“Pankration”: Nicasylus changes Throughout the Novel Essay

Throughout the novel Pankration, Nicasylus changes dramatically. Nicasylus was only considerate of himself and was very selfish; by the end of the novel he was kind, caring, unselfish and self-reliant. Nicasylus becomes less selfish through the novel, he faces his fears and learns to fend for himself and not rely on others as much. Throughout Nicasylus journey he becomes less selfish. Nicasylus starts out as a boy living in Athens who can have slaves do his every command. When the plague strikes Nicasylus is sent away on a boat which is attacked by pirates. The pirates held Nicasylus captive and he had his freedom taken away from him It was such a relief to be given the opportunity to clean of that smell that seemed to have permeated his skin. He climbed into the barrel and scrubbed fiercely at his body, while the crew stood about, staring and laughing rudely. Cadmus the Pirate sold Nicasylus as a slave and he was faced with adversity when he had to undertake tasks as a goat herder With no reason to enjoy life as a slave, Nic enjoyed the long haul up the mountain. The conditions were poor and Nicasylus had to learn to cope in the hard conditions and he became more self-relying because of it. Nicasylus had to face his fears both physically and emotional throughout the novel. Nicasylus journey to Pankration in Athens was full of obstacles. Nicasylus had to live in rough conditions being held captive on a pirates boat; he also had to defend himself against a wolf The stone struck the wolf between the eyes. It hit the ground, a landslide of heavy flesh, and the kid, not yet dead, rolled out of its jaws whilst he was as slave working as a goat herder. Nicasylus also had to escape from Amasis who kidnapped him. Nicasylus had to survive throughout many bad conditions by himself and he grew stronger, learning from these experiences. Nicasylus had to learn to fend for himself and be more self-relying. Whilst Nicasylus was sailing the Aegean Sea being held captive on the pirate ship, he had no-one to rely on, this was also the case when Nicasylus was sold as a slave and became a goat-herder The first months went past like a bad dream, Nic had not been brought up to clean, sweep, look after dirty animals or do any of the tasks he was set. Whilst Nicasylus was a goat-herder he had  to fight a wolf and with help from another slave (Tiso) he avoided death. During Nicasylus adventures he couldnt rely on others, he had to learn to be self-sufficient. When someone has other people to do everything for them they dont learn to do anything by themselves. At the start of Pankration Nicasylus was a selfish boy who couldnt do anything himself. Throughout the novel Nicasylus had to fend for himself and face his fears, this made Nicasylus appreciate what he has and made him learn to be more self-reliant. Therefore, this justifies Nicasylus changes dramatically throughout the novel PANKRATION.

Being an other Essay

In her essay â€Å"Being an Other† Melissa Algranati talks about how she didn’t know what race category she belonged to because of her ethnic background. Algranati’s father was born in Alexandria, Egypt and her mother was born in Maniti, Puerto Rico. She is a product of marriage, and her race is a Puerto Rican Egyptian Jew. She explains how her upbringing was different because of her parents’ different racial barriers. Algranati’s supports her issue and also gives emotional appeal about her childhood. By being different because she is a blend of multiple cultures Algranati and her parents had to face reality of growing up with a different ethnic background in America society. Algranati has a strong tone because she explains how she was faced with challenging her ethnicity. She really didn’t know what category she fell under from her being a mixture of races. â€Å"It was not until I took the standardized PSAT exam that I was confronted with the question: Who am I? (667). She was intertwined up and distraught because of herself identity. She felt lost because this was a moment of realization and there are a lot of issues circulating behind her race and ethnicity. Essentially, the only way she could classify herself was choosing â€Å"other†. When being intertwined in not knowing where you belong in society can be a great burden on someone. Furthermore, she’s really left with trying to figure out her true identity. Algranati connects with the reader by helping them understand her viewpoint of growing up in America with a different cultural background. With so many duel citizenships, because of parents from different traditions , life b ecomes complicated for Algranati and her family. â€Å"The only problem was that the difference in language and social status led â€Å"real† Americans not to consider them citizens† (668). With American society becoming more developed, the next generation is becoming programmed into thinking that certain cultures are below others, therefore confusing them and making them feel like they don’t belong. Algranati not only was from two different ethnicities but she had to deal with the humiliations and discrimination with her Puerto Rican and Jewish Heritage .Nevertheless, the issues behind color and a diverse background run very deep. Algranati states, that her mother was called a â€Å"white Hispanic† because of her outer appearance. She also says that once her mother’s English improved,  no one even noticed her true nationality unless she told them (669). People are quick to judge one another from the color of one’s skin. There are a lot of issues circulating behind race and ethnicity. For a country that is all about diversity and equal rights, it seems some cultures have an unfair advantage over others because of their cultural background. While a lot of immigrants feel they are being mistreated and denied opportunity to be a U.S. citizen, some children of different cultures feel they are being forced to suppress their ethnic backgrounds, to fit in with the dominating race in our society. The writer uses highly emotional language by describing how she was accepted in American society and later was rejected because of her cultural differences. In other words, Algranati was mistaken for another race. She states, how she was accepted by her friend’s father like a daughter until he realized her true uniqueness (670).Immigrants, end up becoming disliked and singled out because of their skin color or ethnicity. Because Algranati is of a different origin doesn’t mean that she should be treated unequal, no one wants to be separated from their social life. As a society most fear the unknown, but with everything changing drastically there is a lot of unknown. Society is already struggling when it comes to social class. Unfortunately, the disputes about race and where someone thinks you belong in society are very cruel because everyone just wants the best opportunities for survival. America is the land of the free, and no one should be denied the freedom to live a better life. With multicultural marriages giving way to mixed children, the families are being caught in the cross fire. Algranati may have been faced with different issues but in the end she embraced who she is. She may have not been an â€Å"All American Girl† but she has a place within society as a Puerto Rican Egyptian Jew. Life is a journey, no one wants to be singled out or treated cruelly because of the color of their skin or their ethnicity, but it happens practically every day. As far as this world has come, people still deal with race and social acceptance. Until society realizes, that the value of life is honesty and respect for one another, there will always be friction. When will this society be all about love and compassion for one another? As  human beings, all are created equally, so really no race is higher than the other. Society needs to learn how to support one another and learn to get along with each other. Most people want to be loved; if people learn to appreciate others not based on their outer appearance then society will be a much better place. Algranati, Melissa. â€Å"Being an Other† from Becoming American, Becoming Ethnic: College Students Explore Their Roots, Ed Sonia Maasik and Jack Solomon. Boston: Bedford, 2012. 667- 671. Print.

Power of Context Essay Essay

The power of context, written by Malcolm Gladwell, discuss’ many different social change theories such as the â€Å"Broken Windows Theory†, â€Å"Tipping Points† and the â€Å"Power of Context theory†. All of these theories were researched and studies performed to prove that we are influenced by the features of our immediate social and physical world, these shaping who we are and how we act. These theories have been seen in every part of town, Graffiti painted buildings and broken windows in vacant houses. Where there are news paper articles written about the few that have taken the initiative to turn their neighborhood around. Where neighbors rally to paint over graffiti, fix broken windows, make a park where once was a gang hangout. Where as sad as it may seem, most of the children fit into the description of the four youths who attempted to mug Goetz December 22 ,1984. Where Goetz was dubbed the â€Å"Subway Vigilante† after fighting back against he would be muggers, shooting them in the subway and later being acquitted on charges of assault and attempted murder. Goetz’ case has become a symbol of a particular, dark moment in New York City history, the moment when the city’s crime problem reached epidemic proportions or the â€Å"Tipping Point†. The â€Å"Tipping Point† where in epidemiology the â€Å"tipping point† is the moment when a virus reaches critical mass. Gladwell links these would have been muggers and the shooting to another theory, one that would change the atmosphere and quite possibly the culture of the neighborhood the thugs came from. The â€Å"Broken Window Theory† was the brainchild of the criminalogistics James Q Wilson and George Kelling. Wilson and Kelling argued that â€Å"crime is the inevitable result of disorder. If a window is broken and left unrepaired, people walking by will conclude that no one cares and no one is in charge. Soon, more windows will be broken, and the sense of anarchy will spread from the building to the street on which it faces, sending a signal that anything goes. In a city, relatively minor problems like graffiti, public disorder, and aggressive panhandling, they write, are all the equivalent of broken windows, invitations to more serious crimes.† (Gladwell, 237) The â€Å"Power of Context† theory that Gladwell writes about and the â€Å"Broken Windows Theory† are one and the same We have all heard the saying, â€Å"You are what you eat†. The same would be true in you are what you surround yourself with. I feel that the â€Å"Power of Context† is true in the context that if you live in a home you are proud of, you will be more confident in your self worth. If you surround yourself with people more intelligent than yourself, you will increase your mental aptitude. Those that set goals and stick to them seem to achieve more than those who never set goals. I feel that Gladwell did a great job in personifying the theories and arguing their relevance. Works Cited Gladwell, Malcolm. Gladwell, Malcolm. The Power of Context. Boston: Houghton Mifflin Harcourt and Publishing Company, 2009. View as multi-pages

Project planning and implementation Assignment Example | Topics and Well Written Essays - 2750 words

Project planning and implementation - Assignment Example Supporting Process Plans 14 4.1 Code of practice: Ethical issues for the B-Spoke Bikes project 14 4.2 Legal issues 15 4.3 Quality Assurance 15 4.4 Project support and maintenance 16 The system will be supported by the existing network system. The systems will also depend on other departments such as finance and human resource. The maintenance of the database system will be done by the IT specialist hired from external companies which offer database maintenance service. The maintenance process will be done monthly. An audit of the system will also be conducted monthly to check the system performance. 16 4.5 Process Improvement 16 4.6 Follow-up project 17 The current project will be followed by a website development project, which will avail the services to the clients, suppliers and the employees via the internet. The database project is the basis of initiating the website project because the user’s ability to use the database is a prerequisite to the website. The website proje ct will start as soon as the company management are satisfied with the employee’s ability to manipulate the business data using the database system. 17 5. References 18 1. Project Overview 1.1 Purpose, Scope, and Objectives The database system should ensure that the information about the suppliers, jobs, customers, staff and stock should be interconnected to ensure effective data sharing. The database system should generate reports that are used by the executive in decision making process. The project should be able to link the data therein should be shared linked to the finance and CRM system. The system should have an interface where the website will be linked. The clients, suppliers, employees and customers should be able to access the data in the database via the internet in future. This means that the database will have to be linked to the website. The integration will take place when the staffs have had excellent skills on the use of database system. All the project del iverables should be handled in accordance with the project charter and business case document. The B-Spoke Bikes database project is meant to automate the business operation of a B-Spoke Bikes company. The project should be is supposed to be completed within the stipulated time. The project covers the design and development of an access database system. The company should be able to achieve its business objectives using the database system. The database system should enable effective communication of data between different departments. The database system should automate all the business process in the company. 1.2 Assumptions, Constraints and Risks The project implementation team assumes that the B-spoke company have in place all the computer hardware and software needed during the implementation process. The project also assumes that the risks to the project remain the identified. There will be an effective collaboration between the implementation team, stakeholders and project fu nctions There will be consistent supply of funds required during the implementation process. Constraints and risks on the project are: The time that allocated for the project might not be adequate to ensure that all the project deliverables are handled effectively. The funds allocated to the project are limited. The project budget does not give considerations cost accruing due to unexpected risks. The human resources (database programmers and system testing team might be inadequate). This may alter the project completion time and

