Simulation and Strategic Options: Decision Tools, 3 Edition, 2012

BU.610.620.
XX – Simulation and Strategic Options – Instructor Name – Page 1 of 18
Simulation and Strategic Options

2 credits
BU.610.625.XX
[NOTE: Each section must have a separate syllabus.]
[Day & Time / ex: Monday, 6pm-9pm]

[Start & End Date / ex: 3/24/15-5/12/15]
[Semester / ex: Fall 2016]

[Location / ex: Washington, DC]
Instructor
[Full Name]
Contact Information
[Phone Number, (###) ###-####]
[Email Address]
Office Hours
[Day(s)/Times]
Required Texts & Learning Materials

Materials and Readings Available Through Blackboard
1. Chambers, C.G. Introduction to Simulation: Random Variables and Modeling, 2010.
2. Chambers, C.G. More Advanced Decision Models & Applications, 2010.
Materials & Readings Available Through JHU Library eReserves

3. DeSantiago, R. Decision Tools to Keep You on the Right Path, IESE Insight, 2013.
4. Hertz, DB. Investment Policies that Pay Off, Harvard Business Review, 1968.
5. Hammond, JS, Better Decisions with Preference Theory, Harvard Business Review, 1967
6. Clemen, RT and T Reilly, Chapter 13: Real Options in Making Hard Decisions Using
Decision Tools, 3rd Edition, 2012.
7. Ferreira, N, J Kar and L Trigeorgis. Option Games, Harvard Business Review, 2009.
8. Bazerman, MH and JJ Gillespie. Betting on the Future: The Virtues of Contingent Contracts,
Harvard Business Review, 1999.
9. Baucells, M and M Weber, Mind Your Mind Traps, IESE Insight, 2009.
Cases & Readings Available Through Study.net
10. Introduction of the Differential Global Positioning System
11. IEC In Sports
12. Enron Corporation’s Weather Derivatives
13. Games of Strategy: An Introduction
14. Airbus and Boeing
15. Applichem
Course Description
This course covers aspects of spreadsheet models, Monte Carlo Simulation, contingent claims
analysis, and scenario planning to formalize the concept of real options as a framework for thinking
BU.610.620.XX – Simulation and Strategic Options – Instructor Name – Page 2 of 18
through contingencies and strategic decisions made in the presence of risk. It uses the logic of options
pricing, decision trees, and decision analysis to position the manager to deal with risks embedded in
the use of real assets. Emphasis will be placed on taking advantage of the up-side of risks, and the
application of rigorous approaches to thinking through “optionality” in the real world.
Prerequisite(s)
(BU.231.620 OR BU.910.611) AND (BU.520.601 OR BU.913.610)
Learning Objectives
The learning objectives specific to this course are:
1. Begin to see how to structure a decision that incorporates options to change course or
direction after receiving new information about risky outcomes
2. Understand and practice generating competing scenarios that account for differing outcomes
that can result
3. Use options pricing tools and methodologies to consider complex settings not perfectly
captured in capital markets
4. Develop strategies that are adaptable to changing environments
5. Present material in written and oral formats which includes treatment of both quantitative
and qualitative elements of risk management
To view the complete list of Carey Business School’s general learning goals and objectives, visit
the Teaching & Learning@Carey website.
Attendance and Participation

The ability to “think on your feet” and succinctly articulate your point of view about a decision to be
made is critical to any general manager. Our classroom will provide a safe place for you to develop
and hone these skills. Please note that the quality of what you contribute to class discussions (whether
a thoughtful question, some astute analysis, or some other meaningful contribution) will count far
more than the quantity of your remarks.
Assignments & Rubrics
Assignment Learning Objectives Weight

