The Federal Reserve sparked a trend of higher interest rates for the first time since 2008 on Wednesday, December 16, 2015[i]. Since then, the Federal Discount rate has gone up by many basis points (bps) numerous times. Although this increase seemed insignificant to some, the trend should continue changing debt structures and eventually profitability margins of corporations.
Graph 1
The main change comes from an adjustment in the Weighted Average Cost of Capital (WACC) for the average corporation. Since the increase in the cost of capital is interpreted as an externality, this would create a shift in the WACC from WACC-i to WACC-ii, as shown in Graph 1.
Figure 1
Taking a closer look at the WACC, it’s clear that an increase in the cost of capital will derive from the cost of capital before taxes [Kd] found in Figure 1. Going forward, acquiring money for corporations is going to be costlier, and as a result, fewer projects should be approved since more of them will become unprofitable. The result is that companies holding heavy debt burdens or negative cash flows will find it a lot more difficult to finance their losses. It will be interesting to see how industries perform against the S&P 500 in this new world of higher interest rates. If we treat this as a cycle, it began on December 16, 2015, and will end when the next time the Federal Reserve decides to lower interest rates again.
Tax Reform:
The U.S. Tax Cuts and Jobs Act is also a significant externality affecting corporations as it could decrease the cost of borrowing after taxes as shown in Figure 2. This should have a positive impact on earnings per share (EPS). Although the cost of debt (Kd) will go up, the amount paid in corporate taxes will go down. Higher interest rates and lower corporate tax rates have happened simultaneously only a few times in recent history. Given that these developments affect corporate profitability, they should become significant factors affecting equity performance for some time to come as these forces act as significant externalities on the market.
Figure 2
Historical Outlook:
Finding time periods where the Federal Discount Rate increased as corporate tax rates decreased can give us a clue as to what might happen in the future as both of these effects become more significant. Specifically, we can look at companies that outperformed the S&P 500 during periods of higher interest rates and lower corporate tax rates.
Graph 2
Graph 2 shows three periods when the federal discount rate increased as the corporate tax rate decreased: 1964 to 1966, 1979 to 1980, and 1987 to 1990. Although these periods are in different stages of the business cycle, they can serve as proxies to see which industries will outperform the S&P500 under these new conditions. To test these three periods against the S&P 500, a paired samples t-test with a 95% significance level was performed between 49 industries and the S&P 500[ii].
Null Hypothesis:
Alternative Hypothesis:
Table 1
Net Neutrality:
From the results shown in Table 1, the telecommunications industry stands out the most due to the changes in net neutrality laws, which recently have mostly been dismantled [iii]. This should allow telecommunication companies to increase their EPS as they expand their Internet services throughout the country[iv]. Although it is uncertain whether companies such as Verizon and AT&T will be able to increase their market shares, the demand for a more extensive telecommunications infrastructure is very likely as we get closer to 5G cellular technology[v].
Graph 3
Dollar:
The decline in value of the U.S. dollar, as seen in Graph 3, is also a significant trend that affects telecommunication companies with exposure to emerging markets since the USD has been decreasing significantly for over a year and is set to keep declining in 2018[vi]. As emerging and developing currencies continue to get stronger against the USD, it should be easier for people to acquire Internet services, which should increase revenue for telecommunication companies. This is because emerging and developing market economies will be able to spend more on infrastructure and increase private consumption as their purchasing power increases.
Global Growth:
From a macroeconomic perspective, emerging and developing country growth also presents an opportunity for telecommunication companies exposed to emerging market economies. Recently, revisions were made for emerging markets and developing countries to grow to about 4.5%[vii] in 2018. The fact that emerging market indexes have increased at a faster pace relative to the S&P500 is an indication that if this trend continues, emerging markets might outperform the S&P500 again in 2018, calculated by Figure 4 and shown in Graph 4.
Figure 4
Graph 4
Ratio analysis:
A closer look at the telecommunications industry suggests that the companies best suited to take advantage of these changes in the market are companies that should not be heavily impacted by the rising cost of debt. As a result, companies with the best liquidity ratios and cash reserves within the telecommunications industry should have an advantage over others that are not as liquid or overleveraged in the next couple of years. More importantly, companies that can use their assets effectively to generate profits, should be able to continue to grow at previous rates.
Table 2
Although the companies that stand out in Table 2 are AT&T and Verizon Communications, other companies such as American Tower also hold massive amounts of free cash flow to the firm (FCFF), which puts them in a prime position to increase their market capitalization and grow in a higher interest rate environment.
American Tower:
Table 3
American Tower Corp (Ticker: AMT) is an owner, operator, and developer of multi-tenant communications real estate. The company profits from leasing space for communication sites to wireless services and wireless data providers in the U.S. and abroad. Using the basic premise that a firm’s value is the present value of its projected future cash flow, we can get an idea of the company’s fair value using multiple-price methods for valuation as shown in Table 3.
Table 4
Deconstructing the EPS of American Tower in Table 4 reveals that it’s firmly poised for growth. Although financial leverage is increasing, the total asset turnover and total profit margin are also increasing, which is a sign that it’s putting its assets to good use. This is reflected by the fact that its return on assets has increased by 20% from 2016 to 2017.
Graph 5[viii]
This growth could happen via a combination of 5G technology expansion in the U.S. and higher wireless and broadband penetration in emerging and developing countries as shown in Graph 5. Specifically, high growth will be observed in countries such as India and Nigeria, where mobile broadband penetration is still low compared to other rapidly emerging countries.
