BUS600 ProSem: Chapter 7 - Operations

I pick up a couple concepts related to Operations below.

• Six M's of Capacity
• Critical Path Method (CPM)

1. The traditional 6Ms are:
* Machines
* Methods
* Materials
* Messages
* Money
* Manpower (People)

2. Critical Path method (CPM) - Sophisticated scheduling method for projects

              
Critical path is the path of critical activities, i.e. activity which has slack/float 0 or less than 0. In this example, the critical path is Activity 1, Activity 2 and Activity 5. Delay should be avoided in these activities, since it will cause delay in overall project completion. Activities 3 and 4 are more flexible, nevertheless project stakeholder should pay attention to the latet finish of these activities to avoid preasure to next critical activity, Activity 5


BUS600 ProSem: Chapter 6 - Finance

I pick up a couple concepts related to Finance below.

• Capital Structure
• Discounted Cash Flow

Capital Structure - The mix of debt and equity of a company

1. Risk and Return

• The relationship between risk and return is one of the fundamental relationship in finance, because investors are risk averse, meaning they prefer less risk to greater risk.
• Investors who are risk averse will not invest in risky securities without greater expected returns.It means that to earn greater expected returns investors must be willing to accept greater risk.

2. Portfolio Risk

• Investors typically hold a collection or portfolio of assets, we need examine the risk of the portfolion context
• Risk and return in a portfolio is very different from stand-alone risk and return due to diversification effects.
• First examine the return of portfolio, then consider the risk of a portfolio

3. Capital Asset Pricing Model

• The measure of risk most commonly used in the single-factor CAPM is called beta (β).
• Cost of Capital
• Capital includes funds supplied to the firm by long-term investors.
• These are usually stockholders and bondholders.

4. Cost of Debt and Equity Capital

• The cost of debt is the interest rate the firm would pay if it issued new debt today.
• Usually the firm will pay about the market interest rate (yield to maturity) on its bonds.

Discounted Cash Flow

• Financial assets are substitutes for each other.
• That implies that they have some properties in common, but will be differentiated in other dimensions
• A substantial piece of this course is learning how to use Excel.
• Use Excel for basic arithmetic operations:
  +, -, *, / (with occasional SUM()).
• This chapter makes heavy use of many Excel functions.

1. Time Value of Money 
   • If I owe you a sum of money, would you rather receive it today or a year from today? The time value of money refers to wht the value of a dollar amount is today (present value) versus what the value of that same dollar amount will be in X amount of time (future value)
2. Future Value
   • The future value (FV) of this security is its value after a specified time has passed
   • In this case the future value is $100+(0.05)($100)=$105.
3. Present Value
   • The future value of any sum today is FV = PV x (1 + I)N. That means PV = FV/(1 + I)N
   • What is the amount that we need to invest or deposit today in order to have a specific amount in the future?
4. Annuities
   • Annuities meet three criteria:
     • Pay an equal amount
     • At a specific time interval
     • For a specific time period