Researching in Business management 2 Literature review

Researching in Business management 2 - Literature review Example As per my research topic I chose that how efficiently UEL undergraduates are planning their future lives and choosing their career. This is a small scale research project where I have chose two different data collection methods they are questionnaire and interview among from three different data collection methods the last one is observation approach. This research is very important for the undergraduate students of UEL as well as the organization which ready to come to the campus to recruit these students and for faculties also. For students that they can evaluate themselves and start thinking straight for their future, teachers can have a clear prospective and view about their students thought process and it will be easy for them to help students accordingly. For industry recruiters that they can evaluate and find right mind for the right kind of profession in their respective organisation. 2. Research Methodology: 2.1 Methods Used: For this research I used both the pillars of mark eting research they are primary and secondary research approach. For primary research best way to complete that is survey method. For data collection approach as I said earlier that among the three different approaches (Questionnaire, Observation and interview), I choose two of them like Questionnaire and Interview methods. For students I chose questionnaire data collection method as they have enough time and patience to do that. But for industry experts and human resource management of various industries as they do not have that much time to evaluate each question and they are professionals so I chose to take interview data collection approach. One to one personal interview is a costly and time consuming one but this interview is best suitable for the qualitative answers from the professionals. As it is a small research so while on data analysis I have to take the help of secondary research as well. Quantitative questions are close ended type in nature here the response from the re spondents will be premeditative and there will be no chance of uncertainty. So compiling of these data will easier as the results are predetermined in nature. But for qualitative responses, response will be explorative and descriptive in nature. Primary research can be descriptive, explorative, causal or very casual in nature. Descriptive research will be at that time when the researcher is doing a research on a broader topic which base is situated among several topics but for explorative research the topic need to be out of the box kind of and very few or no previous research is done on that topic. Here researchers need to look forward to innovative responses and need to explore various approaches. For causal research, researcher will research on cause and effect of a given problem or research project. 2.2 Sample: The most appropriate sampling method is simple random sampling technique. For the students of UEL close ended, quantitative, questionnaire method is the best suitable sam ple technique and for industry experts and human resource department of various organisations qualitative, open ended, interview method is best suitable. As two type of research methods are taken for two different target groups, so questionnaire also will be split up into two different modules. For questionnaire research method the close ended

QuickBooks Online Payroll, Invoicing, and Payments Essay

QuickBooks Online Payroll, Invoicing, and Payments - Essay Example functions which include dealing with the purchasing orders, receiving inventory and subsequently making entering bills and making payments with regard to the purchased goods. It also deals with the accounts payable and ensures the appropriate payments are made to the creditors when they become due (Buteh, 2014). Customers belong to the next functionality and it comes after the vendors. This mainly deals with the accounts receivables and all the transactions related to the customers are recorded in this section. The functionality deals with the invoicing role and therefore all the transactions made with respect to the accounts receivable are recorded here. It also has an option that records the receipts from the debtors as well as those from the cash sales. It also records all the receipts that are associated with the sales made by the business. The employees functionality fall under the payroll function. A list of employees is made in this area and the relevant details in relation to all the employees are made. The details relating to their pay is also recorded as well as other benefits that accrue to them. All the employees who receive their pay in form of pay check should be categorized as employees. Another functionality of QuickBooks is the company. The main function of the company is t he chart of accounts and these are required every month when the company closes its books. Items and services are required in this area and are also important in the customers functionality since they allow the creation of bills. The chart of accounts helps to trace all the transactions to their relevant accounts and ensures that the final books of accounts are prepared with accuracy (Gilbert, 2005). There is also the banking functionality that is used to write checks, confirm the check register to track the transactions relating to the bank account and to print checks for clearance of the outstanding bills. It also ensures that the accountant is able to make the relevant

INDIVIDUAL STRESS AUDIT Essay Example | Topics and Well Written Essays - 1250 words

INDIVIDUAL STRESS AUDIT - Essay Example has been compiled, those which I feel are potentially stressful in my life at present. I have also described the situation, which I actually currently experience as stressful. I have also described the stressful situation, which I handle well and which is not stressful any more now. I have also described the signs and symptoms of the stress I personally experience currently and the ways in which I presently attempt to manage my stress and the successful situations.   Accroding to LeFevre, Matheny and Kolt (2003), adverse situations or adverse influences make people respond differently and the response of the people can be described as a set of psychological and physical behaviour, which is called â€Å"stress†. They further added that the adverse situation or the adverse influence is an external force is called ‘stressor’ which acts on a person. De Charms (1968) defined stress as the psychological and physical changes in an individual due to external forces. Lis t of My Stressful Situations I wonder if there is any person who does not have any stressful situation in his/ her life. ... The selection committee of my university didn’t select me for the football team this year for my poor performance in the selection match 3. My father divorced my mother for another woman 4. My sister is dating with a boy whom I hate the most Situations 1. My roommate is a careless and fussy boy and he always keeps the room dirty and untidy 2. My friends and my girlfriend are angry with me as I am not able to give them adequate time since I am terribly occupied with my studies 3. My mother is broken after my father left and she is all alone at home. I need to meet her but I don’t have time Responsibilities 1. I have to score good grades in my finals so that I get a good job at the soonest 2. I have to earn my for myself and my mother and sister as there is no earning member in my family after my father 3. I have to buy a gift for my girlfriend as her birthday is close Pressures 1. I have the dual responsibility of scoring good grades and earning for my studies and liveli hood 2. I have to finish the project within two days which I have not started yet and I have a scarcity of time. 3. I need a good job as soon as possible but I need to pursue some professional courses for which I neither have time nor money Others 1. I am a very average looking person with a lean physique and with no charms in my personality and I hardly influence others 2. I am very shy and introvert Signs and Symptoms of Stress Above mentioned events, situations, responsibilities, pressures, etc. are quite stressful for me and they have affected me tremendously and I noticed many physical and psychological signs and symptoms when I am under stress. Most of the time I suffer from headaches and constipation and my mouth dries when I think about my stresses.

Law - Employment Essay Example | Topics and Well Written Essays - 3000 words

Law - Employment - Essay Example This large segment of the workforce (sometimes referred to as 'atypical' or 'economically dependent workers') includes agency workers, casuals and freelancers. The issue is especially significant from the industrial relations point of view since economically dependent workers do not generally benefit from the protections granted to employees both by law and collective bargaining, including provisions on health and safety, information and consultation, working time, vocational training and social protection. In addition, they do not have the benefit of trade union representation. The real question from the standpoint of atypical workers appears to be; do they have, in effect, an implied contract of employment The contract of employment is accepted to be the basis of any actual employment relationship in the UK. Hence, it effectively becomes the principles of contract law that define every aspect of employment law. The courts, however, have consistently viewed the employment relationship as essentially different from most contracted relationships. This is essentially due to the fact that there is normally a distinct inequality in the actual bargaining power in such a relationship.1 Nearly one third of all individuals in the UK have working arrangements that are prone to difficulties when establishing employment status according to legal tests. These workers commonly fall between definitions of 'employee' and 'self employed' but are generally classified for legal purposes as 'self-employed'. According to Greene2, in the UK context they are most commonly termed (although not official classifications) as: 'dependent self-employed': workers who are classified as self' employed but who are often reliant on one employer 'false or bogus self-employed': an individual who objectively speaking is an employee but who, for reasons connected to the evasion of regulatory legislation is described as self-employed by themselves and/or by their employer 'borderline self-employed': an individual whose legal status (employee or self-employed) is unclear.3 The category of workers affected by this situation is broad, ranging from low paid manual workers to high-paid information technology staff, journalists and creative professionals. A worker defined as 'self employed' is usually barred from employment protection law, although they do pay lower rates of income tax and can claim back certain expenses against tax. Studies indicate that the majority of such workers in the UK are in Establish Employee Status 4 traditional job sectors (rather than high-paying creative and IT sectors). Their work is often characterised by less employment protection.4 Often these ambiguous training opportunities, increased risk of accidents, uninsured losses, longer hours and less working arrangements are compatible with those considered 'non standard', including casual, zero hours, home, agency, portfolio and freelance

Physical Environment Of South And East Asia Essay

Physical Environment Of South And East Asia - Essay Example The islands have not be left behind as they also boast of rivers such as the Borneo and the Indonesian rivers. Extensive lowland is also another feature that is evident in the region and is separated by the mountain ranges and the forested hills. As a resulted of the physical conditions in the region, the people are taking part in rice planting on the fertile plains. This is seen in places such as Burma and Vietnam. Long coastlines have formed an important physical aspect of the region that promotes trade among the people and movement from one region to another. Another evident physical feature in the region is the presence of the seas that are marked by shallow ends and few deep underground trenches. As a result, they are warm throughout the year and are not saline. These conditions are favorable for the growth and prevalence of sea fish, coral, and seaweeds. The region’s landscape is dominated by mountains whose peaks are below ten thousand feet. The mountains form a very in tegral part of the region as they seem to create political and geographical boundaries. Indian and China are separated by the Northern and Western highlands thus forming a major factor that separates the two regions. Cordilleras in the region are three and seem to run north to south. The cordilleras include a Bilauktaung range that lies between Thailand and Myanmar, the Arakan Yoma range that is located in western part of Myanmar and the Annam Cordillera that marks the boundary between Vietnam, Laos, and Cambodia.

Homosocial Communication Practices Essay Example for Free

Homosocial Communication Practices Essay The issue on mixed or single gender school has raised very many arguments; interestingly there is no profound truth that single-sex schools provide quality education compared to mixed school. But mainly the choice of school depends on where the parent fill their child won’t get good education. The school choice can as well be determined by the individual child’s abilities and weaknesses. Being a parent with a school going girl child, and with much interest to sent her to a public school, my choice would be in a K-12 single-sex school for girls. The reasons behind my decision are that single-sex educational setting often controls student’s academic ability. Girls and boys do better in single-sex schools than in mixed-sex schools (Becker, 2001). Single-sex girl’s schools provide them with confidence and achievement; this is evident since they can take non-traditional courses considered for boys especially advanced mathematics and Physics. The girls have freedom of expression in absence of boys who would make jokes upon what the girls say assuming they where in a mixed class thus learning becomes more comfortable (Forgasz Leder, 1995). Better expression gives the girls the much desired inside to conceptualize scientific concepts. There is also a better teacher-student relationship because teaches do not compare between different sexes. The single-sex class setting provides and creates very many opportunities that cannot exist in mixed classes, these opportunities result to better understanding of life concepts Teaches in single-sex schools undergo specialized training on how to interact with the students thus a one-to-one specialized handling of issues which would otherwise not be solved in a mixed gender school, test scores and grades improve significantly (Forgasz, Leder, 1995). The major disadvantage of same sex school for my child is that they lack enough exposure in interacting with opposite sexes; this reduces their level of maturity and even self-discipline. These can result in shy behavior traits since they lack exposure Later in life it becomes a big challenge interacting with men since they lacked the exposure, do not understand their beliefs and way of life from their early ages. Emotional development is as well not fully established in their lives (Haag, 2000). The establishment of single sex schools means that districts must have twice the number of school as opposed to if they had mixed sex schools within the same district. The number of teacher employed is twice even if classes are small and uneconomical teaching. These would result to a nightmare in timetabling, logistical and budget challenges. This could affect the quality of education being offered within the institutions. The required same-sex education skills and extra training provided to the teachers handling these classes may not be provided and the full benefits of the single-sex school may not be accomplished in the long run (Edison Penelope 1982). In conclusion, though same sex school offer children all the opportunities to effectively explore and maximize their potentials in an open and friendly environment, they mainly equip the young ones with one side of what they need in life which is the academics and offer less of other life knowledge skills required later in live. So as parents we must be considerate on our children whole being without laying much emphasis on the academics and ignoring the social part of life. References Edison T. Penelope T. (1982). The independent school experience: aspects of the normative environment of single-sex. Journal of Educational Psychology. Becker, J. R. (2001). Single-gender schooling in the public sector in California: Promise and practice. Forgasz, H. J. , Leder, G. C. (1995). Single-sex mathematics classes: Who benefits? Lawrence Erlbaum Associates. . Haag, P. (2000). K-12 single-sex education: What does the research say? ERIC Digest.