Graph 6
Externalities:
American Tower is in a rare position to profit from higher interest rates, lower corporate taxes, deregulation of the telecommunications industry in the U.S., a declining dollar, and rising global growth. If deregulation incentivizes telephone companies to upgrade their services to 5G technology, it should be easy for American Tower to increase its profit margins as it increases the number of towers leased to more companies at higher prices. Additional growth in the company’s earnings will hinge on emerging and developing country growth, which should continue in 2018 as shown in Graph 6. Given the current economic externalities and emerging and developing country growth trends, American Tower is a company that might merit a closer look for some investors.
References:
[i] https://www.federalreserve.gov/monetarypolicy/fomcpresconf20151216.htm
[ii] http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html
[iii] https://www.nytimes.com/2017/12/14/technology/net-neutrality-repeal-vote.html
[iv] https://www.nytimes.com/2017/11/21/technology/fcc-net-neutrality.html
[v] https://blogs.scientificamerican.com/observations/the-downside-of-net-neutrality/
[vi] https://qz.com/1164158/the-us-dollar-just-had-its-worst-year-in-more-than-a-decade-and-2018-will-bring-more-of-the-same/
[vii] http://www.worldbank.org/en/news/press-release/2018/01/09/global-economy-to-edge-up-to-3-1-percent-in-2018-but-future-potential-growth-a-concern
[viii] http://www.americantower.com/Assets/uploads/files/PDFs/vendor-relations/investor-relations/2016/AMT%20International%20Overview.pdf
The author’s assessment regarding current economic externalities and emerging and developing country growth trends corresponds with my own: Higher interest rates and lower corporate tax rates have seldomly occurred concurrently in the recent past; yet with President Trump signing the U.S. Tax Cuts and Jobs Act into law and The Federal Reserve repeatedly hiking interest rates, such externalities on the market are manifesting, affecting both corporate profitability and equity performance. In accordance with the historical outlook of companies that outperformed the S&P 500 during periods of higher interest rates and lower corporate tax rates, the telecommunications industry is highly primed to outperform the S&P 500 under these new circumstances following the disintegration of most net neutrality laws. A weak U.S dollar in contrast to the strengthening of exotic currencies can help generate more revenue for telecommunications companies with exposure in emerging markets: As the purchasing power of emerging and developing market economies increases, those economies shall be able to expend more on both infrastructure and private consumption. Owing to the immense amounts of free cash flow it holds, American Tower (an owner, operator, and developer of multi-tenant communications real estate) is tremendously poised to augment its market capitalization and grow in this higher interest rate, lower corporate tax rate market environment; a combination of 5G technology expansion in the U.S. and higher wireless and broadband penetration in emerging and developing countries like India and Nigeria could yield such growth.
The economy of the US could grow even more since the Federal Reserve has done some changes to the WACC, which affects taxes and interest rates. A large amount of countries in the world have emerging markets and this could mean that US companies could profit from the global growth if they now how to put their assets to work properly. Since we have great technological, consumer and infrastructural companies we can help these economies grow will we make a big profit from them. Since the dollar is going down in value, this helps other economies to have greater acquisition power which enables them to have a further development in their country. Countries with a much lower penetration of products, services, technologies, and many other options are the ideal ones for our companies to start business ventures. The global growth and the possibility of companies going overseas is a great opportunity for our economy to grow even more while we help other countries reach a new potential.
Externalities and Global Growth: Keundria Morgan
After deliberately exploring this article and taking in a few certainties the economy can truly change and develop inside the American Tower framework. In spite of the fact ,that the US dollar is declining a various measure of cash is as yet being pump into this industry and it is continually developing. The American Tower can open up another dimensional path for us to get 5G technology.
In results to 5G technology, we will have a superior gateway to nation development, higher remote, better entrance, and more cash. This framework will enable the US to develop in different ways and be useful to outside countries. The American Tower will benefit from higher duties, bring down corporate rates, deregulation of the media communications industry in the U.S., a declining dollar, and rising worldwide development.
At the end of the day, the US has this framework that everybody and each nation could profit by. We have the assets and we should simply design the arrangement.
This article clearly shows the impact that externalities and global growth can have on the economy. With higher interest rates handed down by the Federal Reserve and lower corporate tax rates, huge gains could be in the near future for corporate infrastructures. Specifically, the Telecommunications industry stands to gain the most, partially due to the decrease in the value of the American dollar (USD), and a significant rise in the demand for telecommunications globally. With 5G technology in the near future and the need for upgraded technology in some smaller countries the telecommunications industry has a lot of opportunity growth. American Tower, A telecommunications company is in a unique position due to these externalities. American Tower was accurately depicted in the article as a company that stands to grow in profits, revenue, and even international business opportunities due to these externalities and wise choices in assets and return on assets.
This article is very informative on the growth of telecommunication industries. From the information derived, I can conclude that the telecommunications industry will boom in the near future due to the modernization of 5G data. Even though the U.S. economy is shifting on a downward scale, it is very surprising to see that telemarketing companies are benefitting. I’ve never heard of the American Tower Corp (AMT) and that it is growing at a rapid rate. I can clearly see that AMT is a company an investor might be interested in investing in. As for net naturality, it is fact that telemarketing companies would highly benefit from the repealing of net neutrality – to which I am opposed to – and with the inclusion of 5G data. I anticipate that consumers would still purchase telecommunicating services in these circumstances because of the increasing demand for fast internet. I am anxious of what will come to the future of the economy.
