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q1
According to Lasher (2013), the internal rate of return also known as IRR focuses on the rates of return. A projects IRR is just the return it earns on investment funds; this is what we have been discussing over the last few weeks (Lasher, 2013). Utilizing the IRR is most helpful when attempting to evaluate the rate of return on a project or investment. Doing so, helps investors decide or project whether they will break even or make a profit. Understanding the outcome of the IRR is important for a project because it can give you information about whether to accept or reject. On the other hand with interests’ rates and banks you are looking at collecting interest at the end of a period which cannot create additional profit only set interest. Both IRR and bank interest are similar because they both have cash inflows; however they differ in the sense that one is gradually overtime and the other is one lump sum. In addition, another difference is the risk! With bank deposits you know exactly what is transpiring as far as interest, whereas with IRR it is not constant where you can track what the exact inflows will be. This adds a risk factor which is also in turn why it is very much possible to face a failing IRR which can result in rejection. In my opinion the best option for someone who is looking to be in “control” is to go with “bank interest” that way you know what your looking at with your investment and the outcome will be a win, whereas with IRR there is more risk for a flop.
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Q2
IRR, Internal Rate of Return focuses solely on rates of return. In terms of a business project, the initial project is an investment of the companys money and is seen as a financial asset (Lasher, 2017). The cash that is being spent on the project in the early stages of development is similar to an investor paying cash to purchase a stock or a bond. The cash flow that is coming into the project is the interest, the dividend payments recieved by the investor (Lasher, 2017). Banks interest is the amount the investor or lender charges for the ues of the assets expressed as a percentage that is often known as APR, or annual percentage rate. The assets borrowed are usually cash, consumer goods, vehicles or real estate which is different from IRR. Internal Rate of Return reflects what is being spent and what flows back into the project, whereas annual percentage rate charges borrowers for the consumer goods, cash, vehicles or real estate borrowed – this APR can go up dependent on the item borrowed by lender and their credit history.
IRR is like banks interest because regardless of where the cashflow begins or ends there is still interest being charged and/or paid over a certain period of time no matter the project or bank in which the lender uses.
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Q3
The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments. The internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero (Fernando, 2020). It can be thought of as the break even point. The interest rate is the external rate at which money can be borrowed from lenders.
Both IRR and interest from a bank deposit will provide cash flows. For instance, one provides a cash flow in the form of interest income over the deposit period and the other provides a large one-time inflow.
The IRR is the interest on capital expenditures of investments ignoring external factors.
Determined as a percentage, it is the interest rate that makes the cash flow outflows spent on an investment equal the cash inflows that come into the company as a result of the investment (Wright, 2017). Alternatively, the IRR is the interest rate that occurs when the net cash related to the investment equals zero.
At the end, it can be said that both the IRR and a bank’s interest rate are very similar. The main different is that one will provide a precise return, while the other can fluctuate.
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Q4
How would the incentive plans offered change with the age or marital status of the employee…or would it?
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Q5
In this post, I mainly analyze the compensation model and incentive plan of Bank of America. Bank of America (BAC) is one of the worlds largest investment banks and financial institutions, providing services to a wide range of customers.
First, the incentive plan is the establishment of a competitive incentive plan to achieve these goals by attracting and retaining productive employees (Snell & Bohlander, 2016). Bank of America’s incentive program aims to help customers, customers, colleagues, and communities succeed by providing the power of the company (BAC, n.d.). Just as Snell & Bohlander (2016) mentioned that a good incentive plan needs to determine important organizational indicators that encourage employee behavior and engage employees to provide fair and clear incentive relationships. Incentive plans are divided into individual incentive plans, group incentive plans, and corporate incentive plans. Bank of America’s performance-based governance framework provides employees with competitive compensation based on job requirements and personal performance. It also regularly compares salaries with other companies to improve competitiveness in the industry and market (BAC, n.d.).
From the perspective of individual incentive plans, Bank of America’s minimum wage strategy demonstrates its commitment to paying competitive wages to all employees and monitoring hourly wages to help keep their wages in line with industry trends Consistent. As BAC (n.d.) pointed out that the minimum hourly wage for US employees in 2019 has been raised to $17, and will continue to increase until it reaches $20 in 2021.
From the perspective of corporate incentive plans, especially high-level salaries. Bank of America’s companies uses a part of their total compensation as basic salary and the rest as variable salaries, most of which are provided as incentives based on deferred equity. As mentioned by BAC (n.d.), this helps to motivate executives to achieve sustained shareholder value and responsible growth.
The incentive plan strategy establishes performance thresholds for employees to qualify for rewards and emphasizes a common focus on organizational goals (Fotsch & Case, 2018). In other words, by expanding opportunities to motivate employees, create an operating environment that supports mutual commitments, and corporate culture and values
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u200brecognized by employees. Bank of America’s performance compensation model helps them focus on specific goals in the company’s work and also focuses on supporting the company’s cultural goals. The core of Bank of Americas growth strategy is its commitment to act responsibly, which includes our commitment to ethical behavior, acting with integrity, and complying with the laws, rules, regulations, and policies that strengthen this behavior. In other words, Bank of America has formed a responsible corporate culture while earnestly implementing its reward strategy.
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Q6
A clear compensation system is designed to convey to employees what is most valuable in the organization, thus enabling employees to focus their efforts and behaviors in a direction that helps the organization compete and survive in the market. The salary system can not only satisfy the staffs material conditions but also be an important symbol of the staffs social status and self-worth recognition. Next, I will use Microsofts incentive plan to analyze the relationship between incentive plan and corporate culture, organizational structure, and compensation system.
The establishment of corporate culture is consistent with the development of corporate strategic goals. It can strengthen the values in the organization and thus shape the behaviors of team members. Compensation can support and help managers to promote the development of values and corporate culture. Therefore, the design and establishment of a compensation system should punish and reward employees specific knowledge and skills according to the goals and expectations of the companys values. (Wagewatch, 2013) Microsoft advocates the value of Achieving our Mission all depends on building trust with people and organizations around the Globe. Microsoft wants to be a magnet for the best people by paying smarter, also, they want to attract and retain employees by offering real ownership and great long-term financial incentives. (Microsoft, 2003) Therefore, Microsoft offers long-term stock awards to employees to promote trust and harmonious working relationship with employees.
In 2011, Microsoft used an integrated approach to implement a more streamlined, flexible reward system across the company. The system provides employees with salary increases, annual bonuses, and Russ awards, which allow companies to target their compensation investments to key positions in disciplines that are most important to the companys success, such as engineering research and development. (Miller, 2012) For employees, a clear and targeted salary system can provide a clear direction for employees career development goals, and employees satisfaction with a salary can also be improved. For organizations, the adjustment of the salary system can provide rewards for employees with excellent performance so as to attract and retain talents. Those with high ability can always remain competitive, which can directly promote the efficiency of the implementation of organizational plans.
The reason for the successful implementation of incentive plans lies in the fact that enterprises can accurately cater to and meet the real needs and wants of employees. More and more, we observe that organizations are starting to pay employees based on the relevant skills they bring to their roles rather than traditional factors such as tenure, education (pedigree), or years of experience in the industry. (Hoof, 2017) Therefore, when making compensation strategies, managers need to understand the skills and needs of talents in detail and have an open and transparent dialogue.
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