  As an alternative to NPV, we now introduce the  modified IRR (MIRR)  method, which handles the multiple IRR problem by combining cash flows until only one change in sign remains. To see how it works, consider Project C again. With a discount rate of, say, 14 percent, the value of the last cash flow, -\$132, is:

−\$132 /1.14 = −\$115.79

as of Date 1. Because \$230 is already received at that time, the “adjusted” cash flow at Date 1 is \$114.21 (=\$230 – 115.79). Thus, the MIRR approach produces the following two cash flows for the project:

(−\$100, \$114.21)

Note that by discounting and then combining cash flows, we are left with only one change in sign. The IRR rule can now be applied. The IRR of these two cash flows is 14.21 percent, implying that the project should be accepted given our assumed discount rate of 14 percent.

Of course, Project C is relatively simple to begin with: It has only three cash flows and two changes in sign. However, the same procedure can easily be applied to more complex projects—that is, just keep discounting and combining the later cash flows until only one change of sign remains.

Although this adjustment does correct for multiple IRRs, it appears, at least to us, to violate the “spirit” of the IRR approach. As stated earlier, the basic rationale behind the IRR method is that it provides a single number summarizing the merits of a project. That number does not depend on the discount rate. In fact, that is why it is called the internal rate of return: The number is internal, or intrinsic, to the project and does not depend on anything except the project’s cash flows. By contrast, MIRR is clearly a function of the discount rate. However, a firm using this adjustment will avoid the multiple IRR problem, just as a firm using the NPV rule will avoid it.5

The Guarantee against Multiple IRRs  If the first cash flow of a project is negative (because it is the initial investment) and if all of the remaining flows are positive, there can be only a single, unique IRR, no matter how many periods the project lasts. This is easy to understand by using the concept of the time value of money. For example, it is simple to verify that Project A in Table 5.2 has an IRR of 30 percent because using a 30 percent discount rate gives:

Page 149How do we know that this is the only IRR? Suppose we were to try a discount rate greater than 30 percent. In computing the NPV, changing the discount rate does not change the value of the initial cash flow of -\$100 because that cash flow is not discounted. Raising the discount rate can only lower the present value of the future cash flows. In other words, because the NPV is zero at 30 percent, any increase in the rate will push the NPV into the negative range. Similarly, if we try a discount rate of less than 30 percent, the overall NPV of the project will be positive. Though this example has only one positive flow, the above reasoning still implies a single, unique IRR if there are many inflows (but no outflows) after the initial investment.

If the initial cash flow is positive—and if all of the remaining flows are negative— there can only be a single, unique IRR. This result follows from similar reasoning. Both these cases have only one change of sign or flip-flop in the cash flows. Thus, we are safe from multiple IRRs whenever there is only one sign change in the cash flows.

General Rules  The following chart summarizes our rules:

 Flows Number of IRRs IRR Criterion NPV Criterion First cash flow is negative and 1 Accept if IRR > R. Accept if NPV > 0. all remaining cash flows are positive. Reject if IRR < R. Reject if NPV < 0. First cash flow is positive and 1 Accept if IRR < R. Accept if NPV > 0. all remaining cash flows are negative. Reject if IRR > R. Reject if NPV < 0. Some cash flows after first are May be more No valid IRR. Accept if NPV > 0. positive and some cash flows after first are negative. than 1. Reject if NPV < 0.

Note that the NPV criterion is the same for each of the three cases. In other words, NPV analysis is always appropriate. Conversely, the IRR can be used only in certain cases. When it comes to NPV, the preacher’s words, “You just can’t lose with the stuff I use,” clearly apply.

PROBLEMS SPECIFIC TO MUTUALLY EXCLUSIVE PROJECTS

As mentioned earlier, two or more projects are mutually exclusive if the firm can accept only one of them. We now present two problems dealing with the application of the IRR approach to mutually exclusive projects. These two problems are quite similar, though logically distinct.

The Scale Problem  A professor we know motivates class discussions of this topic with this statement: “Students, I am prepared to let one of you choose between two mutually exclusive ‘business’ propositions. Opportunity 1—You give me \$1 now and I’ll give you \$1.50 back at the end of the class period. Opportunity 2—You give me \$10 and I’ll give you \$11 back at the end of the class period. You can choose only one of the two opportunities. And you cannot choose either opportunity more than once. I’ll pick the first volunteer.”