Aseptic Technique And Cell Counting Biology Essay

Aseptic Technique And Cell Counting Biology Essay Introduction to Aseptic techniques In microbiological and biochemical engineering studies, one almost always deals with a pure culture or a mixture of known cultures, except perhaps in waste water treatment studies. Unless aseptic culture techniques are followed strictly, an originally pure culture will definitely become contaminated with other unwanted species. The use of a contaminated culture with unknown microorganisms will only lead to incredible results that are of little value. Thus, isolation and maintenance of a pure culture is of utmost importance in many microbiological studies. It is especially important to work with a well-characterised strain if the microorganism is used for a food preparation, as well as in antibiotic production where the product is to be taken internally. The need for a clean working environment in biological engineering studies is a must and cleanliness is the prerequisite for any meaningful work. The environment we live in is full of microorganisms capable of surviving in any condition. When working with microorganisms it is desirable to work with a pure culture. A pure culture is composed of only one kind of microorganism. Occasionally a mixed culture is used. In a mixed culture there are two or more organisms that have distinct characteristics and can be separated easily. In either situation the organisms can be identified. When unwanted organisms are introduced into the culture they are known as contaminants. Aseptic technique is a method that prevents the introduction of unwanted organisms into an environment. An example of using aseptic techniques is when growing bacteria; aseptic techniques are carried out to prevent the contamination of the culture. When working with microbial cultures aseptic technique is used to prevent introducing additional organisms into the culture. Microorganisms are everywhere in the environment. When dealing with microbial cultures it is necessary to handle them in such a way that environmental organisms do not get introduced into the culture. Microorganisms may be found on surfaces and floating in air currents. They may fall from objects suspended over a culture or swim in fluids. Aseptic technique prevents environmental organisms from entering a culture. Doors and windows are kept closed in the laboratory to prevent air currents which may cause microorganisms from surfaces to become airborne. Once these microbes are airborne they are more likely to get into cultures. Agar plates are held in a manner that minimizes the exposure of the surface to the environment. When removing lids from tubes, lids are held in the hand and not placed on the countertop during the transfer of materials from one tube to another. Introduction and aims of this report This report was based on two lab sessions; the reason for undertaking two lab sessions was to allow time for the culture to grow. In these sessions the objective was to learn basic aseptic techniques that are required in a lab, and also to learn how to count cells effectively using different methods. Another thing which was trying to be achieved was to be able to grow a colony of bacteria from a single cell by doing streak plating and serial dilution. Overview of practices and uses of aseptic techniques The laboratory session involved learning about the aseptic techniques. These aseptic techniques are important in a lab because they help keep the lab sterile, and sterility is vital in a lab because it allows the scientist to study and grow the bacteria they require accurately. Sterility is also important in preventing bacteria that are not required from replicating and growing on the sterile growth medium or the agar plate. There were a few aseptic techniques we had to follow while working with bacterias and sterile growth medium. To prevent the growth medium from being contaminated by air bore bacteria and other free floating matter, a Bunsen burner was set up near where the growth medium and bacteria samples were to be used. The Bunsen burner created a convection current that killed and destroyed most of the air borne bacteria and other free floating matter near the work station. This reduced the chance of the growth medium and bacteria samples from being contaminated. The Bunsen burner was also set up to allow the use of another technique called flaming. This technique involves passing through the flame of the burner anything that has come in to contact of any bacteria or anything that is about to come in to contact of the bacteria sample. The items that are flamed are lab equipment such as bacteriological loops, glass pipette and bottle or flask necks. The items must reach a temperature of over 100 oC for it to be sterilized. Another aseptic technique is called manipulation. In this technique the smallest finger is used to remove the lid of the bottle containing the bacteria; this allows the rest of the fingers to pick up anything else that is required. This technique also ensures the lid of the bottle is not placed down onto the bench where it is liable to contamination and thus contaminating the culture of bacteria in the bottle. The last but the most important aseptic technique is who someone prevents bacteria from themselves contaminating the lab and the equipment. Every person carries a large amount of bacteria inside and the outside of the body. When working with bacteria in a lab, we had to wearing a lab coat, this prevent bacteria from our clothes and bodies spreading out in the lab. Also we had to be careful that we dont cough or sneeze on the growth medium, as this would lead to the growth of the bacteria released by the body. Also after performing the experiment it was vital that hands were washed with antibacterial soap to help prevent cross contamination. If hands are not washed correctly and if bacteria are still left on hands they are able to multiply at an exponential rate and can cause bacterial infections. The first part of the experiment was to see the different variation and amount of bacteria on hands pre wash and after wash. This was done by placing the fingers in a Petri dish with nutrient agar. Nutrient agar is a microbiological growth medium commonly used for the routine cultivation of bacteria. The dish was separated in two and was labelled with one side of dish having prints from pre washed fingers and the other side after wash. The dish was then placed into incubation at 37 degrees as it is the optimum temperature where bacteria are able to multiply at an exponential rate depending on some factors an example being the amount of food available or space. The next part of the experiment consisted of doing a streak plate. This was done using the bacteria Staphylococcus aureus. Small sample of the bacteria SA was taken and put on a on a sterile loop and streak an agar medium. An example of the streak plate which was carried out is shown on the diagram below: Diagram to show procedure of streak plating    1.   Flame the loop and wire and streak a loopful of broth as at A in the diagram.    2.   Reflame the loop and cool it.    3.   Streak as at B to spread the original bacteria over more of the agar.    4.   Reflame the loop and cool it.    5.   Streak as at C, D E and F following same procedure after each streak as quoted above.    6.   Label the plate and incubate it inverted. The next part of the first session was to do serial dilution. This allows you to determine the number of cells in a bacterial culture. Since bacterial cell numbers are usually very high in the original sample, plating out this sample in an undiluted fashion would just lead to the creation of a bacterial lawn (a smear of many, many individual bacteria colonies that are all growing next to or on top of one another). Bacterial cell numbers need to be reduced, which is done by repeatedly diluting the amount of bacteria in the sample. A small amount of bacteria sample is mixed with a diluent solution (such sterile broth), and then successive dilutions are made. A small amount of each of the diluted bacteria samples is then spread onto an agar plate. The numbers of bacteria colonies that grow on each plate are counted. By working backwards using multiplication with the dilution factor (the number of times that you have diluted the bacteria sample with the diluent solution), we were able to make a determination of the numbers of bacteria in the original sample. After the dilutions were created 100  µl of each dilution was transferred to an agar plate using a pipette, it was then spread around the agar plate with a spreader. These six agar plates were then put into incubation at 37  °C for 24 hours. When spreading the bacterial lawn the plate with the dilution level 10-5 was done first and then th e others 10-4, 10-3, 10-2 .this is because the spreader which was used was plastic so the lower concentrated bacterium was spread first as the plastic spreader could not be flamed to kill the bacteria. If this aseptic technique was not used and the highest concentration of bacteria was used first it would have meant that the bacterial dishes would have become contaminated and also single colonies of bacteria would not be gained. If a glass spreader was used then it could have done in ascending order as the glass could be flamed by placing ethanol on the surface killing the bacteria on the glass spreader before doing the next part of the serial dilution. The final part of the first lab sessions was to prepare smears of bacteria for gram staining. Gram staining is a common technique used to differentiate two large groups of bacteria based on their different cell wall constituents. The Gram stain procedure distinguishes between Gram positive and Gram negative groups by colouring these cells pink or purple. Gram positive bacteria stain purple due to the presence of a thick layer of peptidoglycan in their cell walls, which retains the crystal violet these cells are stained with. Alternatively, Gram negative bacteria stain pink, which is attributed to a thinner peptidoglycan wall, which does not retain the crystal violet during the decolouring process. Gram staining involves three processes: staining with a water-soluble dye called crystal violet, decolourisation, and counterstaining, usually with safanin. Due to differences in the thickness of a peptidoglycan layer in the cell membrane between Gram positive and Gram negative bacteria, Gram positive bacteria (with a thicker peptidoglycan layer) retain crystal violet stain during the decolourisation process, while Gram negative bacteria lose the crystal violet stain and are instead stained by the safranin in the final staining process. The process involves three steps: 1. Cells are stained with crystal violet dye. Next, a Grams iodine solution (iodine and potassium iodide) is added to form a complex between the crystal violet and iodine. This complex is a larger molecule than the original crystal violet stain and iodine and is insoluble in water. 2. A decolouriser such as ethyl alcohol or acetone is added to the sample, which dehydrates the peptidoglycan layer, shrinking and tightening it. The large crystal violet-iodine complex is not able to penetrate this tightened peptidoglycan layer, and is thus trapped in the cell in Gram positive bacteria. Conversely, the outer membrane of Gram negative bacteria is degraded and the thinner peptidoglycan layer of Gram negative cells is unable to retain the crystal violet-iodine complex and the colour is lost. 3. A counter stain, such as the weakly water soluble safranin, is added to the sample, staining it pink. Since the safranin is lighter than crystal violet, it does not disrupt the purple coloration in Gram positive cells. However, the decolourised Gram negative cells are stained pink. (The descriptive methods are shown in the handbook for all experiments.) Results for the gram staining After following the method as stated in the handbook we examined the slides under a microscope using the oil immersion objective of 100x. We then noted the shape of the bacteria that could be seen and the colour being purple (Gram positive) or pink (Gram negative). Below are the traces of the bacteria which could be seen under the microscope. Figure 1 Staph aureus gram positive (purple) Description of what could be seen: Cocci shaped bacteria Irregular clusters of bacterial cells Figure 2 Bacillus cereus gram positive (purple) Description of what could be seen: Rod shaped bacterial cell Singular bacteria Figure 3 Saccharomyces cerevisiae gram positive (purple) Description of what could be seen: Cocci shaped bacteria Clusters of bacteria closely packed Smooth Figure 4 E-coli gram negative (pink) Description of what could be seen: Rod shaped bacteria cells Linked (string like, filamentous) Results of the experiments After 24 hours the agar plates with the bacteria were ready to be viewed. Firstly the agar dishes with the hand prints were viewed. Below is a diagram of the agar dish and the bacteria which was present: There