~Steven Lam
In response to this article, I agree that a combination of these externalities would be in favor of promoting successful U.S. telecommunications industries economically and worldwide while helping fuel growth in emerging market countries. With higher interest rates on the rise in the U.S. today coupled with a reduction in corporate taxes, higher revenue telecommunications industries in the U.S., such as American Tower, could survive increasing costs, expand their industries, and gain more profitability; only the fittest will survive in this scenario. Deregulation could help fuel this growth and encourage telecommunications industries to expand in emerging market countries that are slowly cultivating their uses of telecommunication services. If 5G technology expands as a result of deregulation, then there are higher chances of profitability from consumers in the U.S. and other countries. American Tower is already stationed in many emerging market countries; if industries could expand their products there than both the company and emerging market investors could profit markedly. I noticed that this global growth in, especially, emerging market countries is due to the decline in value of the U.S. dollar. Because of this, these countries’ currency rises in value and the borrowing of U.S. dollars has less risk. If these externalities fall together, U.S. telecommunications industries like American Tower will dominate in the market globally and emerging market countries will grow economically.
The article is enlightening on the potential development of the telecom market. The market is expanding and now bringing the 5G data to market. Though the value of the US Dollar has been declining, it has been leading to noticeable success for the telecom markets. It has been thriving quickly and rapidly throughout the years. Though the repeal of net neutrality is the real win for telemarketing companies. The possibilities they could charge consumers for is quite remarkable. I would assume and it seems to be that most all consumers are highly against the repeal of net neutrality. While most are against such actions, i see most consumers not stopping their service with telecom companies. Certainly less chance with the expansion of 5G. In this modern age, internet service is absolutely essential to most individuals. Many are spending multiple hours a day on their phones alone. Telecom communications are necessary for near all individuals for everyday tasks.
The article informed the about how the tax cuts have benefited businesses since they charge high interest and lose less money as the tax cut law passed allowed them. The problem is that people will go into debt and will not be able to pay and it might ruin the economy. Another problem with the economy is fewer jobs will be available as fewer projects will be accepted as the high interest will force new projects to get rejected. Also with the dollar depreciating and emerging markets expected to surpass the s&p 500 business will increase their revenue by putting their money into these new businesses. Maybe even move tho those countries for cheaper labor. Another thing that was interesting was the telecom that is growing rapidly as more people are into phones and others even kids and will make these companies highly scouted by investors. Especially since we’re almost at the time were 5G services are nearing which make it more appealing for customers.
This article shows the possibilities for growth and the potential for loss due to higher interest rates, tax reform, and the decline in value of the dollar. There have only been a few times in history when interest rates were higher at the same time that there were lower corporate tax rates. President Trump’s tax reform altered rates, slashed the corporate tax permanently and limited deductions.
The increase in interest rates has changed debt structure putting corporations at a risk of not making a profit. Gaining capital is harder because the cost of jobs makes them unprofitable. If the company has heavy debt, the possibility of bankruptcy goes up tremendously.
Telecommunications companies are booming. The 5G technology is going to keep telecommunications at the top of their game.
After reading this article, there are mixed opinions about the higher interest rates because it seems to have gradually changed many factors and caused the federal discount rate to increase by many points. It can viewed as both significant and insignificant because it creates differences in structures of debt and will also affect the amount of profits that margins of corporations receive. One of the main factors that seemed to be mostly affected is the weighted average cost of capital. As time goes on, it seems that it will get harder to get money to invest into corporations. Which will then result in a decrease in projects because most of them will not be able to make profits. The companies that are already having a hard time with their cash flow will be at a greater loss because it will be difficult for them to pay for their losses while still surviving this new adjustment.
Externalities seem to be rare occurrences in the the global economy, and some of these are not particularly a negative thing to happen in any economy. This articles provide us with a few examples of how externalities can help or affect a market or corporation. It seems that these externalities affect or help corporations depending a many things. Some externality could be viewed in such way that it can affect financial status of a corporation, the industry they are in, the taxes they are exposed to, business abroad and how the economy currently values its currency. It also seems that while some corporations may have the opportunity to profit from some externalities, others can’t be so fortunate and potentially be affected by these. Concentrating on the article it is obvious that that the telecommunications industry will grow in the future due to the new 5G technology. What surprises me the most is that while the economy is not trending in a positive trend, the telemarketing industry is going the opposite direction and having positive results. If you really take a moment to think about the telecommunications industry you will realize that the demand is high and only going up. These are the type of investments that investors are seeking, they buy low and once the economy start having a positive trend, they can sell and make some significant profits. To conclude, externalities go hand in hand with global growth, because they give opportunity in the market.
Net Neutrality and the dismantling of its laws removes any caps that the large companies can charge their customers. That’s concerning because it gives these companies and boundless reign and possibly cause a monopoly. The decline of the dollar also gives an advantage to these large companies because it allows them to easily build an infrastructure. I can see how this could be seen on the reverse end as something good because it could attract investors to these large companies that are looking and likely to make profit from a combination of the declining dollar, dissolved laws and access to a large sum of cash. This could be beneficial to investors to make their own money and looking it from an economic stand point, regardless of my personal opinion and I understand how everything ties together. I already had an opinion built when it was Net Neutrality was voted to be dismantled. I learned more about what could happen beyond these large companies benefiting from the average consumer, because it has never been presented to me on a larger scale, such as taking into account the value of the United States’ dollar and the access to liquid funds.
