Scientific and Ethical Complexities - Egg Donation Essay

Scientific and Ethical Complexities - Egg Donation - Essay Example any a negative review such as – â€Å"the most enduring ghost story of all time† and â€Å"a precursor to the existential thriller.† The novel which remains popular even today, unravels the story of a highly ambitious and proud scientist who craves to create a new life form and aspires to become like God. This story is of significant relevance which tells us how Dr. Frankenstein steeps himself into his scientific study and contemplates the creation of life. Mary brings out beautifully the struggle that Frankenstein faces to infuse life into something inanimate. She tells of how he worked ardently in his laboratory from morning to night and sometimes even into the next morning with just that sole goal in his mind to drive him on. He faced many difficulties and pitfalls in the various experiments he carried out and at one point he even wanted to give up and return to his family and friends, but then again it was this burning desire to create life and become like God that At the end of two years, he made great progress and won great appreciation and recognition in his University. The phenomenon that particularly attracted his attention was the human frame. According to him –â€Å"To examine the causes of life, we must first have recourse to death†. He examined and analyised every crevice of life to death and from death to life, until from the darkness broke out a wondrous light that at first blinded him in its simplicity and then exulted him to dizzying heights in the discovery he had made. He had achieved what he wanted to after all! He now had the uncanny power to bestow animation on the object which was once lifeless. He was now left with the job of making a frame work with the intricacy of all its muscles and fibers. It seemed almost impractical in its magnitude and complexity, but the rush of enthusiasm was like a hurricane within him that he could not stop. Frankenstein says –â€Å"A new species would bless me as its creator and source; many happy and

Discussion of the theories on Optimal Capital Structure Essay

Discussion of the theories on Optimal Capital Structure - Essay Example The study by Modigliani and Miller was based on the following assumptions: 1. There are no brokerage costs. 2. There are no taxes. 3. There are no bankruptcy costs. 4. Investors can borrow at the same rate as corporations. 5. All investors have the same information as management about the firm’s future investment opportunities. 6. EBIT is not affected by the use of debt. This theory says that if these assumptions hold true, the value of the firm is not affected by the capital structure. This situation is expressed as follows: VL = VU = SL + D. Here VL is the value of a levered firm, VU is the value of an identical, unlevered firm, SL is the value of the levered firm’s stock and D is the value of its debt. As we know that WACC is a combination of cost of debt and cost of equity. The cost of debt is lower than the cost of equity. As a company raises capital through debt, the weight of debt increases and hence, it drives up the cost of equity as equity gets riskier. According to the assumptions by Modigliani and Miller, the cost of equity increases by an amount to keep the WACC constant. In other words, under these assumptions it does not matter whether the firm uses debt or equity to raise capital. So, capital structure decisions are irrelevant in such conditions. Modigliani and Miller: The Effect of Corporate Taxes In 1963, Modigliani and Miller relaxed the assumption that there are no corporate taxes. The corporate tax laws favour debt financing over equity financing because the tax laws allow companies to deduct interest payments as expense and on the other hand dividends are not deductible. So this treatment encourages debt financing. Interest payments reduce the amount the firm pay s to the government in the form of taxes and more of its cash is available for its investors. Hence, tax deductibility of the interest payments acts as a shield for the firm’s income before tax. Modigliani and Miller presented this concept as follows: VL = VU + Value of side effects = VU + PV of tax shield. They further simplified the concept as: VL = VU + TD. Here T is the corporate tax rate and D is the amount of debt. This relationship is expressed in the graph below. If the corporate tax rate is 40%, then this formula implies that every dollar of debt will increase the value of the firm by 40 cents. Hence, the optimal capital structure is 100% debt. Under this theory, the cost of equity increases as the amount of debt increases but it does not increase as fast as it does under the assumption that there are no taxes. As a result, under this theory the WACC falls as the amount of debt increases. This relationship is shown in the following graph. Miller: The Effect of corpor ate and personal taxes Later Miller brought in the aspect of personal taxes in this model. He said that income from the bonds is considered as interest which is taxed as personal income at a particular rate (Td). On the other hand, income from stocks comes in the form of dividends and capital gains. The tax on long-term capital gains is deferred until the stock is sold and the gain is realized. Of the stock is held until the owner dies no capital gains tax is paid. So he concluded that the returns on stock are taxed at a lower effective tax rate (Ts) than returns on debt. Looking gat this, Miller argued