US Airways reverses soda stance: won't charge

US Airway is planning on canceling extra charges for drinks on domestic flights. US Airways remained the only airline to charge prices for drinks therefore the company felt at a disadvantage. Service is always the most important part of any business. I believe US Airways decided to cancel the extra charges because they have provide good services for passengers especially in this economic recession. Even though oil prices have dropped, the current economic state that we are in means that the airline industry has to be passenger friendly. The airline industry has taken a dip as people are choosing to fly less therefore US Airways has to market and serve passengers efficiently.

http://news.yahoo.com/s/ap/20090223/ap_on_bi_ge/us_airways_soda_reversal;_ylt=Amzdzax1WBJoxVDF93qvQMyyBhIF

Obama to Treasury: Start cutting taxes

President Obama will try to stimulate the economy by implementing tax cuts for 95% of the American people. I believe by handing money back to the American people is a hope that they will spend. I believe it is the right move to give the American people money however it still is difficult to change the current mindset of the people. People are choosing to be reserved and save their money. Their are so many problems with the economy right now with the mortgages and job security amongst others. I believe the governments main goal should be to install confidence in the American people. They have to feel secure for them to spend money. Hopefully the tax relief will help but i beleive it will only help in the short term. Their has to be long term plans that will make the American people feel more secure.

Dragging GM and Chrysler to the altar

There are rumors that the government will try to merge GM and Chrysler together however both companies claim that they will be better off separate. Both these companies are trying to prove that the money the government gave them is worthwhile. There have been previous talks for companies to merge together. The two auto companies believed the cost of shutting down excess factories would be far more than they can bear. Both the auto manufacturers are asking another 26 billion dollars from the government. I believe that it is going to be worse fro the economy this year with both these companies laying of workers. Chrysler plans on cutting 3000 workers and GM plans on cutting 20000 workers. If the government continues to fund these companies then the government will try to choose the best solution.

http://money.cnn.com/2009/02/20/news/companies/auto_panel/index.htm?postversion=2009022015

Stimulus bill restricts executive compensation

After the government passed the $700 Billion financial bailout, on Friday the 13th Congress voted to restrict big bonuses that were given to managers and CEO's. Any company that received money from the bailout will be required to restrict payments and bonuses. In my opinion, the current economic crisis we are currently having requires government intervention of large bonuses and payments that some of the CEO's are giving themselves. The government has to make sure taxpayers money is being used in the right way. There is a need for the people to see an improvement in the economy after all the taxpayers money being spent.



http://money.cnn.com/2009/02/14/news/economy/stimulus_executive_pay.reut/index.htm?postversion=2009021409

Toyota triples year loss forecast

It is not just the American auto companies suffering, it is the whole auto industry. Toyota reported three times its expected operating cost. The article tells us that by the increasing value of the Yen, it has hurt Toyota by sales in oversea companies. This brings out the question whether it could of been worthwhile to hedge against exchange rate risks so that they could make a steady profit. In the current economic state there will be a lot of what-if questions asked by different companies.


http://news.bbc.co.uk/2/hi/business/7873731.stm

JQ: How does the risk premium reflect Beta?

The Beta is the measure of risk that the company has. The risk premium will be correlated with the beta. If the beta is high meaning that there is more risk then the risk premium will be higher and for a lower beta the risk premium will be lower.

JQ Why does it make sense for a company to purchase insurance or hedge its risk?

It makes sense for companies to purchase insurance or/and hedge against its risks because it lowers the cost of the risk occurring. There is a possibility that cash flows could increase indirectly. The company will find it much easier having insurance than to raise capital for future investments. If the company has to worry about lawsuits or even bankruptcy, the company would make bad decisions which could make matters worse therefore insurance would be a wise move for companies. By hedging companies can eliminate any volatile commodity prices that are required for the companies purposes. It could be a benefit if they control manage prices such as gold or oil for example. For example the airline industry could hedge in oil prices so that the company does not have to charge according to oil prices. Overall I believe that it is in the companies best interest to maximize its value to the firm.