After reading this article I know that telecommunication companies have the potential to grow more and benefit due to higher interest rates and lower corporate taxes. I have not heard much about American Tower but they obviously have a lot of potential to grow with the 5G technologies that could easily attract more consumers and investors. I know that Verizon has recently announced that they have launched their 5G home Internet service in some cities. This is a major step towards in the telecommunication industry and I can expect for there to be some competition between all these companies. It is going to be interesting to see how these companies grow rapidly due to 5G data because consumers want fast Internet and there are many emerging market countries that are utilizing telecommunication services now. Especially with the decline in the U.S. dollar value, these emerging countries will be able to get Internet services in turn benefiting the revenue of the telecommunication companies.
Interesting read on the Net neutrality. If feel this will effect me because of the regulations aim to ensure that all the Internet content you want to access will be treated equally by ISPs. Another goal is to give start-ups and entrepreneurs access to broadband networks without undue influence from the ISPs.
After reading this article and from what I have read in the past, none of the world’s top tier companies or industries would be profitable if they remunerate the capital that they use. According to this article and based on some of the diagrams, it seems as if the telecommunications industry has the potential to thrive due to high interest rates and low corporate taxes. Starting up a company or business is now more difficult due to specific aspects of the economy which deem the company to be unprofitable within a very short period of time. The introduction of 5G LTE will ultimately benefit the telecommunication market drastically in a positive manner, as the new generation of cellular data will allow the market to expand their horizons. It is actually quite intriguing to see an inverse relationship between the US economy and the telecommunications industry. We have a downwards sloping economic status, yet telecommunications is positively trending. This is very interesting to observe from an economist’s perspective, as the industry is always changing and never fixed.
This article made me aware of the tax cuts benefitting businesses and how they might be affected in the near future. A large amount of countries in the world have emerging markets and this could mean that US companies could profit from the global growth if they now how to put their assets to work properly. As the purchasing power of emerging and developing market economies increases, those economies shall be able to expend more on both infrastructure and private consumption. In spite of the fact, that the US dollar is declining a various measure of cash is as yet being pump into this industry and it is continually developing. With higher interest rates handed down by the Federal Reserve and lower corporate tax rates, huge gains could be in the near future for corporate infrastructures. I conclude that the telecommunications industry will boom in the near future due to the modernization of 5G data. 5G technology expands as a result of deregulation, then there are higher chances of profitability from consumers in the U.S. and other countries.
This article informed me that as the value of the US dollar declines, certain industries, particularly the telecommunications industry, are getting stronger. The telecommunications industry is growing due to both new technologies like to 5G capabilities, and legislative change with the end of net neutrality. Without net neutrality, it is possible for the massive growth of new and existing providers, because as an example, they could slow down Internet speeds to Netflix, but keep high-speed Internet access to the provider’s online video streaming, causing more people to switch to the provider’s online streaming and more growth for that provider. Because of changes like this, an emerging telecommunications company, American Tower, could now outpace what have historically been the top providers in our economy, AT&T and Verizon. With all of the changes that are currently happening that affect the telecommunications industry, only time will be able to tell which providers will rise to the top of the industry and become the most profitable and successful companies.
This article made me realize that the federal discount rate goes up simultaneously to the corporate tax rates going down. This decreases the weighted average cost of corporations. Meaning, they can borrow more from the federal reserve cheaper. As well as, increase profits without increasing how much they spend in taxes. In effect, the margin for profit to be made increases, this they can acquire huge profits with virtually little or no increase in taxes or costs to new debts incurred.
This article covers tax rates and the ways they are changed and also a couple of things that effect the economy in that way. In the article, WACC (weighted average cost of capital) is explained. It is explained how this moves up and down and how this effects people and companies. With the information in the article, it is inferred that the United States economy has a lot of room to grow due to the changes in WACC. Not only can the United States grow within itself but also through other countries and their economies. We are able to do this through American Tower company which helps achieve 5G technology. This can help us to grow revenue, profits, and international business opportunities. Which allows for more international growth and better opportunities for growth for the United States. I am excited to see how this effects the United States and how much we can actually gain from this tell immunizations company in the future.
During 2008 to December 2015, the Federal Reserve determine a trend of higher interest rates. It’s rate has gone up by many basis points numerous times, this increase seemed insignificant to some, but should continue changing debt structures and corporations margins.
It’s clear that an increase in the cost of capital will derive from the cost of capital before taxes going forward, and as a result, fewer projects should be approved since more of them will become unprofitable. Companies that holding heavy debt burdens or negative cash flows will find it a lot more difficult to finance their losses.
The Tax Reform in the USA is affecting corporations as it could decrease the cost of borrowing after and should have a positive impact on earnings per share. It economic situation of higher interest rates and lower corporate tax rates have happened only a few times in our history. It situation affect company profitability, its have factors affecting equity on the market.
The changes in the International value of the USA Dollar is affecting signification the Telecommunication Companies with exposure to Emerging Markets since the USD has been decreasing in 2018. The Emerging Markets are in developing and their currencies continue to get stronger against the USD, it should increase revenue for telecommunication companies it’s because emerging market economies will be able to increase private consumption as their purchasing power increases. From a macroeconomic perspective, emerging and developing country growth also presents an opportunity.