Participation 1–5 15%
Homework #1 1–5 9%
Group Project 1–5 15%
Final Exam 1–5 25%
Total 100%
Participation –
Participation includes cooperation in the class discussions, lectures, and/or presentations. We reserve
the right to randomly call on students to make sure everyone is on the same page.
Homework –
The course includes four individual submissions and one group submission as homework assignments
based on the cases discussed in session 2-6. Submission of homework problems is to be done via
Blackboard. Each student or group should submit at least one file for each assignment. The first will
be a PDF file containing the related written responses. Some assignments will also involve creation
of a simulation model. When this is needed, it should be submitted as a separate Excel file.
Late assignments will not be accepted without prior arrangement with the course instructor. Such
arrangements are reasonable for medical reasons and other emergencies. However, students should
understand that the general policy is that late submissions will not be graded. Also, any submission
made after the assignment is discussed in class is clearly inadmissible and cannot be considered.
Group Project –
Students will form teams of 3-4 people and develop a complete analysis of a business case focused
on using simulation and/or scenario development to address issues in risk management. Each team
will explain its analysis in a 15-minute presentation to the rest of the class and deal with questions
from other students and/or faculty.
Final Exam –
Session 8 is set aside for an in-class exam. Exam questions will be drawn from class notes, cases
covered, homework problems, and/or a case distributed in advance of the exam time. Exam format
will include multiple choice and short-answer questions. All responses will be correct or incorrect.
Consequently, no Rubric is provided.
Rubric for Class Participation
Assessment Not Good Enough Good Very Good

Score
Criteria (0≤ score <6) (6≤ score <9) (9≤ score ≤10)
Criterion 1 Students does not Student shows Student shows
Preparation show evidence of knowledge of the application of key
consideration of content of assigned concepts from
assigned readings as well as background work to
readings/cases methods/results of the discussion at
assigned work hand
Criterion 2 Students only Student is engaged Students leads
Engagement contributed when and involved in discussions forward
forced to do so or discussion in every on a consistent basis
chooses not to be session whether prompted by
involved in instructor or not
discussion
Criterion 3 Student input does Participation shows Shows how insights
Listening not show awareness and presented by others
consideration of understanding of expands
other statements or what is presented by understanding of
class input both instructor and critical content
other students
Criterion 4 Comments are rare Participations moves Synthesis of

Pedagogical value and/or do not add to discussion forward concepts is displayed
the understanding of and/or presents ideas in a fashion that
relevant material beyond statement of enlightens the group
facts or information
Total Score
Rubric for Homework Submissions

Score
Criterion 1 Does not convey Presents decision Shows how nuances
Demonstrates problem setting as a setting clearly, of course material
how to translate model with internal concisely, and lead to model and
problem consistency completely decisions which
description to a expand upon
consistent introductory
construct concepts
Criterion 2 Submission does not Work shows how a Demonstrates
Presents analysis show evidence of good decision methodology of
in a way that underlying logic follows from general applicability
produces useful and/or does not does analysis across problem
insights not relate to decision domains
setting
Criterion 3 Includes information Includes relevant Explains why some
Captures not relevant to the information and input is used and
important aspects problem and/or omits excludes distracting why other content is
of problem major elements of content omitted in a way that
setting and significance adds clarity and leads
supports decision to a consistent way
making to evaluate complex
problem settings
Criterion 4 Work is hard to Presentation is clear, Presentation shows
Presents work in follow and/or read. neat, and complete that client or decision
a way that Work does not show makers
reflects the logic behind the characteristics are
professionalism analysis incorporated into all
and care for work.
client needs
Total Score
Rubric for Written Submission on Learning Experience from Team Project

Score
Criterion 1 Does not recognize Recognizes multiple Explains how
Demonstrates perspectives of perspectives and can exposure to new
appreciation of others, and/or explain how they perspectives
multiple dismisses them as added to the quality evidenced during
perspectives and having no value of the team’s work project served to
experiences change personalities
or improve working
environment.
Criterion 2 Cannot recall Can identify at 2 Can highlight
Explains how new instances in which perspectives and specific experiences
perspective other perspectives of explain how each with new
helped team and ideas made a positive added to the learning perspectives that
added to student impression or experience altered student’s
experience contribution consciousness
regarding how to
deal with others on
future projects and
work tasks.
Criterion 3 Undermines team Can identify at least Explains how student
Demonstrates dynamics or only 2 instances of how showed leadership in
recognition of focuses on how team teamwork improved managing team
value of structure hindered the work product dynamics in a way
teamwork student efforts and/or explains how that created lessons
student improved that the entire team
team dynamics to may benefit from in
help the project all future endeavors
progress
Criterion 4 Found no insight Can explain at least 2 Explains new insight