are different bacteria which were present while observing the dish, they were the following A The first bacteria which were seen and labelled as A were the largest of the three visible colonies which are circle in shape and yellow in colour with smooth edges, they can be seen to have a slightly humped surface. B These are slightly smaller in size than the ones described above and are also circle in shape but are white in colour, again the edges are smooth and the surface is humped. C- These bacterium were only seen after washing hands they had no specific shape and were a lighter colour which was not very clear. They were flat with rough edges. Before wash After wash The next dish which was observed was the streak plating dish, this had been left to incubate for 24 hours also. The results are shown on the picture below: A sample of Staphylococcus aureus was inoculated onto an agar plate using the streak plate method. From this diagram it can be seen that part 1 shows a higher concentration of bacteria. Parts 2, 3 have fewer bacteria but still there are very few single colonies. Part 4 shows many different single colonies of Staphylococcus aeurus and are easily visible. The final dish which was viewed after 24 hours of incubation was the dish containing Staphylococcus aureus where it had been diluted to 10-5. These results can be seen below where there is diagram of the Petri dish including the bacterium. From counting the colonies on the dish the figure which was calculated was 486. The amount of colonies calculated was still quite high as the preferred number of colonies would have been from 30-300. This may have been achieved if the serial dilution was carried further. To calculate the amount of cells in this agar plate first the following was done: 0.1ml of solution = 4.8610-2 (486) 1ml of solution = 4.8610-3 so as it was the serial dilution of 10-5 the calculation was then multiplied by 5 to give the final answer number of bacterial cells = 4.8610-8 The last part of the lab session was to count cells using an Improved Neubauer Counting Chamber also sometimes known as a haemocytometer. The main objective of this session was to be able to calculate the total cells in the given sample. Below is a diagram of a haemocytometer with the slide placed over it: The haemocyometer contains 9 large squares under the microscope at the 40X lens. The area of the square can be measured at 1mm2. The way to distinguish these squares from one another is by the tripe dense lines. Within each large square there are smaller grids which can be used to help during counting. Also when the counting the bacteria cells there was a set way to do this as shown below in the diagram:- Bacterial cells So as can be seen in the diagram if the bacteria cells are at placed on the edge of the small squares then they will not be recorded. The orange lines representing cells will not be recorded as they are the end of the grid. 3 dense line separating each large square The way the cells were counted was to identify which squares were going to be used to observe and calculate the number of bacteria present. The way this was done was there were 9 squares and only 5 squares were chosen as shown in the diagram below: Squares 1, 3, 5, 7 and 9 were the squares which were used to count the bacteria. Once the haemocytometer was set and the proposed samples were placed into the counting chambers and then placed under a microscope to view (extended method is described in the module handbook). The cell count was done for two different cell suspensions whole blood (ovine) and brewers yeast (Saccharomyces cervisiae) the samples were not diluted. They were then counted and the results are shown in the table below. Table to show cell count from haemocytometer for the whole blood Square Number Number Of Cells Present 1 50 2 48 3 47 4 48 5 44 Total 237 To calculate the total cell count in the neat solution a calculation was needed. Firstly the average number of cells was needed to be worked out. The sum was 237/5=47.4. To work out the cell number it was multiplied by 110-4=4.7410-5 So then finally to work out the cell yield the number of cells/ml was used which was 4.710-5 and was multiplied by the total volume of 10ml and thus the yield calculated was 4.7410-6. Table to show cell count from haemocytometer for the Brewers yeast Square Number Number Of Cells Present 1 22 2 20 3 15 4 9 5 15 total 81 The same steps were taken to work out the cell number and yield for the Brewers yeast. Cell number = 1.6210-5 Cell Yield = 1.6210-6 Table to show cell number and cell yield of both samples Brewers yeast Whole blood Cell number 4.7410-4 1.6210-5 Cell yield 4.7410-6 1.6210-6 Discussion of results In this part of the report I will refer to the results obtained and assess if they were accurate or not to the study of aseptic techniques. Firstly the practical which involved looking at bacteria on the skin showed that after washing there was fewer bacteria but another form of bacterial cells started to grow. The reason for this could have been that when closing the taps I may have used my hands. The taps in the lab are made o be closed by the wrist so the bacteria is unable to come in contact with the surface of your hands. The reason for this is because if you wash your hands and then close the taps with your hands again then you are just collecting the bacteria off the taps again. In some cases the amount of microbacterium on the skin can increase after washing, this is because by covering the skin with water you are making conditions for microrganisms more favourable and thus more will grow. It is therefore understandable that the growth of microorganisms will depend upon the c hemical composition of the skin, for example if it is dry or whether it has a low pH. Most microorganisms that are present on the skin are located near hair follicles or sweat glands this is because they provide the nutrients and the correct environment for there growth. Also another reason for the bacteria still being there after washing hands on the agar dish was because of the process of washing hands. The process of washing hands should be done surgically as there is not such thing as part sterile. So to make sure that all germs and bacteria are washed away from skin the procedure of hand washing should be followed correctly. There are over 100 different types of bacteria on hands. The most common types of bacteria found on hands are familiar household names: Propionobacterium (the bacteria responsible for acne), strep, and staph (of which the infamous methicillin resistant staph aureus, MRSA is a subtype). Not all these bacteria are harmful as skin infections do not arise because you have bacteria on your skin. Rather, they arise because the type of bacteria on infected skin is not healthy bacteria but aggressive pathogenic bacteria. Streak plating discussion From looking at the results obtained from the streak plating it can be seen that the streak plate was not very accurate as the intended result was not achieved. The aim of this experiment was to try and gain single colonies but the problem with the streak plate which I had carried out was that there was not enough room for the single colonies to advance. This was because the initial inoculation streaks were too thick and so took up too much space thus leaving little space in the middle of the plate for single colonies. It is therefore required that the initial streaks are made thinner and cover, as a rough estimate, the outer 2cm of the agar plate thus, leaving plentiful space at the centre of the plate for single colonies to grow. The problem with this procedure is that each colony may not represent the progeny from one cell, as two or more cells which are very close together could appear as one colony. Another problem which may have caused difficulty achieving single colonies may h ave been the concentration of the bacteria. If the bacteria were diluted it may have helped to achieve single colonies. The single colonies which were achieved were all similar to one another this shows that the bacterium which was present in them colonies was the same bacteria. This was achieved as the inoculating loop was sterilised each time so only the bacterium which was being used grew on the agar dish. Gram Staining In this part of the practical there were four different bacteria which were tested by using the gram staining process to see if they were gram positive or gram negative. The first bacterium was Staphylococcus aureus, Bacillus cereus and Saccharomyces cerevisiae which were gram positive bacterium as after testing the bacteria under the microscope it showed that it was stained purple. The SA under the microscope was seen like a bunch of grapes as its names suggest as Staphyle in Greek terms meant grapes. Staphylococcus aureus is a bacterium, frequently living on the skin or in the nose of a healthy person that can cause illnesses ranging from minor skin infections and abscesses, to life-threatening diseases such as pneumonia, meningitis, endocarditis and septicemia. The Bacillus cereus is a facultative anaerobic bacterium associated with food poisoning in humans. The food poisoning is a result of ingesting toxins produced by the bacteria. B. cereus is widespread in the soil and the food industry in such foods as herbs, spices, milk, and vegetables. Transmission of this disease results not only from contaminated foods, but also from improper food handling/storage and improper cooling of cooked food. The bacteria seen under the microscope and as can be seen in the diagram (figure 2) shows the bacteria as rod shaped bacteria which do not cluster together and are separated around the slide, in different directions and are not in any particular order as they all in different angles. The Saccharomyces cerevisiae is also known better as yeast which could be used for baking or used while making alcohol. These cells where seen under the microscope as single cells which were rounded shaped cells and were closely packed together in groups. The last bacterium was the E. coli which was stained pink as this was a gram negative bacterium. This bacterium is found in animals and birds in the lower intestines it helps with the digestion of food. If E. coli is ingested it will cause the small intestine to become inflamed. People can contract an E. coli infection by drinking contaminated water, eating fruit or vegetables that have been watered with contaminated water, drinking unpasteurised milk, or eating undercooked ground meat. In Gram-positive cells, peptidoglycan makes up as much as 90% of the thick cell wall; more than 20 layers of this polymer stacked together. These peptidoglycan layers are the outermost cell wall structure of Gram positive cells, whereas in Gram negative cells, the thinner peptidoglycan component is covered by an external lipopolysaccharide (LPS) membrane. Serial dilution agar dish 10-5 This practical was done to see if individual colonies were able to be produced so the cells could be counted. The main aim was to reach from 30 -300 individual colonies. The amount of colonies which I produced in my agar dish was calculated and counted at 486. The method used was to try and calculate the number of cells in 1 ml solution of SA. This could only be done by serial dilution as it would be too difficult to count the cells if the bacterium solution was not diluted. The other dishes had too many colonies to count just by using the naked eye because it looked like a bacteria lawn. To try and achieve a better result and fewer colonies the experiment could have gone further and instead of having a concentration of 10-5 the solution could have been diluted further. By diluting down the solution it also allows the bacterium to grow in optimum conditions as they do not have problems such as less space or food. Cell counting using a haemocytometer In this part of the practical two solution were supplied and cells were counted by the use of a haemocytometer and a microscope. While counting the bacteria it may have been misjudged as some bacteria may not have been counting this is one reason why the number recorded were quite low as the solution was not diluted as well. Also when counting the bacteria its a total cell count so it is the living and dead bacteria so the results are not as accurate if only doing a live cell count. A better idea would be to do a serial dilution when doing a live cell count as only the living cells will grow into individual colonies. For the whole blood the amount of cells which were calculated was 237 and in the brewers yeast there were 81 cells. A reason for the brewers yeast having less amount of cells maybe that the cells form flocks of cells so it may be hard to visually see separate cells so when counting them a few cells may be counted as one cell. Also when counting these cells the same perso n was used to count the cells in both solution the reason for this being as different people have different judgments and by using the same person it will help gain fair and more accurate results.