Page 150Which would you choose? The correct answer is Opportunity 2.6 To see this, look at the following chart:

 Cash Flow at Beginning of Class Cash Flow at End of Class (90 Minutes Later) NPV 7 IRR Opportunity 1 −\$ 1 +\$ 1.50 \$ .50 50% Opportunity 2 −10 + 11.00 1.00 10

As we have stressed earlier in the text, one should choose the opportunity with the highest NPV. This is Opportunity 2 in the example. Or, as one of the professor’s students explained it, “I’m bigger than the professor, so I know I’ll get my money back. And I have \$10 in my pocket right now so I can choose either opportunity. At the end of the class, I’ll be able to buy one song on iTunes with Opportunity 2 and still have my original investment, safe and sound. The profit on Opportunity 1 pays for only one half of a song.”

This business proposition illustrates a defect with the internal rate of return criterion. The basic IRR rule indicates the selection of Opportunity 1 because the IRR is 50 percent. The IRR is only 10 percent for Opportunity 2.

Where does IRR go wrong? The problem with IRR is that it ignores issues of scale. Although Opportunity 1 has a greater IRR, the investment is much smaller. In other words, the high percentage return on Opportunity 1 is more than offset by the ability to earn at least a decent return8 on a much bigger investment under Opportunity 2.

Because IRR seems to be misguided here, can we adjust or correct it? We illustrate how in the next example.

EXAMPLE

5.2

NPV versus IRR  Stanley Jaffe and Sherry Lansing have just purchased the rights to Corporate Finance: The Motion Picture. They will produce this major motion picture on either a small budget or a big budget. Here are the estimated cash flows:

 Cash Flow at Date 0 Cash Flow at Date 1 NPV @25% IRR Small budget −\$10 million \$40 million \$22 million 300% Large budget −25 million 65 million 27 million 160

Because of high risk, a 25 percent discount rate is considered appropriate. Sherry wants to adopt the large budget because the NPV is higher. Stanley wants to adopt the small budget because the IRR is higher. Who is right?

Page 151For the reasons espoused in the classroom example, NPV is correct. Hence Sherry is right. Howwever, Stanley is very stubborn where IRR is concerned. How can Sherry justify the large budget to Stanley using the IRR approach?

This is where incremental IRR comes in. Sherry calculates the incremental cash flows from choosing the large budget instead of the small budget as follows:

 Cash Flow at Date 0 (in \$ millions) Cash Flow at Date 1 (in \$ millions) Incremental cash flows from choosing large budget instead of small budget −\$25 − (-10) = −\$15 \$65 − 40 = \$25

This chart shows that the incremental cash flows are -\$15 million at Date 0 and \$25 million at Date 1. Sherry calculates incremental IRR as follows:

Formula for Calculating the Incremental IRR:

IRR equals 66.67 percent in this equation, implying that the incremental IRR is 66.67 percent. Incremental IRR is the IRR on the incremental investment from choosing the large project instead of the small project.

In addition, we can calculate the NPV of the incremental cash flows:

NPV of Incremental Cash Flows:

We know the small-budget picture would be acceptable as an independent project because its NPV is positive. We want to know whether it is beneficial to invest an additional \$15 million to make the large-budget picture instead of the small-budget picture. In other words, is it beneficial to invest an additional \$15 million to receive an additional \$25 million next year? First, our calculations show the NPV on the incremental investment to be positive. Second, the incremental IRR of 66.67 percent is higher than the discount rate of 25 percent. For both reasons, the incremental investment can be justified, so the large-budget movie should be made. The second reason is what Stanley needed to hear to be convinced.

In review, we can handle this example (or any mutually exclusive example) in one of three ways:

1. Compare the NPVs of the two choices. The NPV of the large-budget picture is greater than the NPV of the small-budget picture. That is, \$27 million is greater than \$22 million.

2. Calculate the incremental NPV from making the large-budget picture instead of the small-budget picture. Because the incremental NPV equals \$5 million, we choose the large-budget picture.

3. Compare the incremental IRR to the discount rate. Because the incremental IRR is 66.67 percent and the discount rate is 25 percent, we take the large-budget picture.

Page 152All three approaches always give the same decision. However, we must not compare the IRRs of the two pictures. If we did, we would make the wrong choice. That is, we would accept the small-budget picture.