Explains insight from experience or lessons learned about related to teamwork
related to cannot express it an a teamwork that will that is not borrowed
teamwork gained coherent fashion be of value to student from course readings
through in future endeavors or instructions.
experience with Shows how this
class project insight will help
team members in
future
jobs/endeavors.
Total Score
Rubric for Written Submission on Case Discussions

Score
Criterion 1 Does not recognize Recognizes multiple Explains how
Demonstrates perspectives of others, perspectives and can exposure to new
appreciation of and/or dismisses them explain how they perspectives
multiple as having no value added to the quality of evidenced during
perspectives and the discussion discussions served
experiences to change
personalities or
improve working
environment.
Criterion 2 Cannot recall Can identify at least 2 Can highlight
Explains how new instances in which perspectives and specific experiences
perspective helped other perspectives or explain how each that altered
improve learning ideas made a positive added to the learning student’s
experience impression or experience consciousness
contribution regarding how to
deal with others on
future projects and
work tasks.
Criterion 3 Undermines Can identify at least 2 Explains how
Demonstrates classroom dynamics instances of how student showed
recognition of or only focuses on information provided leadership in
value of group how group discussion in class discussion improving
discussion hindered student improved under- classroom dynamics
efforts to get attention standing of difficult in a way that
topic and/or explains created lessons that
how student improved the entire class may
classroom dynamics benefit from in all
to help the discussion future endeavors
progress
Criterion 4 Found no insight from Can explain at least 2 Explains new

Explains insight experience or cannot lessons learned about insight that is not
related to business express it an a business from borrowed from
gained through coherent fashion discussions that will course readings or
experience in class be of value to student instructions. Shows
discussions in future endeavors how this insight will
help student in
future
jobs/endeavors.
Total Score
RUBRIC FOR PRESENTATION PORTION OF COURSE PROJECT
Analysis
1. Was the analysis of the case complete? Max 10 pts. _________
2. Does the analysis properly incorporate the relevant tools? 10 pts. _________
3. Does the analysis show the relationships among important 10 pts _________
factors in the situation?
Recommended Actions
1. Is the action plan specific and complete? 10 pts. _________
2. Is the action plan practical (i.e., something that can be done _________
reasonably)? 5 pts.
3. Does the action plan recognize the importance of timing _________

(short-term and long-term)? 5 pts.
4. Is the plan of action integrated in a logical way and linked _________

to the analysis? 5 pts
Case Presentation
1. Did the case discussion stimulate interest among class _________
participants? 5 pts.
2. How effectively did the presenting team lead the discussion? 5 pts _________
3. How good was the timing of the case presentation? 5 pts. _________
Class Handouts
1. Were the class handouts effective in communicating _________
information? 5 pts.
2. Did they help to clarify some of the detailed points of _________

the case analysis? 5 pts.
Overall Criteria
1. How well organized was the presentation? 10 pts. _________
2. What was the level of clarity and cogency of presented _________

arguments? 10 pts.
RUBRIC FOR WRITTEN PORTION OF APPLICHEM ASSIGNMENT
Analysis
1. Does the paper contain analyses of the major issues? 10 pts. _________
2. Does the analysis properly incorporate the relevant tools? 10 pts. _________
3. Does the analysis show the relationships among important _________

factors in the situation? 5 pts
4. Are assumptions made in the analysis stated explicitly? 5 pts _________
5. Does the analysis isolate the fundamental causes of problems _________

in the case? 5 pts.
Recommended Actions
1. Are the criteria for selecting recommendations stated? 5 pts. _________
2. Is the plan of action integrated in a logical way and linked _________

to the analysis? 5 pts.
3. Does the action plan recognize the importance of timing _________