I find this article very interesting. I’m very not very familiar and know little to nothing about the particular terminology but it’s very intriguing to see how much the economy and debt matters on a financial scale in the United States. The topic of corporate taxes and interest rates has been a controversial matter since 2008 with the financial crash beginning with mortgage backed securities. Ultimately, I like the idea of low corporate taxes. We have one of the highest corporate tax rates in the world on business and it’s time we lower it. We are at a point of recovering in our economy and if more businesses have money to use, the more they can put into investment spending, hire more workers, and later, increase profit. The high interest rate could be a positive for banks but not all corporations who often make transfers between banks and credit unions where they keep their money.
With the Federal Reserve raising the interest rates affecting corporations taxes, it will have effects in every category in American career choices. I believe the American people will have late and early career changes as the taxes settle into our economy and causing corporations to start cutting back on jobs and projects within certain professions. Though I find the possible change for the information technology field unsurprising, it will impact our future culture and business positively.* On the other hand I was surprised to read that American Tower has such a huge hand in the 5G network here in America. I am curious as to the huge job market they will impose for the STEM world as is it projected for the corporation spreading its wings to other rising countries. The future of our nation is hopefully gaining access to global markets by private companies to help expand our economy. In the end, the moves by the Federal Reserve System is a tell sign for issues to come affecting the small store clerk Americans.
According to this article, telecommunication companies are in utmost positions to make a lot of incomes in the present economy. It is impossible for one to function without internet in this day and time, when everything revolves around internet. Education, entertainment, communication all centered through the internet. Furthermore, the weighted average cost of capital was talked about in this article. Big companies will handle lesser projects according to the equation. The new tax cuts and job act, Big companies will be able to handle more projects for less funds, which in return can result in more job opportunity for the citizens of the country. Finally, although there is alot of money for telecommunication companies to make, The companies that benefit from the Tax cut will be making alot more money in the long run.
This ariticle shows the huge impact that externalities and global growth has on the economy. It shows us that with higher interest rates passed down by the Federal Reserve, and lower corporate taxes, there could be huge gains for corporates in the economy. The companies that might benefit the most are the telecommunications industry, specifically because of the need for telecommunications worldwide. With the constant growth of technology in smaller and developing countries, this industry will grow at an exceptional rate. Companies like American Tower will benefit alot due to these changes, and will have greater profits and opportunties with many other businesses globally due to these externalities.
In my opinion, it would be a smart idea for companies to start investing or incorporating their business into developing countries. The reason being is there are many benefits for both the company and the country, with advanced technology. Also, these new companies could drastically help the unemployment rate. They already need new buildings for their growing business and their is a large number of labor units in these countries. Why wouldn’t these new companies invest in an area like that? In conclusion, if a company did choose to do that they would create a stable employment rate and a more efficient functioning economy. Not only that but another huge benefit would be that the U.S. dollar is increasingly becoming more valuable in developing countries.
Harold Mosquera
After exploring this article and making some assumptions the economy might truly change and have some adjustments in the American Tower. First, American Tower Corp is an owner, operator, and developer of multi-tenant communications real estate. The company profits from leasing space for communication sites to wireless services and wireless data providers in the U.S. and abroad. The article also has a graph for the actual US dollar price and I can see how the index price is decreasing significantly for all over the year and experts prognosticate the line is heading down for next year as well. This effect must benefit other sector such as telecommunication companies and it’s just because emerging markets are able to extend the amount of US dollars on infrastructure. This will cause an increase in its revenues due to the increase on consumption of their consumers. Below are many charts of the top 8 of telecommunication services and their ratios in the service industry. Debt to capital, free cash flow, debt to capital, and debt to assets are some of ratios on these tables. At&t and Verizon are commanding the list with greater cash flow in this market.
This was a very interesting topic to read about and I personally think that it would be a good idea for companies, for example American Tower, would begin incorporating their company into developing countries. Because it will have many benefits for not only the business itself, but it will also help these developing countries acquire technology. I also believe that if new companies move into these developing countries it will cause the unemployment rate to drop dramatically due to the fact that these businesses need new infrastructures to be built for it to continue to grow in that particular area. All in all, I think that if a company chooses to do this it would create a very stable employment rate and also benefit the economy. Lastly, I think that potential investors in this company would benefit greatly simply because the US dollar is becoming more and more valuable in these emerging countries.
The article begins by discussing how the Weighted Average Cost of Capital has increased causing a change in margins of profit. The Weighted Average Cost of Capital is the rate at which a company expects to pay to utilize its assets and is dependent on external markets. If the weighted average cost of capital continues to increase businesses will be required to approve fewer projects due to higher debt burdens and unprofitability. Moreover, the value of the U.S dollar has declined (graph 3) causing the telecommunication to experience a boom in the industry. With other countries being able to compete with the U.S. dollar, more people now have the ability to afford telecommunication services, which could be due in part to the phone industry. If this trend continues, it is highly likely U.S businesses will seek to move their corporations back to the United States due to the decline in value of using one’s money overseas.