Although students frequently think that problems of scale are relatively unimportant, the truth is just the opposite. No real-world project comes in one clear-cut size. Rather, the firm has to determine the best size for the project. The movie budget of \$25 million is not fixed in stone. Perhaps an extra \$1 million to hire a bigger star or to film at a better location will increase the movie’s gross. Similarly, an industrial firm must decide whether it wants a warehouse of, say, 500,000 square feet or 600,000 square feet. And, earlier in the chapter, we imagined McDonald’s opening an outlet on a remote island. If it does this, it must decide how big the outlet should be. For almost any project, someone in the firm has to decide on its size, implying that problems of scale abound in the real world.

One final note here. Students often ask which project should be subtracted from the other in calculating incremental flows. Notice that we are subtracting the smaller project’s cash flows from the bigger project’s cash flows. This leaves an outflow at Date 0. We then use the basic IRR rule on the incremental flows.9

The Timing Problem  Next we illustrate another, somewhat similar problem with the IRR approach to evaluating mutually exclusive projects.

EXAMPLE

5.3

Mutually Exclusive Investments  Suppose that the Kaufold Corporation has two alternative uses for a warehouse. It can store toxic waste containers (Investment A) or electronic equipment (Investment B). The cash flows are as follows:

 Cash Flow at Year NPV Year: 0 1 2 3 @ 0% @10% @15% IRR Investment A −\$10,000 \$10,000 \$1,000 \$1,000 \$2,000 \$669 \$109 16.04% Investment B −10,000 \$1,000 \$1,000 12,000 4,000 751 −484 12.94

We find that the NPV of Investment B is higher with low discount rates, and the NPV of Investment A is higher with high discount rates. This is not surprising if you look closely at the cash flow patterns. The cash flows of A occur early, whereas the cash flows of B occur later. If we assume a high discount rate, we favor Investment A because we are implicitly assuming that the early cash flow (for example, \$10,000 in Year 1) can be reinvested at that rate. Because most of Investment B’s cash flows occur in Year 3, B’s value is relatively high with low discount rates.

The patterns of cash flow for both projects appear in Figure 5.6. Project A has an NPV of \$2,000 at a discount rate of zero. This is calculated by simply adding up the cash flows without discounting them. Project B has an NPV of \$4,000 at the zero rate. However, the NPV of Project B declines more rapidly as the discount rate increases than does the NPV of Project A. As we mentioned, this occurs because the cash flows of B occur later. Both projects have the same NPV at a discount rate of 10.55 percent. The IRR for a project is Page 153the rate at which the NPV equals zero. Because the NPV of B declines more rapidly, B actually has a lower IRR.

Figure 5.6  Net Present Value and the Internal Rate of Return for Mutually Exclusive Projects

As with the movie example, we can select the better project with one of three different methods:

1. Compare NPVs of the two projects. Figure 5.6 aids our decision. If the discount rate is below 10.55 percent, we should choose Project B because B has a higher NPV. If the rate is above 10.55 percent, we should choose Project A because A has a higher NPV.

2. Compare incremental IRR to discount rate. Method 1 employed NPV. Another way of determining whether A or B is a better project is to subtract the cash flows of A from the cash flows of B and then to calculate the IRR. This is the incremental IRR approach we spoke of earlier.

Here are the incremental cash flows:

 NPV of Incremental Cash Flows Year: 0 1 2 3 Incremental IRR @ 0% @10% @15% B−A 0 − \$9,000 0 \$11,000 10.55% \$2,000 \$83 − \$593

This chart shows that the incremental IRR is 10.55 percent. In other words, the NPV on the incremental investment is zero when the discount rate is 10.55 percent. Thus, if the relevant discount rate is below 10.55 percent, Project B is preferred to Project A. If the relevant discount rate is above 10.55 percent, Project A is preferred to Project B.

Figure 5.6 shows that the NPVs of the two projects are equal when the discount rate is 10.55 percent. In other words, the crossover rate in the figure is 10.55. The incremental cash flows chart shows that the incremental IRR is also 10.55 percent. It is not a coincidence that the crossover rate and the incremental IRR are the same; this equality must always hold. The incremental IRR is the rate that causes the incremental cash flows to have zero NPV. The incremental cash flows have zero NPV when the two projects have the same NPV.Page 154

3. Calculate NPV on incremental cash flows. Finally, we could calculate the NPV on the incremental cash flows. The chart that appears with the previous method displays these NPVs. We find that the incremental NPV is positive when the discount rate is either 0 percent or 10 percent. The incremental NPV is negative if the discount rate is 15 percent. If the NPV is positive on the incremental flows, we should choose B. If the NPV is negative, we should choose A.