General Dynamics and Lockheed Martin Comparison

General Dynamics and Lockheed Martin Comparison Financial Statement Analysis General Dynamics vs. Lockheed Martin Executive Summary: This analysis provides a comparison of two major companies within the Aerospace and Defense industry, General Dynamics and Lockheed Martin. General Dynamics had an ROE of 25% whereas Lockheed Martin was 49% demonstrating LMT has a higher spread and generated a higher amount of return above its cost of equity capital as compared to GD. GD generates a higher NOPAT margin over LMT (9.4% and 7.8%, respectively) allowing GD to contribute more to ROE as a result of the decreased effect interest expenses have on net income with respect to total sales revenue. LMT has a considerable advantage for generating increased asset turnover, by generating $1.37 for every dollar as compared to GDs $1.08 for every dollar spent on company assets. General Dynamics stock is extremely undervalued (estimated $77.71 compared to closing price of $57.79) whereas Lockheed Martins stock was slightly overvalued ($85.93 compared to closing price of $84.08). Equity valuation indicates that investors were overly opt imistic in LMTs earning potential and pessimistic for GDs earning potential. Despite the valuation, the destiny of this industry remains dependent on governments decisions to decrease military spending, which will have a negative impact on both companies. However, expansion of commercial airlines and partnerships with healthcare industries will have a positive effect on these companies and overall this industry will have a neutral outcome for the upcoming year. General Dynamics (NYSE: GD) General Dynamics is the sixth largest defense contractor in the world and the second largest maker of corporate jets. The company maintains four business groups including aerospace, combat systems, marine systems and information systems and technology. Net earnings for the company increased from 2006-2008 ($1.86 to $2.46), a 24% increase over 3 years. Sales for all groups increased from $24.1 to $29.3 billion from 2006-2008, a 17% increase. The company is based in Virginia and gets 67% of its revenue from the Department of Defense. The aerospace group generated $5.5 billion (19%) in sales in 2008, mostly due to Gulfstream business jet, which include long-range and ultra-long-range jets. In response to the downturn in the economy, the production of large-body and medium-size aircraft were reduced from 87 to 73 and 69 to 24, respectively, in 2008. In product development, Gulfstream introduced 2 additions, which are the ultra-large-cabin, ultra-long-range G650 and the super-mid-size G250. Production of both of these aircrafts, which enter into service in 2011 and 2012, are foreseeable income generators based on orders placed in 2008. The combat systems group generated $8.2 billion (28%) in sales in 2008, mostly driven by demand for combat vehicles, specifically Mine-Resistant, Ambush-Protected (MRAP) vehicles. The combat system group makes, repairs and supports wheeled and tracked armored vehicles and munitions. Combat system product lines include combat vehicles, guns and ammunition systems, mobile bridge systems, armor, chemical, biological and explosion detection systems. Future opportunities include delivering hundreds of tanks and armored vehicles to Saudi Arabia between 2010 and 2012. The marine systems group generated $5.6 billion (19%) in sales in 2008, extremely productive as compared to 2007. The group delivers destroyers, submarines, logistic ship and the first commercial product carrier. Upcoming contracts include doubling production to two submarines per year beginning in 2011, which is predicted to increase revenue and earnings over the next three years. The information systems and technology generated $10 billion (34%) of sales in 2008; its biggest achievement developing a battlefield communications network program and Joint Tactical Radio System (JTRS). Customers include federal civilian agencies and commercial customers, which primarily focus on electronics for land, sea and air-based weapons systems. The acquisition of two companies in the tactical communications and healthcare information technology field are indicative of the direction this group will be making in the upcoming years. Information gathered from Morningstar1, SP500 Industry reports2 and www.generaldynamics.com3 Lockheed Martin (NYSE: LMT) Lockheed Martin is the worlds largest military weapons maker, deriving 84% of its net sales from the United States government, including the Department of Defense. The company is comprised of four operating systems including aeronautics, electronic, space and information systems and global services. Net sales increased 7.3% from 2006 to 2008 ($39.6 to $42.7 billion) and earnings increased 21.8% over three years ($2.5 to $3.2 billion). The company operates in Maryland and employs 146,000 people. The aeronautics segment generated 27% of sales ($11.5 billion) in 2008. The segments primary production are the F-35 Lightning II combat aircraft which is projected to be completed in 2010. The aeronautics segment is focused on making fighter jets and military transport planes and on unmanned military aircraft. The segment also operates the Global Sustainment enterprise to ensure success throughout the life cycle of its aircraft. The electronics systems segment also generated 27% of sales in 2008 and primarily makes land, sea and air-based missiles and missile defense systems. Specifically, this segment is focused on maritime systems and sensors, missiles and fire control, and platform, training and energy. This system also manages and operates the Sandia National Laboratories for the US Department of Energy. Current projects include the Terminal Altitude Area Defense System (THAAD), the Ballistic Missile Defense system and the firehead control system for the Apache helicopter. The space systems segment generated 19% of sales ($8.2 billion) in 2008. This segment is comprised of satellites, strategic and defensive missile systems, and space transportation systems. The US government customers accounted for 96% of this segments sales in 2008. An ongoing partner is NASA; the LMT-built Phoenix Lander will continue to rove on Mars. Another venture is with Boeing, the United Launch Alliance, which provides satellite launch services to the US government. Information systems and global services segment account for 27% of sales in 2008. This segment contains mission solutions, information systems and global services. The US government customers accounted for 93% of the segments sales in 2008. Major products/programs include communication systems, mission and combat support solutions, civil agency programs (US Census), the FAA Automated Flight Service Station, the FBIs Sentinel IT program, and various NASA programs. Collaborations and partnerships with companies around the globe enable Lockheed Martin to grow its international business both with government and industry. The establishment of Lockheed Martin Australia in 2009 indicates an international interest to grow and expand. Information gathered from Morningstar1, SP500 Industry reports2 and www.lockheedmartin.com4 Industry Outlook: Aerospace Defense The aerospace and defense industry relies heavily on US government allocation and the upcoming year will likely bring budget cuts to the defense budget in 2010. However, there are predictions that the conventional military equipment is aging and once the Iraq war ends, there will be a need for repair and replacement. Due to the high levels of deficit spending and an increasing trend for social spending, it is likely there will be cuts in defense spending and the outlook for this industry will decline. On the other hand, it is estimated that there will be an increased growth of global passenger air traffic in 2010 as compared to a decline in 2009. This is based on positive air traffic growth since comparison between 2009 and 2010. Aircrafts that are less fuel-efficient in the US will also need to be upgraded and replaced with newer aircraft. The industry predictions are moderate production cuts at Boeing and Airbus, and declines in the business jet markets due to falling corporate profits. The industry outlook is therefore at a neutral rating, due to decreased military budget but increased commercial air traffic for 2010. Competition in the industry (Boeing, Northrop Grumman, Honeywell and Raytheon) will strive for contracts within the industry. Many of these defense contractors will face uncertainty from upcoming government decisions in the next year and hence the neutral outlook for this industry. Information gathered from Morningstar and SP500 Industry Reports Financial Statement Adjustments The following table contains information on the cumulative adjustment to General Dynamics and Lockheed Martins financial Statements. Adjustments General Dynamics Lockheed Martin Income Statement  · Increase Net Income by $19 million from loss from discontinued operations net of tax  · Increase Net Income by $196 million from deferred portion of income tax  · Decrease Net Income by $70 million for gain on sale of LKEI and ILS net of tax  · Decrease Net Income by $56 million for gain on land sale  · Increase Net Income by $215 million to reverse impairment charge (215 = 314(1-.316)  · Increase Net Income by $72 million to unwind deferred taxes  · Subtract $246 million from Net Income for Pension Income Balance Sheet  · Increase assets by 75% of PV of capitalized leases ($709 million)  · Decrease assets by $7 million to unwind taxes (DTA)  · Adjustments for LIFO reserve not added to Total Assets. Added in denominator of ITR and Current Asset in Current Ratio  · Added 100% of PV of capitalization of leases to Total Liabilities ($946 million)  · Subtracted 25% of PV of capitalized leases to SE ($236 million)  · Decrease SE by $7 million to unwind deferred taxes effect (-DTA; +DTL)  · Increase assets by 75% of PV of capitalized leases ($699 million)  · Decrease assets by $5,390 million to unwind deferred taxes (DTA)  · Increase liabilities by 100% of PV of capitalized leases ($932 million)  · Decrease SE by 25% of PV of operating leases ($233 million)  · Decrease SE by $5,390 million to unwind deferred tax (-DTA; +DTL) Caveats  · Termination of A-12 program in 1991 is an unlikely contingency of $690 and is currently on appeal in the Appeals Court. Cost of Equity Capital Historically, LMT common stock has proven less sensitive to the broad stock market. With a beta of .923 and using the Capital Asset Pricing Model (CAPM), LMT investors require an annual rate of return of 10.2%. Although this is lower than the expected market return of 10.8% (see appendix for calculation and assumptions), it is greater than its industry (Guided Missile Space Vehicles) expected return of 8.7%. However, although LMT may be more volatile as a stock than its competitors, it enjoyed a Return on Equity (ROE) significantly higher than the industry average. In 2008, LMT had an ROE of 49.2% while the industry followed with a 23.4% average ROE. Just as significant and telling is the comparison of LMTs ROE to its own required rate of return. This spread of 39% is an impressive sign as it demonstrates the amount of return LMT generated above its cost of equity capital. This is also impressive to investors at first glance, and will warrant a deeper interest from prospective investors. Much the same can be said for GD when comparing its required rate of return to its ROE. Although the spread was only 12.9%, it is still a good sign that GD generates such a return above its cost of equity. However, unlike LMT GD has a beta greater than 1 and is therefore more sensitive to stock market moves; and has an expected return less than its industry return by approximately 1.25%. NOPAT Margin When we analyze the potential net income in the absence of debt, NOPAT, we observe that General Dynamics (9.4%) generates a higher margin over Lockheed Martin (7.8%), which allows General Dynamics to contribute more to ROE in comparison to Lockheed Martin as a result of the decreased effect interest expenses have on net income with respect to total sales revenue. However, when comparing NOPAT performance to the rest of their industry (Ship Boat Building Repair), General Dynamics comes in slightly below the 9.9% average that was established for 2008, but does not necessarily signify any under-performance in this area since the industry data only takes into account two firms when generating Industry NOPAT margin averages. Lockheed Martin was similarly compared to Industry data, generated by two firms as well, in which NOPAT margins were recorded that were more than double of what was found for similarly classified companies (Guided Missiles Space Vehicles 3.69%). Asset Turnover This portion of the ROE evaluates the efficiency to produce revenue based on the investment in assets made by the company. When we begin to evaluate the simplified Asset TO values provided by the multiplicative decomposition of ROE, we observe a noticeable advantage by Lockheed Martin since they reportedly generate $1.37 for every $1.00 spent on assets. General Dynamics generate slightly lower values at $1.08 for every $1.00 spent on company assets. We then continued to analyze Asset TO, now based on the additive decomposition of ROE to see how other variables affect the turnover rates. When this