(short-term and long-term)? 5 pts.
4. Is the action plan specific and complete? 5 pts. _________
5. Is the action plan practical (i.e., something that can be done _________
reasonably)? 5 pts.
6. Is the action plan effective (i.e., does it resolve the problems _________
and achieve the desired results)? 5 pts.
7. Is the action plan efficient (i.e., does it make good use of _________
the available resources)? 5 pts.
Exhibits
1. Are analyses in the exhibits done correctly? 10 pts _________
2. Do the key exhibits support and add to the text on key points? 10 pts. _________
Overall Criteria
1. Is the paper logically consistent and effectively structured _________
so it sells its recommendations? 10 pts.
Grading –
The grade of A is reserved for those who demonstrate extraordinarily excellent performance. The
grade of A- is awarded only for excellent performance. The grade for good performance in this
course is a B+/B. The grades of D+, D, and D- are not awarded at the graduate level.
Please refer to the Carey Business School’s Student Handbook for grade appeal information.
Tentative Course Calendar*

*The instructor reserves the right to alter course content or adjust the pace to accommodate class
progress.
Week Content Reading Due

Session 1 Simulation & Trees Readings 1, 2 & 3 HW #0
Session 2 Risk Profiles Readings 4 & 5 HW #1
Session 3 Real Options Reading 6 HW #2
Session 4 Option Bundles Reading 7, 13 HW #3
Session 5 Scenario Planning Reading 8 HW #4
Session 6 Options and Strategy Reading 9 HW #5
Session 7 Group Presentations Group Report &

Presentation
Session 8 Final Exam N/A
Carey Business School

Policies and General Information
Blackboard Site
A Blackboard course site is set up for this course. Each student is expected to check the site
throughout the semester as Blackboard will be the primary venue for outside classroom
communications between the instructors and the students. Students can access the course site at
https://blackboard.jhu.edu. Support for Blackboard is available at 1-866-669-6138.
Course Evaluation
As a research and learning community, the Carey Business School is committed to continuous
improvement. The faculty strongly encourages students to provide complete and honest feedback
for this course. Please take this activity seriously; we depend on your feedback to help us improve.
Information on how to complete the evaluation will be provided toward the end of the course.
Disability Services
Johns Hopkins University and the Carey Business School are committed to making all academic
programs, support services, and facilities accessible. To determine eligibility for accommodations,
please contact the Disability Services Office at time of admission and allow at least four weeks
prior to the beginning of the first class meeting. Students should contact Priscilla Mint in the
Disability Services Office by phone at 410-234-9243, by fax at 443-529-1552, or by email.
Honor Code/Code of Conduct

All students are expected to view the Carey Business School Honor Code/Code of Conduct tutorial
and submit their pledge online. Students who fail to complete and submit the pledge will have a
registrar’s hold on their account. Please contact the student services office via email if you have any
questions.
Students are not allowed to use any electronic devices during in-class tests. Calculators will be
provided if the instructor requires them for test taking. Students must seek permission from the
instructor to leave the classroom during an in-class test. Test scripts must not be removed from the
classroom during the test.
Other Important Academic Policies and Services

Students are strongly encouraged to consult the Carey Business School’s Student Handbook and
Academic Catalog and Student Resources for information regarding the following items:
 Statement of Diversity and Inclusion
 Student Success Center
 Inclement Weather Policy
Copyright Statement
Unless explicitly allowed by the instructor, course materials, class discussions, and examinations
are created for and expected to be used by class participants only. The recording and
rebroadcasting of such material, by any means, is forbidden. Violations are subject to sanctions
under the Honor Code.
Detailed Schedule
Instructors reserve the right to alter course content or adjust the pace to accommodate class
progress. Note (BB), (ER), & (HBSP) refer to Blackboard, e-Reserves, and the coursepak at
Harvard Business School Publishing respectively.
SESSION 1: SIMULATION & TREES
In this session we review material covered on simulations from the Decision Models course, work
through examples in class, and use the tool to address a simple case.
Readings 1. Introduction to Simulation: Random Variables and Modeling