In summary, the same decision is reached whether we (1) compare the NPVs of the two projects, (2) compare the incremental IRR to the relevant discount rate, or (3) examine the NPV of the incremental cash flows. However, as mentioned earlier, we should not compare the IRR of Project A with the IRR of Project B.

We suggested earlier that we should subtract the cash flows of the smaller project from the cash flows of the bigger project. What do we do here when the two projects have the same initial investment? Our suggestion in this case is to perform the subtraction so that the first nonzero cash flow is negative. In the Kaufold Corp. example we achieved this by subtracting A from B. In this way, we can still use the basic IRR rule for evaluating cash flows.

The preceding examples illustrate problems with the IRR approach in evaluating mutually exclusive projects. Both the professor-student example and the motion picture example illustrate the problem that arises when mutually exclusive projects have different initial investments. The Kaufold Corp. example illustrates the problem that arises when mutually exclusive projects have different cash flow timing. When working with mutually exclusive projects, it is not necessary to determine whether it is the scale problem or the timing problem that exists. Very likely both occur in any real-world situation. Instead, the practitioner should simply use either an incremental IRR or an NPV approach.

REDEEMING QUALITIES OF IRR

IRR probably survives because it fills a need that NPV does not. People seem to want a rule that summarizes the information about a project in a single rate of return. This single rate gives people a simple way of discussing projects. For example, one manager in a firm might say to another, “Remodeling the north wing has a 20 percent IRR.”

To their credit, however, companies that employ the IRR approach seem to understand its deficiencies. For example, companies frequently restrict managerial projections of cash flows to be negative at the beginning and strictly positive later. Perhaps, then, both the ability of the IRR approach to capture a complex investment project in a single number, and the ease of communicating that number explain the survival of the IRR.

A TEST

To test your knowledge, consider the following two statements:

1. You must know the discount rate to compute the NPV of a project, but you compute the IRR without referring to the discount rate.

2. Hence, the IRR rule is easier to apply than the NPV rule because you don’t use the discount rate when applying IRR.

The first statement is true. The discount rate is needed to compute NPV. The IRR is computed by solving for the rate where the NPV is zero. No mention is made of the discount rate in the mere computation. However, the second statement is false. To apply IRR, you must compare the internal rate of return with the discount rate. Thus the discount rate is needed for making a decision under either the NPV or IRR approach.Page 155

5.6 The Profitability Index

Another method used to evaluate projects is called the profitability index. It is the ratio of the present value of the future expected cash flows after initial investment divided by the amount of the initial investment. The profitability index can be represented as:

EXAMPLE

5.4

Profitability Index   Hiram Finnegan Inc. (HFI) applies a 12 percent discount rate to two investment opportunities.

 Cash Flows               (\$000,000) PV @ 12% of Cash      Flows Subsequent     to Initial Investment             (\$000,000) Project C0 C1 C2 Profitability      Index NPV @12% (\$000,000) 1 −\$20 \$70 \$10 \$70.5 3.53 \$50.5 2 −10 15 40 45.3 4.53 35.3

CALCULATION OF PROFITABILITY INDEX

The profitability index is calculated for Project 1 as follows. The present value of the cash flows after the initial investment is:

The profitability index is obtained by dividing this result by the initial investment of \$20. This yields:

Application of the Profitability Index How do we use the profitability index? We consider three situations:

1. Independent projects: Assume that HFI’s two projects are independent. According to the NPV rule, both projects should be accepted because NPV is positive in each case. The profitability index (PI) is greater than 1 whenever the NPV is positive. Thus, the PI decision rule is:

1. •  Accept an independent project if PI > 1.

2. •  Reject it if PI < 1.

2. Mutually exclusive projects: Let us now assume that HFI can only accept one of its two projects. NPV analysis says accept Project 1 because this project has the bigger NPV. Because Project 2 has the higher PI, the profitability index leads to the wrong selection.

Page 156For mutually exclusive projects, the profitability index suffers from the scale problem that IRR also suffers from. Project 2 is smaller than Project 1. Because the PI is a ratio, it ignores Project 1’s larger investment. Thus, like IRR, PI ignores differences of scale for mutually exclusive projects.

However, like IRR, the flaw with the PI approach can be corrected using incremental analysis. We write the incremental cash flows after subtracting Project 2 from Project 1 as follows:

 Cash Flows               (\$000,000) PV @ 12% of Cash      Flows Subsequent     to Initial Investment             (\$000,000) Project C0 C1 C2 Profitability      Index NPV @12% (\$000,000) 1–2 −\$10 \$55 −\$30 \$25.2 2.52 \$15.2

Because the profitability index on the incremental cash flows is greater than 1.0, we should choose the bigger project—that is, Project 1. This is the same decision we get with the NPV approach.