approach is taken, average assets for both companies in 2008 needed to be adjusted, and was done so by pulling out all non-interest bearing liabilities (NIBL). This is where we noticed that NIBLs for Lockheed Martin ($20,742) were 62.8% higher than those reported by General Dynamics ($12,735). As a result, the Asset TO ratios increased significantly for both companies (LMT 2.05 and GD 4.09 ) with respect to assets dollars invested by each company. As we can observe, unexpected losses in each companys pension fund had led them to classify their losses as liabilities since they will still needed to be accounted for in the near future. The 32% drop in the fair value of the LMT pension fund ($27,259 down to $18,539) in 2008 and the 35% drop in the fair value of the GD pension fund ($7,452 down to $4,823)was felt somewhat more extensively by LMT, since the higher amount lost reflects LMTs larger workforce of 140,000 employees. GD, although enduring a similar percentage drop in fund value, only accommodates a workforce of 91,000, and therefore lost less in overall value amount. Leverage When we analyze leverage, we are analyzing each companys ability and efficiency in using interest bearing debt to generate revenue. The higher the leverage value, the better the ability of a company is at using invested funds (IBLs) to obtain desired revenues. When evaluating LMTs and GDs effect of leverage as a result of their 2008 results, we observe that the numbers generated by LMT (0.17) are over three times higher than those generated by GD (0.05) during the same time period. As we continue to drill down into the effect of leverage, we notice that ROA is also higher for LMT as a result of the large variation in NIBLs between the two companies. Although a higher leverage effect value may indicate that LMT relies more on interest bearing debt to generate more sales revenue, an analysis of interest bearing liabilities for both LMT and GD was performed based on data available at the end of 2007 and 2008. This analysis revealed that LMT had reduced their interest bearing liabilities ($4,407 down to $3,805) while GD, whom recorded a smaller leverage effect, had done the opposite and showed to have increased their interest bearing liabilities ($2,791 increased to $4,024) by the end of 2008. Selected Ratio Comparison: Accounts Receivable Days General Dynamics Industry Lockheed Martin Industry 39.51 32.50 43.62 57.12 From the results presented above, General Dynamics demonstrates that it under-performed the rest of the industry by exceeding the average account receivable days by 7 days. In contrast, Lockheed Martin out-performed the rest of its industry by having recorded an account receivable average of 43.62 days, which means LMT was collecting from customers on an average of 13.5 days ahead of the rest of the industry. Accounts Payable Days General Dynamics Industry Lockheed Martin Industry 33.88 31.50 20.09 19.66 GD is collecting from customers on average over 2 days past the industry average of 31.50 days LMT is collecting just  ½ day over the industry average of 19.66 days Inventory Days General Dynamics Industry Lockheed Martin Industry 25.97 56.62 17.35 13.55 GD is turning inventory on average over 30 days under the industry average of 56.62 days LMT is turning inventory on average over 3 days over the industry average of 13.55 days Interest Coverage General Dynamics Industry Lockheed Martin Industry 29.57 30.43 14.49 5.49 GD could cover its yearly interest expenses 29.57 times in 2008, just under its industry average of 30.43 times LMT could cover its yearly interest expenses 29.57 times in 2008, significantly over its industry average of 5.49 times Equity Valuation The equity valuation of General Dynamics for 2008 produced an estimated share price of $77.71. This price is significantly higher than the closing per-share price of $57.59 for 2008 showing the companys stock was extremely undervalued. According to analyst reports5, some concerns about growth for General Dynamics stem from shrinking credit markets, which would impair the ability to finance business jets. Additionally, it is possible that investors were concerned the aerospace and defense industry would decline with a shift from government defense spending to social spending and deficit spending. Abnormal net income was computed as predicted net income less the cost of equity capital. Predicted net income was computed using 2008 pro forma net income of $2,674 and implementing annual growth rates suggested by Goldman Sachs earnings forecasts5. The growth rates from 2009 through 2013 were -2.9%, 7.3%, 5.2%, 7.3% and 7.8% respectively. The same earnings forecasts were used to calculate the predicted dividends. The predicted dividends from 2009 to 2013 are 577, 617, 643, 671 and 700 respectively. The terminal value assumption used in computing abnormal net income was the competitive equilibrium on incremental real sales assumption. This strategy was chosen because the government is one of General Dynamics most significant customers, comprising approximately 67% of the companys revenue. This lead to the assumption that General Dynamics may not need to invest a large amount of resources in developing new customers and that most of their future growth would be lead by existing custo mers. This assumption provided a terminal value of $21,999. The cost of capital for General Dynamics was calculated using a beta of 1.119, a risk free rate of 5% and a market risk premium of 4%. This produced a cost of capital of 9.5%. The present value of abnormal net income was calculated to be $20,265, by dividing abnormal net income by a discounting factor derived using the cost of capital. The present value of abnormal net income was combined with the initial book value of $9,810 to produce an estimated predicted price of $30,075. This price was divided by the number of shares outstanding according to the 2008 annual report to arrive at an estimated share price of $77.71. The equity valuation for Lockheed Martin for 2008 produced an estimated share price of $85.93, which is slightly higher than the actual share price as of the end of 2008 of $84.08. This shows the stock was slightly overvalued. This shows investors may have been overly optimistic in their opinion of Lockheed Martins earnings potential. Abnormal net income was computed just as that of General Dynamics. Using analysts reports6, estimated (negative) growth rates of (6%), (7%), (6.6%), 11% and 8.92% were applied to the 2008 pro forma net income of $3,114. The same terminal value assumption was used for Lockheed Martin as was used for General Dynamics. The US government is a substantial customer of Lockheed Martins, which lead to the assumption that a large portion of future growth could be attributed to existing customers and few resources could be devoted to developing new customers. The terminal value assumption provided a terminal value of $41,132. The cost of equity capital was calculated using a beta of .923, a risk free rate of 4% and a market risk premium of 5%. The 8.7% cost of capital was used to find the present value of abnormal net income of $37.936. This present value was combined with an initial book value of ($2,758) to produce an estimated price of $35,178. The estimated price divided by the number of s hares outstanding per the Lockheed Martin annual report to arrive at a per-share price of $85.93. References: 1www.Morningstar.com 2www.netadvantgage.standardandpoors.com 3www.generaldynamics.com 4www.lockheedmartin.com 5Richard Safran, Noah Poponak, Goldman Sachs, January 26, 2009. Noah Poponak, Chun-Yai Wang, Sai Krishna, Goldman Sachs, January 27, 2010 6Richard Safran, Noah Poponak, Goldman Sachs, January 22, 2009. Noah Poponak, Chun-Yai Wang, Sai Krishna, Goldman Sachs, January 29, 2010 APPENDIX CAPM = Rf Rate + (Beta*Rmrkt) Given Data Risk Free rate = 3.77% (10 Year Treasury as of 2/18/10) Market Premium (Rmrkt) = 7% (given on page 26 of class notes) LMT Beta = 0.923 Industry Beta = 0.697 GD Beta = 1.119 Industry Beta = 1.298 CAPM Calculations LMT = .0377 + .923*.07 LMT = 10.23% Industry = .0377 + .697*.07 Industry = 8.65% GD = .0377 + 1.119*.07 GD = 11.60% Industry = .0377 + 1.298*.07 Industry = 12.86% Financial Statement Analysis GD LMT 2008 2008 Beginning assets 25,733 28,926 Ending assets 28,373 33,439 Beginning equity 11,768 9,805 Ending equity 10,053 2,865 Beginning interest-bearing liabilities 2,791 4,407 Ending interest-bearing liabilities 4,024 3,805 Net income (pro forma) 2,674 3,114 Sales revenue 29,300 42,731 Other revenue 0 0 Research development expense 474 1,220 Selling, general administrative expense 1,700 2,344 Income tax expense 1,126 1,485 Income tax rate 0.31 0.32 Interest expense 133 341 Beginning inventory 1,621 1,718 Ending inventory 2,029 1,902 Cost of goods sold 25,647 38,082 Beginning accounts receivable 2,874 4,925 Ending accounts receivable 3,469 5,296 Beginning accounts payable 2,318 2,163 Ending accounts payable 2,443 2,030 Shares outstanding 386 393 Closing price per share 57.59 84.08 bloomberg.com Average assets 27,053 31,183 Average equity 10,911 6,335 Average interest-bearing liabilities 3,408 4,106 Average non-interest bearing liabilities 12,735 20,742 Average accounts receivable 3,172 5,111 Average inventory 1,825 1,810 Average accounts payable 2,381 2,097 After-tax interest rate 0.03 0.06 Multiplicative Decomposition of ROE ROE 0.25 0.49 Net profit margin 0.09 0.07 Asset turnover 1.08 1.37 Leverage 2.48 4.92 Additive Decomposition of ROE ROE 0.25 0.49 Market-to-book 2.21 11.53 NOPAT Margin 0.09 0.08 Asset turnover 2.05 4.09 ROA 0.19 0.32 Spread 0.17 0.26 Leverage 0.31 0.65 Effect of leverage 0.05 0.17 Gross profit margin 0.12 0.11 RD to revenue 0.02 0.03 SGA to revenue 0.06 0.05 Accounts receivable days 39.51 43.65 Inventory days 25.97 17.35 Operating cycle 65.48 61.00 Accounts payable days 33.88 20.09 Cash-to-cash cycle 31.60 40.91 Interest coverage 29.57 14.49 Debt ratio 0.65 0.91 Appendix C: General Dynamics Lockheed Martin Financial Statement Adjustments Cumulative Financial Statement Adjustments Summary of Income Statement Adjustments Summary of Income Statement Adjustments Net Income as Reported: $ 2,459 Net Income as Reported: $ 3,217 Discontinued operations 19 Loss on sale of property, (126) Unwind tax effects 196 land, equipment Adjusted Net Income $ 2,674 Reverse of Impairment charge 215 Unwind tax effects 72 Pension Income (264) Adjusted Net Income $ 3,114 Summary of Balance Sheet Adjustments Summary of Balance Sheet Adjustments Total Assets as reported $ 28,373 Total Assets as reported $ 33,439 Constructive capitalization of 709 Constructive capitalization 699 operating leases of operating leases Unwind tax effects (DTA) (7) Unwind tax effects (DTA) (5,390) Adjusted Total Assets $ 29,075 Adjusted Total Assets $ 28,748 Total Liabilities as reported $ 18,320 Total Liabilities as reported $ 30,574 Constructive capitalization 946 Constructive capitalization 932 of operating leases of operating leases Adjusted Total Liabilities $ 19,266 Adjusted Total Liabilities $ 31,506 Total SE as reported $ 10,053 Total SE as reported $ 2,865 Constructive capitalization (236) Constructive capitalization of operating leases (233) of operating leases Unwind tax effects (5,390) Unwind tax effects (7) (DTA+DTL) (DTA+DTL) Adjusted Total SE $ (2,758) Adjusted Total SE $ 9,810 Adjusted Total Liabilities + SE $ 29,075 Adjusted Total Liabilities + SE $ 28,748 General Dynamics Pension Income Pro Forma Calculation 1 Net pension cost (benefit) $ 20 Net postretirement plan cost 56 Total cost $ 76 Net earnings $ 2,459 Percentage 3.1% 2008 2007 2 Funded status pensions $ (2,922) $ 383 Funded status other postretirement plans (640) (642) Total funded status (3,562) (259) Difference $ (3,303) 3 Rate of return on U.S. plan assets 8.1% Expected return 593 Implied asset base 7,330 = 592 / .081 Actual return percentage -32.20% = 2360 / 7330 4 Implied asset base $ 7,330 Pro forma expected rate 7.0% Given Pro forma expected return 513 Less: Original expected return (593) Difference (reduction in pension income) (80) 1 Effective tax rate 68.8% =1-.312 Adjustment (reduction) to net income $ (55) OR: [(.081-.070)*7,330] * (1-.312) = $ 55 Adjusted income $ 2,404 = 2,459 55 Lockheed Martin Pension Income Pro Forma Calculation 1 Net pension cost (benefit) $ 462 Net postretirement plan cost 46 Total cost $ 508 Net earnings $ 3,217 Percentage 15.8% 2008 2007 2 Funded status pensions $ (11,882) $ (879) Funded status other postretirement plans 1426 2017 Total funded status (10,456) 1,138 Difference $ (11,594) 3 Rate of return on U.S. plan assets 8.5% Expected return $ 2,184 Implied asset base 25,694 = 2184 / .085 Actual return percentage -28.62% = 7354 / 25694 4 Implied asset base $ 25,694 Pro forma expected rate 7.0% Given Pro forma expected return 1,799 Less: Original expected return (2,184) Difference (reduction in pension income) (385) 1 Effective tax rate 68.4% =1-.316 Adjustment (reduction) to net income $ (264) Adjusted income $ 2,953 = 3,217 264 General Dynamics Capitalization of Operating Leases Enter interest rate below: 0.039 Enter operating lease commitments below (in millions): 2009 205.0 2010 174.0 2011 131.0 2012 97.0 2013 70.0 2014 thereafter 405.0 Solution: Present value of operating lease commitments $ 945.9 Calculation of Present Value of Operating Lease Payments: 0 205.0 1.000 205.0 1 174.0 1.039 167.5 2 131.0 1.080 121.3 