(BB)
2. Chambers, C.G. More Advanced Decision Models &
Applications, 2010. (BB)
3. Decision Tools to Keep You on the Right Path (ER)
Discussion Questions 1. Create a model of the Newsvendor setting described in Example

1 but use demand levels of 0,1,2,3, and 4. What is the optimal
order quantity for this case?
Introduction of Global Positioning System (HBSP)
This exercise introduces a powerful concept using a very simple

analytical tool that students were introduced to in prior Managerial
Economics coursework.
Discussion Questions 1. What do you think of Waser’s analysis in Exhibit 6? Does it

appropriately evaluate the project’s attractiveness? If not, what
specific characteristics of the project does it ignore?
2. Why would Crossair apply a discount rate of 15% to projects

such as this? What does this discount rate reflect?
3. How would the value of the project be affected if the competitive

damage may be anywhere from 2.5 and 10 M SFr? How would
the value be affected if there was a possibility of quality problems
with the SNS system, causing additional maintenance costs after
installation?
SESSION 2: RISK PROFILES
In this session we look at using spreadsheet models to explore value and use of managerial flexibility
as a strategy for managing risks.
Required Readings 1. Investment Policies that Pay Off (ER)

2. Better Decisions With Preference Theory (ER)
Submission Due 1. Answers to questions 1 - 3 below
IEC In Sports (HBSP)
This case is useful in exploring issues in probability, expected

monetary value, risk management, and simulation.
Discussion questions 1. Describe the uncertainties in this problem.
2. Calculate Expected Values of key outcomes and show them in

the form of a decision tree.
3. Explain whether these calculations (i.e. multiplying

probabilities by revenues, etc.) are sufficient to address the key
managerial concern in this problem?
4. What is simulation? Why would simulation be helpful in

working out this problem?
5. Is it a good idea to carry out best and worst case simulations in

this case?
SESSION 3: TREES, SIMULATION & REAL OPTIONS
In this session we continue our exploration of issues involved when decisions can be adjusted in
response to real events.
Required Readings 1. Real Options (ER)
Submission Due Respond to question 1 for both cases.
Case APPSHOP (ER)
Discussion Questions **1. Appraise the risk alternatives, and use your simulation of the
problem setting to recommend what Eric Clark should choose.
Submit your written response as well as your simulation model.
Case Enron Corporation’s Weather Derivatives A & B (HBSP)
Discussion Questions 1. What are the pros and cons of weather protection from PNW’s
perspective?
2. What is Enron’s role in this market and why would they expect
this to be a profitable business?
3. Which, if any, of the available contracts would you be willing to

accept?
4. Which is the best contract for you?
5. If you could design your own contract to reduce your exposure

to the greatest extent what would it be?
SESSION 4: OPTIONS BUNDLES AND STRATEGIC RISKS
This session deals with categories of risk that most managers ignore when making large deals. Proper
analysis involves multiple methodologies and proper management involves extending beyond the
obvious choices.
Required Readings 1. Games of Strategy (HBSP)

2. Option Games (ER)
Submission Due Response to questions 1 - 3 shown below. Your submission should

include your written portion AND your simulation model.
Airbus and Boeing (HBSP) – this case focuses on the strategic

