General course information (this page)

Formal SIMS course description

Course Outline

INFOSYS 230  CCN: 42712  3 unit(s)		Economic Methods for Decision Making
Instructor(s)		Yale Braunstein E-mail: yale@sims.berkeley.edu Office: 203B South Hall
Time/Location		W 2:00 - 5:00 202 South Hall

(Last updated 25 November 2002)

General information for Fall 2002

• This course is for graduate students only.  Preference will be given for SIMS students.  Permission of the instructor required for all other students.
• Prerequisites:
• Introductory accounting course
• Introductory economics course.  Intermediate micro-economics in highly desirable.

• Class format: Mix of lectures, case studies, and student-led classes
• Required readings: Financial management textbook. Additional readings will be assigned.
• Basis for final grade: Problem sets, examinations, class presentations, and class participation.

 

Schedule & Topics 
 

Date	Topic	References
Aug. 28	Introduction	.
Sept. 4	Financial statements	BH, Ch. 1-3
Sept. 11	Forecasting, uncertainty, introduction to risk	BH, Ch. 4-5; Insight Ch. 1-3, 5
Sept. 18	Financial markets, interest, risk	BH, Ch. 5-6
Sept. 25	Risk, return, CAPM, Time value of money	BH, Ch. 6-7
Oct. 2	Valuation - Bonds	BH, Ch. 8
Oct. 9	Valuation - Stocks; problems 8-19, 9-26; Review; Hand out mid-term exam	BH, Ch. 9
Oct. 16	Mid-term exam due; Capital budgeting I - WACC	BH, Ch. 10-12
Oct. 23	Review mid-term exam; Capital budgeting II - project evaluation; problems 10-20, 11-18 Variable project life	"
Oct. 30	Guest speaker: Diane Ghorbani Project budgeting lessons (presentation ppt) Business case format (Excel) Additional project evaluation topics Inflation  Tax shields (Excel example)	"
Nov. 6	Project evaluation (continued) Problem 12-11 Real options, decision trees Capital structure	BH, Ch. 13-14 Insight, Ch. 6
Nov. 13	Capital structure (continued); problems 13-13, 14-16;  Working capital	BH, Ch. 15-16
Nov. 20	Working capital (continued); problems 15-10, 16-14;  Optimization	BH, Ch. 17 Insight, Ch. 7-8
Nov. 28	Extended office hours; Hand out final exam (link to Adobe PDF version; contact Yale for other formats)
Dec. 4	Extended Office Hours
Dec. 6	(Friday, 4 pm) Final exam due

Specific information on content
 

This course covers a variety of economic methods and tools useful to decision makers in information industries.  The general framework is built around a financial management textbook with additional topics and emphasis on forecasting, decision trees, simulation, and optimization.  Given this approach, the course is probably not appropriate for students who have already taken an MBA-level finance course.

Topics in a finance course that are not in this course: derivatives, hybrids (preferred stock, convertibles), mergers, LBOs, bankruptcy.

(All of the above is subject to change.)

Case studies, problem sets, etc.

Several of the class presentations will be based on the "integrated cases" at the end of the relevant chapters in the Brigham & Houston text.  These are usually available in both Excel and Powerpoint formats on the CD-ROM that accompanies the text and at the textbook web site. It is very important for you to read the text before the lectures.  I'll try to have handouts of the Powerpoint slides so that you can mark them up rather than take copious notes.

Note: The chapter 4 spreadsheet model on the CD-ROM incorrectly identifies the sales growth rate to be 3% in cell C69. The correct sales growth rate is 10%. The 04model.xls that you can download from this web site correctly has the sales growth rate at 10%
 
 


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