IEOR E4003
Industrial Economics


Syllabus:
Financial Analysis

Cash Flow Cycle

Balance Sheet

Income Statement

Sources and Uses Statement

Cash Flows and Free Cash Flows

Compounding

Ratio Analysis

Discrete Compounding (uniform, linear-gradient and geometric gradient)

Continuous Compounding

Equivalence of Cash Flows

Effect of Inflation

Cash Flow Transform Techniques (Z-transforms and Laplace transforms)

Figures of Merit

The Net Present Value, the Future Value and the Annual Equivalence Criteria

The Internal Rate of Return, Solomon’s Average Rate of Return and The Modified Internal Rate of Return Criteria

The Benefit-Cost Ratios Criteria

The Discounted Payback Period

The Project Balance Concept; Conventional, Potentially Profitable, Pure and Mixed Investments

Weighted Average Cost of Capital

WACC Tree

Estimating WACC parameters

Cost of Debt, Cost of Equity, CAPM and Beyond

Unlevering and Relevering Betas

Deterministic Capital Budgeting Models

Decision Rules for Selecting Among Multiple Alternatives

Comparison of Industrial Projects with Unequal Lives

The Use of Linear Programming Models

Pure Capital Rationing, with no Lending or Borrowing Allowed

Capital Budgeting, with Equal Borrowing and Lending Rates

Capital Budgeting, with Unequal Borrowing and Lending Rates

Discrete Capital Budgeting

Utility Theory

Preference and Ordering Rules

Properties of Utility Functions

Empirical Determination of Utility Functions

Mean-Variance Analysis

Optimization under Uncertainty

Decision Trees and Decision Analysis

Dynamic Programming

Applications to Pricing and Airline Revenue Management

Simulation

Real Options Analysis

Valuing Entry and Exit Options

Fireflies Before the Storm

How Much is Flexibility Worth?

Making Real Options Real

Real Power of Real Options