3. Capital rationing: The first two cases implicitly assumed that HFI could always attract enough capital to make any profitable investments. Now consider the case when the firm does not have enough capital to fund all positive NPV projects. This is the case of capital rationing.

Imagine that the firm has a third project, as well as the first two. Project 3 has the following cash flows:

 Cash Flows               (\$000,000) PV @ 12% of Cash      Flows Subsequent     to Initial Investment             (\$000,000) Project C0 C1 C2 Profitability      Index NPV @12% (\$000,000) 3 −\$10 −\$5 −\$60 \$43.4 4.34 \$33.4

Further, imagine that (1) the projects of Hiram Finnegan Inc. are independent, but (2) the firm has only \$20 million to invest. Because Project 1 has an initial investment of \$20 million, the firm cannot select both this project and another one. Conversely, because Projects 2 and 3 have initial investments of \$10 million each, both these projects can be chosen. In other words, the cash constraint forces the firm to choose either Project 1 or Projects 2 and 3.

What should the firm do? Individually, Projects 2 and 3 have lower NPVs than Project 1 has. However, when the NPVs of Projects 2 and 3 are added together, the sum is higher than the NPV of Project 1. Thus, common sense dictates that Projects 2 and 3 should be accepted.

What does our conclusion have to say about the NPV rule or the PI rule? In the case of limited funds, we cannot rank projects according to their NPVs. Instead we should rank them according to the ratio of present value to initial investment. This is the PI rule. Both Project 2 and Project 3 have higher PI ratios than does Project 1. Thus they should be ranked ahead of Project 1 when capital is rationed.

Page 157The usefulness of the profitability index under capital rationing can be explained in military terms. The Pentagon speaks highly of a weapon with a lot of “bang for the buck.” In capital budgeting, the profitability index measures the bang (the dollar return) for the buck invested. Hence it is useful for capital rationing.

It should be noted that the profitability index does not work if funds are also limited beyond the initial time period. For example, if heavy cash outflows elsewhere in the firm were to occur at Date 1, Project 3, which also has a cash outflow at Date 1, might need to be rejected. In other words, the profitability index cannot handle capital rationing over multiple time periods.

In addition, what economists term indivisibilities may reduce the effectiveness of the PI rule. Imagine that HFI has \$30 million available for capital investment, not just \$20 million. The firm now has enough cash for Projects 1 and 2. Because the sum of the NPVs of these two projects is greater than the sum of the NPVs of Projects 2 and 3, the firm would be better served by accepting Projects 1 and 2. But because Projects 2 and 3 still have the highest profitability indexes, the PI rule now leads to the wrong decision. Why does the PI rule lead us astray here? The key is that Projects 1 and 2 use up all of the \$30 million, whereas Projects 2 and 3 have a combined initial investment of only \$20 million (= \$10 + 10). If Projects 2 and 3 are accepted, the remaining \$10 million must be left in the bank.

This situation points out that care should be exercised when using the profitability index in the real world. Nevertheless, while not perfect, the profitability index goes a long way toward handling capital rationing.

5.7 The Practice of Capital Budgeting

So far this chapter has asked “Which capital budgeting methods should companies be using?” An equally important question is this: Which methods are companies using? Table 5.3 helps answer this question. As can be seen from the table, approximately three- quarters of U.S. and Canadian companies use the IRR and NPV methods. This is not surprising, given the theoretical advantages of these approaches. Over half of these companies use the payback method, a rather surprising result given the conceptual problems with this approach. And while discounted payback represents a theoretical improvement over regular payback, the usage here is far less. Perhaps companies are attracted to the user-friendly nature of payback. In addition, the flaws of this approach, as mentioned in the current chapter, may be relatively easy to correct. For example, while the payback method ignores Page 158all cash flows after the payback period, an alert manager can make ad hoc adjustments for a project with back-loaded cash flows.

Table 5.3 Percentage of CFOs Who Always or Almost Always Use a Given Technique

 % Always or Almost Always Internal rate of return (IRR) 75.6% Net present value (NPV) 74.9 Payback method 56.7 Discounted payback 29.5 Profitability index 11.9

SOURCE: Adapted from Figure 2 from John R. Graham and Campbell R. Harvey, “The Theory and Practice of Corporate Finance: Evidence from the Field,” Journal of Financial Economics 60 (2001). Based on a survey of 392 CFOs.