-Erin Ragland
It is very interesting how externalities and global growth can affect and impact the economy. With higher interest rates handed down by the Federal Reserve, lower corporate taxes, deregulation of the telecommunication industries in the U.S., a decline in the price of the dollar, and raising global growth have been affecting the economy and the market; however, there are companies that can benefit from these situations where they can have huge opportunities of economic growth, gain in profits, increase in assets and capitalization, and grow in higher interest rate could be in the near future according to the trend in the economy that has been emerging in the last few years. One of the sector that can benefit and take advantage from this trend is the telecommunication companies where they can increase their profits and capitalization as they expand their market and services throughout the countries around the world; however, in addition, American Tower Corporation, which owns, operates, and develops multi-tenant communication real estate, is in the best position to profit from these changes because of the demand for more extensive telecommunications in infrastructure is likely to increase due to new cellular technologies, Internet services, and more consumption of services required by many countries.
Aynur Saylak
I understood, if The Federal Reserve increase interest rate, same time Federal discount rate is increasing. And I saw the graph 2, it is showing when Federal Discount Rate is going up. Mostly Federal Discount Rate is going up during the economical crisis. And I think, higher interest rate and lower corporate tax rate are effecting positively the country`s economy. I see how important telecommunication companies for economy. If dollar has strong currency, it will increase revenue of telecommunication companies. AT&T, Verizon and American Tower are holding big amount of free cash flow to the firm. It is showing, how important they are for U.S economy. All around the world is same things. This is remind me my country telecommunication, because they sold telecommunication company other foreign country. This is a big mistake. And they messed it up, they made too many debts. And now, they are trying to fix it up. So telecommunication is important for human life and countries economy.
This article was particularly insightful as it emphasized the influence of externalities and global growth. To elaborate, higher interest rates and lower corporate taxes are altering debt structures and margins of profitability for corporations. An increase in interest rates causes corporations to acquire money, allowing fewer projects to be completed. Evidently, profits decrease bringing forth increases in debt and negative cash flows. Markets expect to alter their structures, to avoid financial losses to investors. Particularly, I found the global impact of the Federal Reserve to be interesting; by raising interest rates and lowering corporate taxes, an international domino effect occurs, encouraging firms to invest abroad. Furthermore, I found the relation between the value decrease of the dollar and corporate actions to be surprising. Corporate actions alter in attempt to maximize economic benefits. Evidently, while bigger corporations gain profit in the long run, smaller corporations will not have significant financial success. Moreover, I was surprised by the impact of telecommunication industries on the market; in detail, telecommunication industries generate revenue due to the societal influence of their product consumption. Ultimately, the article provided me with greater understanding on the actions of the Federal Reserve and the influence of rising interest rates.
This article is a good example of how externalities and global growth tie into and integrate one another. Externalities can either be a positive or negative consequence due to the third party influence that is effecting the economy. In addition, the federal government has increased tax rates for companies, thus having a significant impact in the future. Net neutrality is a good example on how externalities and global growth work together. In the article, the author mentions about how telecommunication companies are great for an emerging or developing country because the countries with and emerging markets currency will be worth more over time and as a result the companies value will increase and this ties in with global growth because telecom infrastructures are being modernized and access to internet will me more abundant. Now when its about the growth of the United States, net neutrality is a negative externality because its affecting everyone that uses the internet by making everyone pay more, but this also helps with updating and modernizing telecom infrastructure so that people will have better and stronger services.
The Fed interest rate going up is good, it will allow more companies to try and rake out loans. But the repeal on net neutrality law hurts everyone but the big guys who are tired of having to provide the same services as other companies.
This article gives light to the externalities that affect corporations and markets, such as the telecommunication industry. Two major externalities explained in this article are higher interest rates and lower tax rates for corporations, and the rare occurrence of these variables affecting the market simultaneously. I find it very interesting that unique circumstances such as this could propel some markets forward while hindering others. For instance, the telecommunications industry is in a very unique place with the abolishment of most net neutrality laws, the decrease in value of the US dollar, and milestones in near reach, such as global expansion and 5G cellular technology, that will allow corporations, like American Tower corporation, to outperform the S&P 500. On the other hand, I believe these rare circumstances will make it harder for smaller businesses to become competitive with larger corporations due to the fact that they will have a more difficult time recovering from debt and financing their losses.
This article is a good example of how externalities and worldwide development tie into and incorporate each other. Externalities can either be a positive or negative outcome because of the third party influence that is affecting the economy. What’s more, the government has increased tax rates for organizations, therefore having a noteworthy effect later on. Net neutrality is a good example on how externalities and worldwide development cooperate. It demonstrates to us that with higher interest rates passed by the Federal Reserve, and lower corporate taxes, there could be immense profits for corporates in the economy. The organizations that may profit the most are the telecommunications industry, particularly on account of the need for media communications around the world. With the steady development of innovation in smaller and developing countries, this industry will develop at an extraordinary rate. Organizations like American Tower will profit a lot because of these changes, and will have more prominent benefits and opportunties with numerous different organizations all inclusive because of these externalities
This article about externalities and global growth was very interesting to me and kept my attention the whole time. A few points that stood out in my mind were the example of the U.S. tax cuts and how they are a significant externality which is affecting larger corporations causing them to decrease the borrowing after taxes. This will all more than likely lead to a positive impact on the earnings per share also known as EPS. Another interesting point to me was the change in net neutrality laws and how it is affecting the telephone companies. These telecommunication companies have recently been dismantled due to the changing in the net neutrality laws. This should also allow these companies to increase their EPS overtime as they begin to expand over many countries. Resulting in this is also the likely increase of market shares and also the demand the closer these companies get to 5G technology over time.