General Dynamics and Lockheed Martin Comparison General Dynamics and Lockheed Martin Comparison Financial Statement Analysis General Dynamics vs. Lockheed Martin Executive Summary: This analysis provides a comparison of two major companies within the Aerospace and Defense industry, General Dynamics and Lockheed Martin. General Dynamics had an ROE of 25% whereas Lockheed Martin was 49% demonstrating LMT has a higher spread and generated a higher amount of return above its cost of equity capital as compared to GD. GD generates a higher NOPAT margin over LMT (9.4% and 7.8%, respectively) allowing GD to contribute more to ROE as a result of the decreased effect interest expenses have on net income with respect to total sales revenue. LMT has a considerable advantage for generating increased asset turnover, by generating $1.37 for every dollar as compared to GDs $1.08 for every dollar spent on company assets. General Dynamics stock is extremely undervalued (estimated $77.71 compared to closing price of $57.79) whereas Lockheed Martins stock was slightly overvalued ($85.93 compared to closing price of $84.08). Equity valuation indicates that investors were overly opt imistic in LMTs earning potential and pessimistic for GDs earning potential. Despite the valuation, the destiny of this industry remains dependent on governments decisions to decrease military spending, which will have a negative impact on both companies. However, expansion of commercial airlines and partnerships with healthcare industries will have a positive effect on these companies and overall this industry will have a neutral outcome for the upcoming year. General Dynamics (NYSE: GD) General Dynamics is the sixth largest defense contractor in the world and the second largest maker of corporate jets. The company maintains four business groups including aerospace, combat systems, marine systems and information systems and technology. Net earnings for the company increased from 2006-2008 ($1.86 to $2.46), a 24% increase over 3 years. Sales for all groups increased from $24.1 to $29.3 billion from 2006-2008, a 17% increase. The company is based in Virginia and gets 67% of its revenue from the Department of Defense. The aerospace group generated $5.5 billion (19%) in sales in 2008, mostly due to Gulfstream business jet, which include long-range and ultra-long-range jets. In response to the downturn in the economy, the production of large-body and medium-size aircraft were reduced from 87 to 73 and 69 to 24, respectively, in 2008. In product development, Gulfstream introduced 2 additions, which are the ultra-large-cabin, ultra-long-range G650 and the super-mid-size G250. Production of both of these aircrafts, which enter into service in 2011 and 2012, are foreseeable income generators based on orders placed in 2008. The combat systems group generated $8.2 billion (28%) in sales in 2008, mostly driven by demand for combat vehicles, specifically Mine-Resistant, Ambush-Protected (MRAP) vehicles. The combat system group makes, repairs and supports wheeled and tracked armored vehicles and munitions. Combat system product lines include combat vehicles, guns and ammunition systems, mobile bridge systems, armor, chemical, biological and explosion detection systems. Future opportunities include delivering hundreds of tanks and armored vehicles to Saudi Arabia between 2010 and 2012. The marine systems group generated $5.6 billion (19%) in sales in 2008, extremely productive as compared to 2007. The group delivers destroyers, submarines, logistic ship and the first commercial product carrier. Upcoming contracts include doubling production to two submarines per year beginning in 2011, which is predicted to increase revenue and earnings over the next three years. The information systems and technology generated $10 billion (34%) of sales in 2008; its biggest achievement developing a battlefield communications network program and Joint Tactical Radio System (JTRS). Customers include federal civilian agencies and commercial customers, which primarily focus on electronics for land, sea and air-based weapons systems. The acquisition of two companies in the tactical communications and healthcare information technology field are indicative of the direction this group will be making in the upcoming years. Information gathered from Morningstar1, SP500 Industry reports2 and www.generaldynamics.com3 Lockheed Martin (NYSE: LMT) Lockheed Martin is the worlds largest military weapons maker, deriving 84% of its net sales from the United States government, including the Department of Defense. The company is comprised of four operating systems including aeronautics, electronic, space and information systems and global services. Net sales increased 7.3% from 2006 to 2008 ($39.6 to $42.7 billion) and earnings increased 21.8% over three years ($2.5 to $3.2 billion). The company operates in Maryland and employs 146,000 people. The aeronautics segment generated 27% of sales ($11.5 billion) in 2008. The segments primary production are the F-35 Lightning II combat aircraft which is projected to be completed in 2010. The aeronautics segment is focused on making fighter jets and military transport planes and on unmanned military aircraft. The segment also operates the Global Sustainment enterprise to ensure success throughout the life cycle of its aircraft. The electronics systems segment also generated 27% of sales in 2008 and primarily makes land, sea and air-based missiles and missile defense systems. Specifically, this segment is focused on maritime systems and sensors, missiles and fire control, and platform, training and energy. This system also manages and operates the Sandia National Laboratories for the US Department of Energy. Current projects include the Terminal Altitude Area Defense System (THAAD), the Ballistic Missile Defense system and the firehead control system for the Apache helicopter. The space systems segment generated 19% of sales ($8.2 billion) in 2008. This segment is comprised of satellites, strategic and defensive missile systems, and space transportation systems. The US government customers accounted for 96% of this segments sales in 2008. An ongoing partner is NASA; the LMT-built Phoenix Lander will continue to rove on Mars. Another venture is with Boeing, the United Launch Alliance, which provides satellite launch services to the US government. Information systems and global services segment account for 27% of sales in 2008. This segment contains mission solutions, information systems and global services. The US government customers accounted for 93% of the segments sales in 2008. Major products/programs include communication systems, mission and combat support solutions, civil agency programs (US Census), the FAA Automated Flight Service Station, the FBIs Sentinel IT program, and various NASA programs. Collaborations and partnerships with companies around the globe enable Lockheed Martin to grow its international business both with government and industry. The establishment of Lockheed Martin Australia in 2009 indicates an international interest to grow and expand. Information gathered from Morningstar1, SP500 Industry reports2 and www.lockheedmartin.com4 Industry Outlook: Aerospace Defense The aerospace and defense industry relies heavily on US government allocation and the upcoming year will likely bring budget cuts to the defense budget in 2010. However, there are predictions that the conventional military equipment is aging and once the Iraq war ends, there will be a need for repair and replacement. Due to the high levels of deficit spending and an increasing trend for social spending, it is likely there will be cuts in defense spending and the outlook for this industry will decline. On the other hand, it is estimated that there will be an increased growth of global passenger air traffic in 2010 as compared to a decline in 2009. This is based on positive air traffic growth since comparison between 2009 and 2010. Aircrafts that are less fuel-efficient in the US will also need to be upgraded and replaced with newer aircraft. The industry predictions are moderate production cuts at Boeing and Airbus, and declines in the business jet markets due to falling corporate profits. The industry outlook is therefore at a neutral rating, due to decreased military budget but increased commercial air traffic for 2010. Competition in the industry (Boeing, Northrop Grumman, Honeywell and Raytheon) will strive for contracts within the industry. Many of these defense contractors will face uncertainty from upcoming government decisions in the next year and hence the neutral outlook for this industry. Information gathered from Morningstar and SP500 Industry Reports Financial Statement Adjustments The following table contains information on the cumulative adjustment to General Dynamics and Lockheed Martins financial Statements. Adjustments General Dynamics Lockheed Martin Income Statement  · Increase Net Income by $19 million from loss from discontinued operations net of tax  · Increase Net Income by $196 million from deferred portion of income tax  · Decrease Net Income by $70 million for gain on sale of LKEI and ILS net of tax  · Decrease Net Income by $56 million for gain on land sale  · Increase Net Income by $215 million to reverse impairment charge (215 = 314(1-.316)  · Increase Net Income by $72 million to unwind deferred taxes  · Subtract $246 million from Net Income for Pension Income Balance Sheet  · Increase assets by 75% of PV of capitalized leases ($709 million)  · Decrease assets by $7 million to unwind taxes (DTA)  · Adjustments for LIFO reserve not added to Total Assets. Added in denominator of ITR and Current Asset in Current Ratio  · Added 100% of PV of capitalization of leases to Total Liabilities ($946 million)  · Subtracted 25% of PV of capitalized leases to SE ($236 million)  · Decrease SE by $7 million to unwind deferred taxes effect (-DTA; +DTL)  · Increase assets by 75% of PV of capitalized leases ($699 million)  · Decrease assets by $5,390 million to unwind deferred taxes (DTA)  · Increase liabilities by 100% of PV of capitalized leases ($932 million)  · Decrease SE by 25% of PV of operating leases ($233 million)  · Decrease SE by $5,390 million to unwind deferred tax (-DTA; +DTL) Caveats  · Termination of A-12 program in 1991 is an unlikely contingency of $690 and is currently on appeal in the Appeals Court. Cost of Equity Capital Historically, LMT common stock has proven less sensitive to the broad stock market. With a beta of .923 and using the Capital Asset Pricing Model (CAPM), LMT investors require an annual rate of return of 10.2%. Although this is lower than the expected market return of 10.8% (see appendix for calculation and assumptions), it is greater than its industry (Guided Missile Space Vehicles) expected return of 8.7%. However, although LMT may be more volatile as a stock than its competitors, it enjoyed a Return on Equity (ROE) significantly higher than the industry average. In 2008, LMT had an ROE of 49.2% while the industry followed with a 23.4% average ROE. Just as significant and telling is the comparison of LMTs ROE to its own required rate of return. This spread of 39% is an impressive sign as it demonstrates the amount of return LMT generated above its cost of equity capital. This is also impressive to investors at first glance, and will warrant a deeper interest from prospective investors. Much the same can be said for GD when comparing its required rate of return to its ROE. Although the spread was only 12.9%, it is still a good sign that GD generates such a return above its cost of equity. However, unlike LMT GD has a beta greater than 1 and is therefore more sensitive to stock market moves; and has an expected return less than its industry return by approximately 1.25%. NOPAT Margin When we analyze the potential net income in the absence of debt, NOPAT, we observe that General Dynamics (9.4%) generates a higher margin over Lockheed Martin (7.8%), which allows General Dynamics to contribute more to ROE in comparison to Lockheed Martin as a result of the decreased effect interest expenses have on net income with respect to total sales revenue. However, when comparing NOPAT performance to the rest of their industry (Ship Boat Building Repair), General Dynamics comes in slightly below the 9.9% average that was established for 2008, but does not necessarily signify any under-performance in this area since the industry data only takes into account two firms when generating Industry NOPAT margin averages. Lockheed Martin was similarly compared to Industry data, generated by two firms as well, in which NOPAT margins were recorded that were more than double of what was found for similarly classified companies (Guided Missiles Space Vehicles 3.69%). Asset Turnover This portion of the ROE evaluates the efficiency to produce revenue based on the investment in assets made by the company. When we begin to evaluate the simplified Asset TO values provided by the multiplicative decomposition of ROE, we observe a noticeable advantage by Lockheed Martin since they reportedly generate $1.37 for every $1.00 spent on assets. General Dynamics generate slightly lower values at $1.08 for every $1.00 spent on company assets. We then continued to analyze Asset TO, now based on the additive decomposition of ROE to see how other variables affect the turnover rates. When this