Capital expenditures by individual corporations can add up to enormous sums for the economy as a whole. For example, in 2014, ExxonMobil announced that it expected to make about \$39.8 billion in capital outlays during the year, down 6 percent from the record \$42.5 billion in 2013. The company further indicated that it expected to spend an average of \$37 billion per year through 2017. About the same time, Chevron announced that its capital budget for 2014 would be \$39.8 billion, down \$2 billion from the previous year, and ConocoPhillips announced a capital expenditure budget of \$16.7 billion for 2014. Other companies with large capital spending budgets in 2014 were Intel, which projected capital spending of about \$11 billion, and Samsung Electronics, which projected capital spending of about \$11.5 billion.

Large-scale capital spending is often an industrywide occurrence. For example, in 2014, capital spending in the semiconductor industry was expected to reach \$60.9 billion. This tidy sum represented a 5.5 percent increase over industry capital spending in 2013.

According to information released by the U.S. Census Bureau in 2013, capital investment for the economy as a whole was \$1.090 trillion in 2009, \$1.106 trillion in 2010, and \$1.226 trillion in 2011. The totals for the three years therefore equaled approximately \$3.422 trillion! Given the sums at stake, it is not too surprising that successful corporations carefully analyze capital expenditures.

One might expect the capital budgeting methods of large firms to be more sophisticated than the methods of small firms. After all, large firms have the financial resources to hire more sophisticated employees. Table 5.4 provides some support for this idea. Here firms indicate frequency of use of the various capital budgeting methods on a scale of 0 (never) to 4 (always). Both the IRR and NPV methods are used more frequently, and payback less frequently, in large firms than in small firms. Conversely, large and small firms employ the last two approaches about equally.

The use of quantitative techniques in capital budgeting varies with the industry. As one would imagine, firms that are better able to estimate cash flows are more likely to use NPV. For example, estimation of cash flow in certain aspects of the oil business is quite feasible. Because of this, energy-related firms were among the first to use NPV analysis. Conversely, the cash flows in the motion picture business are very hard to project. The grosses of great hits like Spiderman, Harry Potter, and Star Wars were far, far greater than anyone imagined. The big failures like Alamo and Waterworld were unexpected as well. Because of this, NPV analysis is frowned upon in the movie business.

Table 5.4 Frequency of Use of Various Capital Budgeting Methods

 Large Firms Small Firms Internal rate of return (IRR) 3.41 2.87 Net present value (NPV) 3.42 2.83 Payback method 2.25 2.72 Discounted payback 1.55 1.58 Profitability index .75 .78

Firms indicate frequency of use on a scale from 0 (never) to 4 (always). Numbers in table are averages across respondents. SOURCE: Adapted from Table 2 from Graham and Harvey (2001), op. cit.

Page 159How does Hollywood perform capital budgeting? The information that a studio uses to accept or reject a movie idea comes from the pitch. An independent movie producer schedules an extremely brief meeting with a studio to pitch his or her idea for a movie. Consider the following four paragraphs of quotes concerning the pitch from the thoroughly delightful book Reel Power:10

“They [studio executives] don’t want to know too much,” says Ron Simpson. “They want to know concept… . They want to know what the three-liner is, because they want it to suggest the ad campaign. They want a title… . They don’t want to hear any esoterica. And if the meeting lasts more than five minutes, they’re probably not going to do the project.”

“A guy comes in and says this is my idea: ‘Jaws on a spaceship,’” says writer Clay Frohman ( Under Fire). “And they say, ‘Brilliant, fantastic.’ Becomes Alien. That is Jaws on a spaceship, ultimately… . And that’s it. That’s all they want to hear. Their attitude is ‘Don’t confuse us with the details of the story.’ ”

“… Some high-concept stories are more appealing to the studios than others. The ideas liked best are sufficiently original that the audience will not feel it has already seen the movie, yet similar enough to past hits to reassure executives wary of anything too far- out. Thus, the frequently used shorthand: It’s Flashdance in the country (Footloose) or High Noon in outer space (Outland ).”

“… One gambit not to use during a pitch,” says executive Barbara Boyle, “is to talk about big box-office grosses your story is sure to make. Executives know as well as anyone that it’s impossible to predict how much money a movie will make, and declarations to the contrary are considered pure malarkey.”