Version: November 10, 2009

Course Overview

The course has three interwoven modules: economic forecasting, simulation, and EVA and capital budgeting. The forecasting 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 to allow you to gain a better understanding of incorporating risk in decision making. The last module examines how to measure if capital investments are expected to contribute value period-by-period. The capital budgeting techniques of NPV or IRR fail to reveal this information; an EVA approach overcomes the problem.

Textbooks & Other Materials

There are no textbooks or cases required to be purchased for the course. The syllabus contains links to required readings. Some handouts will be provided.

Grading & Course Requirements

Grades are allocated as follows:

• 15 points — Short individual assignments
• 25 points — NPV/EVA project
• 25 points — Economic forecasting project
• 10 points — Class contribution.

Individual 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.

• Class 4: Calculate covariance and variance (5 points)
• Class 5: Explain results for a tornado graph (5 points)
• Class 6: Calculate the mean reversion level for a time series (5 points)

Two-member Team NPV/EVA Assignment

• Class 7: Convert NPV to EVA and simulate results for both NPV and EVA analyzes;  provide a write-up of your results (25 points)

Two-member Team Economic Forecasting Project

Forecast:

1. the December 2009 monthly percentage change in year-over-year real personal consumption expenditures
2. when the recession will officially be over as deemed by NBER
3. when the unemployment rate will be below 8

The write-up should look professional -- a document that you would be proud to give to an executive to read. I encourage you to embed any charts within the document, as opposed to attaching them as appendices. Single space the document (25 points).

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. A-'s and B-'s will never cutoff higher than the 90 and 80 percentiles, respectively. I expect everyone in class to earn grades 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 any 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.

Click on the Appropriate Date to Go Directly to the Class Schedule

Lecture: What happened to the economy in 2008?

Session 8: Tuesday, December 8

Session 9: Thursday, December 10