approach is taken, average assets for both companies in 2008 needed to be adjusted, and was done so by pulling out all non-interest bearing liabilities (NIBL). This is where we noticed that NIBLs for Lockheed Martin ($20,742) were 62.8% higher than those reported by General Dynamics ($12,735). As a result, the Asset TO ratios increased significantly for both companies (LMT 2.05 and GD 4.09 ) with respect to assets dollars invested by each company. As we can observe, unexpected losses in each companys pension fund had led them to classify their losses as liabilities since they will still needed to be accounted for in the near future. The 32% drop in the fair value of the LMT pension fund ($27,259 down to $18,539) in 2008 and the 35% drop in the fair value of the GD pension fund ($7,452 down to $4,823)was felt somewhat more extensively by LMT, since the higher amount lost reflects LMTs larger workforce of 140,000 employees. GD, although enduring a similar percentage drop in fund value, only accommodates a workforce of 91,000, and therefore lost less in overall value amount. Leverage When we analyze leverage, we are analyzing each companys ability and efficiency in using interest bearing debt to generate revenue. The higher the leverage value, the better the ability of a company is at using invested funds (IBLs) to obtain desired revenues. When evaluating LMTs and GDs effect of leverage as a result of their 2008 results, we observe that the numbers generated by LMT (0.17) are over three times higher than those generated by GD (0.05) during the same time period. As we continue to drill down into the effect of leverage, we notice that ROA is also higher for LMT as a result of the large variation in NIBLs between the two companies. Although a higher leverage effect value may indicate that LMT relies more on interest bearing debt to generate more sales revenue, an analysis of interest bearing liabilities for both LMT and GD was performed based on data available at the end of 2007 and 2008. This analysis revealed that LMT had reduced their interest bearing liabilities ($4,407 down to $3,805) while GD, whom recorded a smaller leverage effect, had done the opposite and showed to have increased their interest bearing liabilities ($2,791 increased to $4,024) by the end of 2008. Selected Ratio Comparison: Accounts Receivable Days General Dynamics Industry Lockheed Martin Industry 39.51 32.50 43.62 57.12 From the results presented above, General Dynamics demonstrates that it under-performed the rest of the industry by exceeding the average account receivable days by 7 days. In contrast, Lockheed Martin out-performed the rest of its industry by having recorded an account receivable average of 43.62 days, which means LMT was collecting from customers on an average of 13.5 days ahead of the rest of the industry. Accounts Payable Days General Dynamics Industry Lockheed Martin Industry 33.88 31.50 20.09 19.66 GD is collecting from customers on average over 2 days past the industry average of 31.50 days LMT is collecting just  ½ day over the industry average of 19.66 days Inventory Days General Dynamics Industry Lockheed Martin Industry 25.97 56.62 17.35 13.55 GD is turning inventory on average over 30 days under the industry average of 56.62 days LMT is turning inventory on average over 3 days over the industry average of 13.55 days Interest Coverage General Dynamics Industry Lockheed Martin Industry 29.57 30.43 14.49 5.49 GD could cover its yearly interest expenses 29.57 times in 2008, just under its industry average of 30.43 times LMT could cover its yearly interest expenses 29.57 times in 2008, significantly over its industry average of 5.49 times Equity Valuation The equity valuation of General Dynamics for 2008 produced an estimated share price of $77.71. This price is significantly higher than the closing per-share price of $57.59 for 2008 showing the companys stock was extremely undervalued. According to analyst reports5, some concerns about growth for General Dynamics stem from shrinking credit markets, which would impair the ability to finance business jets. Additionally, it is possible that investors were concerned the aerospace and defense industry would decline with a shift from government defense spending to social spending and deficit spending. Abnormal net income was computed as predicted net income less the cost of equity capital. Predicted net income was computed using 2008 pro forma net income of $2,674 and implementing annual growth rates suggested by Goldman Sachs earnings forecasts5. The growth rates from 2009 through 2013 were -2.9%, 7.3%, 5.2%, 7.3% and 7.8% respectively. The same earnings forecasts were used to calculate the predicted dividends. The predicted dividends from 2009 to 2013 are 577, 617, 643, 671 and 700 respectively. The terminal value assumption used in computing abnormal net income was the competitive equilibrium on incremental real sales assumption. This strategy was chosen because the government is one of General Dynamics most significant customers, comprising approximately 67% of the companys revenue. This lead to the assumption that General Dynamics may not need to invest a large amount of resources in developing new customers and that most of their future growth would be lead by existing custo mers. This assumption provided a terminal value of $21,999. The cost of capital for General Dynamics was calculated using a beta of 1.119, a risk free rate of 5% and a market risk premium of 4%. This produced a cost of capital of 9.5%. The present value of abnormal net income was calculated to be $20,265, by dividing abnormal net income by a discounting factor derived using the cost of capital. The present value of abnormal net income was combined with the initial book value of $9,810 to produce an estimated predicted price of $30,075. This price was divided by the number of shares outstanding according to the 2008 annual report to arrive at an estimated share price of $77.71. The equity valuation for Lockheed Martin for 2008 produced an estimated share price of $85.93, which is slightly higher than the actual share price as of the end of 2008 of $84.08. This shows the stock was slightly overvalued. This shows investors may have been overly optimistic in their opinion of Lockheed Martins earnings potential. Abnormal net income was computed just as that of General Dynamics. Using analysts reports6, estimated (negative) growth rates of (6%), (7%), (6.6%), 11% and 8.92% were applied to the 2008 pro forma net income of $3,114. The same terminal value assumption was used for Lockheed Martin as was used for General Dynamics. The US government is a substantial customer of Lockheed Martins, which lead to the assumption that a large portion of future growth could be attributed to existing customers and few resources could be devoted to developing new customers. The terminal value assumption provided a terminal value of $41,132. The cost of equity capital was calculated using a beta of .923, a risk free rate of 4% and a market risk premium of 5%. The 8.7% cost of capital was used to find the present value of abnormal net income of $37.936. This present value was combined with an initial book value of ($2,758) to produce an estimated price of $35,178. The estimated price divided by the number of s hares outstanding per the Lockheed Martin annual report to arrive at a per-share price of $85.93. References: 1www.Morningstar.com 2www.netadvantgage.standardandpoors.com 3www.generaldynamics.com 4www.lockheedmartin.com 5Richard Safran, Noah Poponak, Goldman Sachs, January 26, 2009. Noah Poponak, Chun-Yai Wang, Sai Krishna, Goldman Sachs, January 27, 2010 6Richard Safran, Noah Poponak, Goldman Sachs, January 22, 2009. Noah Poponak, Chun-Yai Wang, Sai Krishna, Goldman Sachs, January 29, 2010 APPENDIX CAPM = Rf Rate + (Beta*Rmrkt) Given Data Risk Free rate = 3.77% (10 Year Treasury as of 2/18/10) Market Premium (Rmrkt) = 7% (given on page 26 of class notes) LMT Beta = 0.923 Industry Beta = 0.697 GD Beta = 1.119 Industry Beta = 1.298 CAPM Calculations LMT = .0377 + .923*.07 LMT = 10.23% Industry = .0377 + .697*.07 Industry = 8.65% GD = .0377 + 1.119*.07 GD = 11.60% Industry = .0377 + 1.298*.07 Industry = 12.86% Financial Statement Analysis GD LMT 2008 2008 Beginning assets 25,733 28,926 Ending assets 28,373 33,439 Beginning equity 11,768 9,805 Ending equity 10,053 2,865 Beginning interest-bearing liabilities 2,791 4,407 Ending interest-bearing liabilities 4,024 3,805 Net income (pro forma) 2,674 3,114 Sales revenue 29,300 42,731 Other revenue 0 0 Research development expense 474 1,220 Selling, general administrative expense 1,700 2,344 Income tax expense 1,126 1,485 Income tax rate 0.31 0.32 Interest expense 133 341 Beginning inventory 1,621 1,718 Ending inventory 2,029 1,902 Cost of goods sold 25,647 38,082 Beginning accounts receivable 2,874 4,925 Ending accounts receivable 3,469 5,296 Beginning accounts payable 2,318 2,163 Ending accounts payable 2,443 2,030 Shares outstanding 386 393 Closing price per share 57.59 84.08 bloomberg.com Average assets 27,053 31,183 Average equity 10,911 6,335 Average interest-bearing liabilities 3,408 4,106 Average non-interest bearing liabilities 12,735 20,742 Average accounts receivable 3,172 5,111 Average inventory 1,825 1,810 Average accounts payable 2,381 2,097 After-tax interest rate 0.03 0.06 Multiplicative Decomposition of ROE ROE 0.25 0.49 Net profit margin 0.09 0.07 Asset turnover 1.08 1.37 Leverage 2.48 4.92 Additive Decomposition of ROE ROE 0.25 0.49 Market-to-book 2.21 11.53 NOPAT Margin 0.09 0.08 Asset turnover 2.05 4.09 ROA 0.19 0.32 Spread 0.17 0.26 Leverage 0.31 0.65 Effect of leverage 0.05 0.17 Gross profit margin 0.12 0.11 RD to revenue 0.02 0.03 SGA to revenue 0.06 0.05 Accounts receivable days 39.51 43.65 Inventory days 25.97 17.35 Operating cycle 65.48 61.00 Accounts payable days 33.88 20.09 Cash-to-cash cycle 31.60 40.91 Interest coverage 29.57 14.49 Debt ratio 0.65 0.91 Appendix C: General Dynamics Lockheed Martin Financial Statement Adjustments Cumulative Financial Statement Adjustments Summary of Income Statement Adjustments Summary of Income Statement Adjustments Net Income as Reported: $ 2,459 Net Income as Reported: $ 3,217 Discontinued operations 19 Loss on sale of property, (126) Unwind tax effects 196 land, equipment Adjusted Net Income $ 2,674 Reverse of Impairment charge 215 Unwind tax effects 72 Pension Income (264) Adjusted Net Income $ 3,114 Summary of Balance Sheet Adjustments Summary of Balance Sheet Adjustments Total Assets as reported $ 28,373 Total Assets as reported $ 33,439 Constructive capitalization of 709 Constructive capitalization 699 operating leases of operating leases Unwind tax effects (DTA) (7) Unwind tax effects (DTA) (5,390) Adjusted Total Assets $ 29,075 Adjusted Total Assets $ 28,748 Total Liabilities as reported $ 18,320 Total Liabilities as reported $ 30,574 Constructive capitalization 946 Constructive capitalization 932 of operating leases of operating leases Adjusted Total Liabilities $ 19,266 Adjusted Total Liabilities $ 31,506 Total SE as reported $ 10,053 Total SE as reported $ 2,865 Constructive capitalization (236) Constructive capitalization of operating leases (233) of operating leases Unwind tax effects (5,390) Unwind tax effects (7) (DTA+DTL) (DTA+DTL) Adjusted Total SE $ (2,758) Adjusted Total SE $ 9,810 Adjusted Total Liabilities + SE $ 29,075 Adjusted Total Liabilities + SE $ 28,748 General Dynamics Pension Income Pro Forma Calculation 1 Net pension cost (benefit) $ 20 Net postretirement plan cost 56 Total cost $ 76 Net earnings $ 2,459 Percentage 3.1% 2008 2007 2 Funded status pensions $ (2,922) $ 383 Funded status other postretirement plans (640) (642) Total funded status (3,562) (259) Difference $ (3,303) 3 Rate of return on U.S. plan assets 8.1% Expected return 593 Implied asset base 7,330 = 592 / .081 Actual return percentage -32.20% = 2360 / 7330 4 Implied asset base $ 7,330 Pro forma expected rate 7.0% Given Pro forma expected return 513 Less: Original expected return (593) Difference (reduction in pension income) (80) 1 Effective tax rate 68.8% =1-.312 Adjustment (reduction) to net income $ (55) OR: [(.081-.070)*7,330] * (1-.312) = $ 55 Adjusted income $ 2,404 = 2,459 55 Lockheed Martin Pension Income Pro Forma Calculation 1 Net pension cost (benefit) $ 462 Net postretirement plan cost 46 Total cost $ 508 Net earnings $ 3,217 Percentage 15.8% 2008 2007 2 Funded status pensions $ (11,882) $ (879) Funded status other postretirement plans 1426 2017 Total funded status (10,456) 1,138 Difference $ (11,594) 3 Rate of return on U.S. plan assets 8.5% Expected return $ 2,184 Implied asset base 25,694 = 2184 / .085 Actual return percentage -28.62% = 7354 / 25694 4 Implied asset base $ 25,694 Pro forma expected rate 7.0% Given Pro forma expected return 1,799 Less: Original expected return (2,184) Difference (reduction in pension income) (385) 1 Effective tax rate 68.4% =1-.316 Adjustment (reduction) to net income $ (264) Adjusted income $ 2,953 = 3,217 264 General Dynamics Capitalization of Operating Leases Enter interest rate below: 0.039 Enter operating lease commitments below (in millions): 2009 205.0 2010 174.0 2011 131.0 2012 97.0 2013 70.0 2014 thereafter 405.0 Solution: Present value of operating lease commitments $ 945.9 Calculation of Present Value of Operating Lease Payments: 0 205.0 1.000 205.0 1 174.0 1.039 167.5 2 131.0 1.080 121.3