response of one major player to the actions of the other. Case analysis
combines elements of game theory, subjective probability
assessments, decision trees, and simulation.
Discussion questions 1. Create a payoff matrix for Boeing’s choices to Develop Now (D)
or Never Develop (N).
2. Create a payoff matrix for Airbus’ choices to be “In development
of an offering for” (I) or “stay Out of” the superjumbo market.
3. Should Airbus introduce a superjumbo jet?
4. Assuming that Airbus is in development of an offering for the
superjumbo market draw the decision diagram for Boeing
including alternatives Airbus has to improve its situation.
5. What should Boeing’s strategy be?
6. The GFB analyst has asked for your help in preparing his report
to a large institutional investor. This investor is concerned about
the significant difference in superjumbo market forecasts by the
two companies as treated in the model, and in particular, about
the effect this difference may have on the value added by the
superjumbo market to each company’s business. This investor
believes it is equally likely that the initial orders will follow either
the analyst’s model based on Boeing’s view or the analyst’s
model based on Airbus’s view. Incorporating this belief into your
analysis, write a paragraph for the analyst’s report to the investor
about the value added to Airbus by the superjumbo market
relative to the value added to Boeing by the superjumbo market.
SESSION 5: REAL OPTIONS & SCENARIO PLANNING
In this session we introduce several issues involved in the management of Supply Chains. Elements
of systems engineering and economics will be used to lay a foundation to understand the dominant
behavior of these serial systems in dynamic environments.
Required Readings 1. Betting on the Future: The Virtues of Contingent Contracts (ER)
Submission Due Simulate the variety of outcomes discussed in the case to show
expected values linked to the options presented there. Use your
simulation to justify your recommended course of action. You are
free to perform this analysis in groups of 3-4 students, as the
workload from the simulation creation is considerably greater than
in most cases.
Applichem (HBSP)
This case provides us with detailed data on costs, material, and labor
resources, capacity output rates, and international exchange and
inflation rates to compare the performance of 6 plants which
manufacture Release-Ease (a chemical additive to molding
compounds) in 6 different countries. It introduces us to the problems
and opportunities entailed in managing a multi-plant network. It
raises the opportunities for coordinating among plants as well as for
rationalizing capacity. It helps us to understand the role of
operational flexibility in managing in the presence of exchange rate
uncertainty.
Discussion questions 1. How would you explain the large differences in the performance
of the plants making Release-ease??
2. As Joe Spadaro, what would you do given the current over

capacity situation? In doing so approach the problem in two
ways: first assume that exchange rates stay as they are when the
case is written. Second, include fluctuating exchange rates.
SESSION 6: OPTIONS BUNDLES AND STRATEGIC RISKS
This session deals with categories of risk that most managers ignore when making large deals. Proper
analysis involves multiple methodologies and proper management involves extending beyond the
obvious choices.
Required Readings 1. Mind Your Mind Traps (ER)

Submission Due Use your simulation to explain your response to question 1 shown
below. Submit both your written response to question 1 as well as
the simulation model that supports it.
SCOR-eStore.com (HBSP)
A potential investor in a new on-line sheet-music business is ready

to deny funding based on simple expected monetary values. Further
reflection identifies potential downstream options that have been
previously overlooked. Understanding the opportunity fully,
requires exploration of each of these options as a portfolio of
strategies rather than a simple go-no go decision.
Discussion questions 1. What value does each of the four ideas offered by Lance
Bernard’s friends have, over and above the value of the original
opportunity?
2. Are there other contingent opportunities that would add value to
this business?
3. Should Bernard invest in this business?
4. Perhaps not all the uncertainty is considered in the base model of
Exhibit 2. Think about what the addition of more uncertainty
would do to the values found in question 1.
5. Does Bernard have reasonable cutoff levels to trigger action on
each of the ideas in question 1?
SESSION 7 STUDENT PRESENTATIONS
Session 7: Student Presentations

In this session student groups will present a complete analysis of a business case that focuses on
decision making in an environment that includes high levels of risk in a way that leverages the
material covered throughout the course. Each team will select one of the three cases listed below as
the focus of their analysis.
Eli Lilly – this case considers the use of flexible production capacity in the face of technical
uncertainty. The main uncertainty in place here involves FDA approval for experimental drug based
products about the start their life cycle. The required analysis involves extensive use of spreadsheet
modeling and Decision trees.
Genentech – this case deals with capacity management decisions for a large Biotech firm that must
respond to very high levels of uncertainty when capacity decisions must be made for a longer term
and associated capital expenditures are quite large. The required analysis uses spreadsheet modeling
and simulation of outcomes.
Nucleon - This case looks at a very small biotechnology company whose first product almost ready
to be tested in human beings. The company has been entirely focused on R&D up to this point but
must now think strategically about production capabilities, licensing alternatives, and the
complexities of contract design under great market and technical uncertainty. The case involves
application of the ideas behind Options Pricing and applying that to Real operational problems.
SESSION 8 FINAL EXAM

