Professor: George W. Gallinger | Office: BAC 524 | Telephone: 480.965.4221

bac524

Tentative Version: August 10, 2011

Course Overview

This 1.5 credit course has three interwoven modules: an examination of the economy, simulation, and capital budgeting extensions using EVA and real options. The economy module will make you more aware of economic activity and how it can help you make decisions — whether the decisions be job related or about personal finances. The simulation module introduces you to the use of @Risk (and ModelRisk) to allow you to gain a better understanding of incorporating risk in decision making. The last module examines how to use real options and EVA in capital investment decisions.

Textbooks & Other Materials

The textbook for this course is Project Valuation Using Real Options: A Practitioners Guide by Prasad Kodukula and Chandra Papudesu. I advised you earlier this summer to purchase the book from Amazon.

The syllabus contains links to required readings. Some handouts will be provided.

You can download free simulation software from VoseSoftware. The program, since it is free, has switched off some useful options; however, it will do basic simulation. If you need access to options such as correlation and define distributions, use @Risk which is on the Citrix server.

Also residing on the Citrix server is an add-in Excel program called Research Insight. You access it through the Excel 2007 icon. The following links provide you with some help documentation: Research Insight Primer and Compustate Guide.

Grading & Course Requirements

Assignments

Keep your write-ups brief but cover the salient issues. Write-ups need to be typed with all necessary supporting documentation attached. Late assignments will not be accepted. Please don’t use a cover page. Simply put a staple in the top left-hand corner with you name in the top right-hand corner. The following assignments will be graded. They are due at the beginning of the indicated class.

• Class 1: State of the economy (5 points) — individual assignment
• Class 6: Capital budgeting using EVA and simulation (10 points) — paired with one other person
• Class 9: Real options (10 points) — individual assignments
• Class 10: Economic forecast (15 points) — paired with one other person

Class Contribution

Failure to contribute to class discussions will result in a low contribution grade. Contribution will take account of the quality and regularity of your comments, attendance, and preparation. Effective contribution means participating such that your answer or question moves our analysis and understanding forward. I expect you to come to class on time, fully prepared, and ready to open the discussion. Contribution involves careful analysis of the available quantitative and qualitative evidence presented in the case to develop specific recommendations.

Class contribution points are allocated as follows:

• 9-10 — Excellent contribution
• 8-8.9 — Average contribution
• 0-7.9 — Below average contribution.

Grading

A 90-80-70-60 percentile grading system is not used. Instead, I accumulate grades and look for break points. Plus and minus ticks will be used. A-‘s and B-‘s will never cutoff higher than the 90 and 80 percentiles, respectively. I expect everyone in class to earn a grade of B- or better. However, a final grade below 70 percent will result in a C or lower.

W. P. Carey Honor Code and Laptop Computer Policy

For all individual assignments, do your own writing. I encourage you to speak to other students about the issues, unless stated otherwise. Write the analysis in your own words and share no files whatsoever. Failure to do so will result in zero points for the assignment for both the receiver and provider (if involved) of the files if I detect noncompliance. Some of the assignments used in this class may have been used before at ASU or other institutions. You may not consult with students previously enrolled in this class, their class notes, or other materials that were otherwise provided in the past. Moreover, you may not use material or solutions from other institutions (e.g. posted on the Internet), unless otherwise instructed in class to do so for a particular assignment.

Laptop computers may be used in class for note taking and when required for a class activity. Checking email or surfing the Internet during class is not acceptable, and will be considered a violation of policy. The penalty will be a lower contribution grade.