One of the eye opening things that I wasn’t aware of before reading this was how tax cuts benefit businesses and how that could be shifted in the near future. An overwhelming amount of countries in the world seem to have emerging markets which could ultimately benefit US companies in which they could gain some profit from the global growth (if they have a plan for putting their assets to good use). Looking at the diagrams, the telecommunications industry has a real good chance to excel thanks to high interest rates and low corporate taxes. After reading it, it looks like these days it’ll be more challenging to get your own business started because of certain natures of the economy that can make a business unprofitable under a small period of time.When it comes to the 5G technology, the framework will allow the US to grow in many ways while also contributing to countries outside the US. Altogether, we hold the framework that the masses and nations can thrive off of. Ultimately the Telecommunications industry looks to be in a real fruitful state. The 5G tech is almost exclusively going to keep telecommunications in a very “Top Dog” position.
This article is interesting for me as it is related to the global growth and externalities. Through global growth some companies such as telecommunications companies in the developing countries will expand their economy. Also, if the government lower the taxes and the interest rate and then incite the telephone companies to upgrade the 5G it will expand the economy growth. Again, the lower value of the dollar will help some emerging countries to be competitive with the international market and then contribute to the economic growth.
My full name is Fatimata Nabaloum
After reading this article, I learn that telecommunication companies have a potential to grow more and getting more benefit because of the higher interest rates and taxes. Now, I am aware about taxes outs benefiting businesses. Also, this article informs that the value of the dollar is declining, and hundreds of industries, particularly telecommunications industry, are getting stronger. I learned that the federal discount rate goes up simultaneously to the corporate tax rates going down. The use of telecommunications is something worldwide, so because of that, companies who provide these services are getting more and more benefit. They can also play with people decisions, they can slow down Netflix wireless speed and put in more speed for other services. Companies like Netflix would rid of the market easily because of this. Also, each day more quantity of people are getting into phone, smartphones, tablet, which need wireless in order to work.
Even though telecommunication companies will grow, I do not see this as a good thing for consumers. All this says to me is that now my smart phone price is going to skyrocket. I would hope that those tax cuts would counteract the technology cost of perfecting the 5G network. But I just want people to not ignore the fact that technology cost money and contrary to popular belief the U.S. doesn’t have much of it. If we were talking agriculture it be different. There is a reason why Samsung has a lot more feature early on than an iPhone has. So no big companies growing is not always a good thing for consumers and does not constitute more jobs. Because why pay more if I can increase production with the workers I have and pay them the same? Externalities most times work against consumer mainly the middle class.
The articles starts off by demonstrating how the Weighted Average Cost of Capital ( the rate at which a company expects to pay to utilize its assets and is dependent on external markets) has increased, which has been causing a change in margins of profit. According to the article, if the weighted average cost of capital continues to increase businesses will be required to approve fewer projects due to higher debt burdens and unprofitability. In graph 3, we can see how the U.S dollar values have decreased which is causing the telecommunication to go through a change in the industry. Now there are other countries who are now in the compeition with the U.S dollar, and more people can afford to obtain communication services (cell phones). If these trends continue then U.S businesses will go back to their original place instead of expanding to overseas.
In this article, net neutrality really caught my attention. The fact that the government had the idea of getting rid of net neutrality had me on edge when I first heard about it. It disgusted me how I was going to have to pay the same amount of money and be limited on what I can do on the internet or have to pay more money to visit certain websites. Happy to see the laws against it get dismantled. In my opinion, if we are able to have internet providers expand throughout the country more profits will go to those companies which will generate more profits for them. If multiple companies are expanding they will compete against one another forcing each other to innovate more efficient towers and technology eventually driving us further into creating faster and more efficient services. I am excited to see how far technology will go.
Passed by the Trump Administration, the TCJA (Tax Cuts and Jobs Act) causes businesses and citizens to pay less for taxes. As for the Federal discount rate, which determines how much interest must be paid to the Federal reserve bank for borrowing money, the increase that was made at the time of this article made it costlier for businesses to borrow money. These two events do not usually happen at the same time, and with the value of the dollar decreasing too, the movement going on, specifically in the telecommunication industry, has caused these telecom companies to expand to other countries and grow their business. As these businesses, such as Verizon and AT&T, expand towards emerging countries such as India and Nigeria, American Towers rises as one of the top gainers in the industry. AT&T and Verizon are already making the switch to 5G in America, but with other countries not having the same mobile broadband penetration, this gives telecom companies, including American Tower, to take advantage of those opportunities, especially with the U.S. dollar going down.
With interest rates getting higher, it is harder for corporations to get money for their projects and expansions. The combination of the lower corporate taxes and the higher interest rates have an impact on corporation growth. The article shows us that the telecommunications industry is still able to expand and even do well, while other companies are more impacted by the cost of the rising debt. With the expansion of wireless technology , broadband penetration, and deregulation of the industry, the need for the telecommunications industry will be prevalent, and we should expect to see growth , even if the cost of the American dollar is lower, and the other factors are added in. This article shows us that companies like American Tower might be worth investing in, as this company shows potential for growth and profit, even with the decline of the U.S dollar, higher interest rates and lower corporate taxes.