THE EXAM WILL COVER CLASS DISCUSSIONS, HOMEWORK ASSIGNMENTS, AND MAY
INVOLVE A CASE STUDY TO BE HANDED OUT AT THE END OF SESSION 7.

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BU.610.620.

XX – Simulation and Strategic Options – Instructor Name – Page 1 of 18

Simulation and Strategic Options

[Day & Time / ex: Monday, 6pm-9pm]

[Semester / ex: Fall 2016]

Required Texts & Learning Materials

Materials & Readings Available Through JHU Library eReserves

Attendance and Participation

Assignments & Rubrics

Assignment Learning Objectives Weight

Rubric for Class Participation

Assessment Not Good Enough Good Very Good

Criterion 4 Comments are rare Participations moves Synthesis of

Rubric for Homework Submissions

Assessment Not Good Enough Good Very Good

Rubric for Written Submission on Learning Experience from Team Project

Assessment Not Good Enough Good Very Good

Criterion 4 Found no insight Can explain at least 2 Explains new insight

Rubric for Written Submission on Case Discussions

Assessment Not Good Enough Good Very Good

Criterion 4 Found no insight from Can explain at least 2 Explains new

RUBRIC FOR PRESENTATION PORTION OF COURSE PROJECT

3. Does the action plan recognize the importance of timing _________

4. Is the plan of action integrated in a logical way and linked _________

2. Did they help to clarify some of the detailed points of _________

2. What was the level of clarity and cogency of presented _________

RUBRIC FOR WRITTEN PORTION OF APPLICHEM ASSIGNMENT

3. Does the analysis show the relationships among important _________

4. Are assumptions made in the analysis stated explicitly? 5 pts _________

5. Does the analysis isolate the fundamental causes of problems _________

2. Is the plan of action integrated in a logical way and linked _________

3. Does the action plan recognize the importance of timing _________

4. Is the action plan specific and complete? 5 pts. _________

Tentative Course Calendar*

Week Content Reading Due

Session 2 Risk Profiles Readings 4 & 5 HW #1

Session 3 Real Options Reading 6 HW #2

Session 4 Option Bundles Reading 7, 13 HW #3

Session 5 Scenario Planning Reading 8 HW #4

Session 6 Options and Strategy Reading 9 HW #5

Session 7 Group Presentations Group Report &

Carey Business School

Honor Code/Code of Conduct

Other Important Academic Policies and Services

SESSION 1: SIMULATION & TREES

Readings 1. Introduction to Simulation: Random Variables and Modeling

Discussion Questions 1. Create a model of the Newsvendor setting described in Example

Introduction of Global Positioning System (HBSP)

This exercise introduces a powerful concept using a very simple

Discussion Questions 1. What do you think of Waser’s analysis in Exhibit 6? Does it

2. Why would Crossair apply a discount rate of 15% to projects

3. How would the value of the project be affected if the competitive

SESSION 2: RISK PROFILES

Required Readings 1. Investment Policies that Pay Off (ER)

Submission Due 1. Answers to questions 1 - 3 below

IEC In Sports (HBSP)

This case is useful in exploring issues in probability, expected

Discussion questions 1. Describe the uncertainties in this problem.

2. Calculate Expected Values of key outcomes and show them in

3. Explain whether these calculations (i.e. multiplying

4. What is simulation? Why would simulation be helpful in

5. Is it a good idea to carry out best and worst case simulations in

SESSION 3: TREES, SIMULATION & REAL OPTIONS