Reading this article again gave me a better understanding about Externalities and Global Growth than the first time I read it. The federal reserve takes a huge part when it comes to our market economy. Big companies benefit a lot with higher interest rates and low corporate taxes. This article is very important for me to have read because my major is Business Management, so it gives me a good understanding on how many things work. This class has helped me a lot and has taught me to be aware when owning a business. Many wrong and right things can happen one just has to be smart about the choices we make. The author mentions the American Tower and I’m sure many of us have heard about it. It’s always interesting to learn new things about names we have heard before. This article is very useful in many ways for it teaches us more about our market economy.
So from what I understand this article is talking about how the federal reserve imposing higher interest rates as well as tax reforms are having an effect on companies, the economy, and how investors spend their money overall. It also seems because of things like this it seems like a great time to invest in the telecommunications industry. Because of the current state of the economy, the strength of the U.S. dollar has been decreasing which as a result allows other foreign currencies, that are developing and emerging, to become stronger in comparison. As a result these countries can better afford internet services, and should allow profits for industries in the telecommunications field to increase and should allow them to expand if they can take advantage of the opportunity. Meaning it probably be a good idea to consider investing in this market.
This article talks about the probable growth of the telecommunication industries in the U.S. It’s likely that the telecommunications industry will experience an increase in profits in a few years due to new data inventions- like 5G. Particularly, we learn that American Tower Corp is growing particularly fast, meaning there will probably be lots of investors putting in money in the upcoming years. With more and more inventions from companies like Apple and Samsung it’s no surprise that this market keeps growing and spreading globally. Because the American Dollar’s value is increased, these phone/internet are expanding to other countries where the currency is worth more- it is a good investment for them to do so to make more money and also offer their product to a wider range of people. We can also suspect that in months such as November and December, around the holidays, this particular market (like many others) will see a huge spike in the stock market.
– Kasen Jones
I feel that you are over valuing the deregulation of the telecommunications industry. That specifically relates to internet consumption, which means that telephones are still regulated. I don’t know enough to say for a fact that this incongruity of internet usage through telephone infrastructure would result in no profits, but I do think that this will result in lower than expected returns.
However, I also think that you didn’t hit on an important aspect of developing countries, specifically India. Population density is a crucial aspect for investing in wireless infrastructure. Because India is so dense with people, investing in wireless infrastructure opens the internet to more people than most developing nations. As a result, I feel that while investment might be profitable regardless of regulations, this will only be true so long as these developing countries are incredibly population dense. I don’t believe that there are enough developing countries with a sufficiently dense population to allow for continued growth of the telecommunications industry.
This article is very insightful. For someone like me, the author has made me think about things that I hadn’t thought much about in the past. The graph that shows the three recent times when the corporate tax rates were decreasing, and the increasing interest rates, leads me to believe that will happen again in the near future. The author mentioned too that as 5G approaches, the likeliness of the telecommunications demand to increase is high. Globally, the world is demanding more telecommunication and if the firms were to play their hands right, they could gain a large profit because of it. With 5G just around the corner, and the demand for telecommunications growing each day, it’s likely that companies such as Verizon or AT&T will increase their market shares. Unfortunately, the US dollar has been decreasing since March 2017 and is set to continue this trend all thought 2018 (when this article was written). This however, isn’t a bad thing for the telecommunication companies who can potentially bring in more profit because more people are able to purchase internet. American Tower Corp is a company that leases communication sites to telecommunication companies. This particular company has an increasing in financial leveraging, total asset turnover, and total profit margin which indicates that it’s putting its assets and resources to work efficiently. Between 2016 and 2017, its return on asset had increased more than 20 percent! At the end of the day, I think the US population, as well as the global population, will continue to demand internet at a higher speed and as long as the telecommunication companies are utilizing their resources wisely, they will continue to profit because of it.
Yikes! This problem of increasing interest rates seems like it’s going to be a major headache for many business owners! Considering that taxes will be going down while interest for business owners will be going up, it’s easy to see that business owners will be grateful for the US Tax Cuts and Job Act because it will be a significant relief on their profit margins; however, on the other hand, we can see that taxes cuts alone will only ease the economy minimally compared to the strain that will be experiences by business owners with increasing interest rates. In this article it seems evident the impact a dominating worldwide free market system is having on its economy. In microeconomics we learned that free markets systems have very high capacities for regulating economic efficiency. This efficiency enacting work seems increasingly evident in the world economy as seen through this article, and particularly the telecommunications industry seems to be an industry where consumers’ votes are flowing. So, we can see from this article that the theory that free markets promote efficiency extremely well is highly accurate. Efficiency will be extracted by free markets, whether by taxes, increasing interest rates etc.
This article is very interesting. Here I thought 4G was a big deal and now 5G is coming into the market. The decline of the United States dollar value (no surprise there) is a seemingly negative externality but not for telecommunication industries. It is a major factor in their success. With the new tax cut law that was passed, businesses are coming out on top being able to charge higher interest resulting in them loosing less money. This article has also helped me to understand why people voted for Trump. However, I still can’t help but wonder how this will dramatically affect the economy in a negative way if people aren’t able to pay. One thing is for sure, the telecommunication industry won’t have to worry about future investors. Especially with 5G technology. Its easy to see how globally emerging markets can benefit from the telecommunication industry. It could really help their economical growth which can later give them advantage when dealing with other countries.