Timing and Structure
Christmas vacation - dates below; Assessment: Coursework 100% ind project combining spreadsheet modelling, written analysis and a management-style report - details TBA. You may conduct some Excel modelling with fellow students. Michaelmas/Lent Term break.
All participants are expected to be familiar with probability and statistics at the level of a final year high school or introductory undergraduate course. See the prerequisites document on the course website for details. Participants are also expected to be familiar with basic Excel spreadsheet modelling (see e.g. http://best-excel-tutorial.com/54-basics for a tutorial). The basic Excel functions and tasks that you must know how to use competently are: MAX, AVERAGE, COUNT, IF, SUMPRODUCT; mathematical formulas based on relative and absolute references; creating simple tables; plotting pie, bar, column and line charts.
The aims of the course are to:
- See below.
As specific objectives, by the end of the course students should be able to:
- See below.
- Module Time: 3 full days (9.00am – 5.00pm) on 9th, 11th, and 13th December 2019.
- Reserve 9th – 16th December 2019 for TPE25 only.
- Reserve 14th - 15th December 2019 for conducting part I of the course assessment.
- Reserve a compulsory Q&A session for the course assessment at 9am-11am on 16th December 2019.
- It is useful for you to have a Window-based laptop for Excel modelling. If you do not have a laptop, be prepared to stay in Cambridge for a few more days after 16th December 2019 so that you can conduct Excel modelling in the CJBS Computer Lab.
- The level of mathematical theory may be below the expectation of some CUED students.
Day 1: Foundations
- Course aims and objectives
- Review of traditional project valuation
- System value is a shape, not a number
- Monte Carlo Simulation
- (Valuing flexibility)
- Savage (2003), Ch. 2: ‘The building blocks of uncertainty: random variables’, Ch. 3: ‘The buildings of uncertainty: functions of random variables’.
- If you have not seen Net Present Value (NPV) or Discounted Cash Flows before, read Brealey and Meyers, Ch. 2: ‘Present values’
Day 2: Portfolio Thinking
- Trading off risk against return
- www.moneychimp.com/articles/risk/riskintro.htm, first five sections (short!) from ‘MPT Introduction’ to ‘Build a Portfolio’.
- Optionally, Brealey and Meyers, Ch. 9: ‘Risk’ [For 8th edition, use Ch. 8]
Day 3: Real Options Analysis
- Flexibility: Intuition behind real options
- Lattice valuations
- Brealey and Meyers, Ch. 10: ‘Project Analysis’, Ch. 20: ‘Understanding Options’ [For the 9th edition, use Ch. 11, Ch. 21]
- de Neufville and Scholtes (2011), Ch. I: ‘High Level Overview’ (pp. 1-39)
The basic modelling tool will be Microsoft Excel. Essential add-ins include Analysis ToolPak and Solver, both of which come with Excel but may require the Excel installation disks, and @Risk, which will be distributed to you.
100% individual project combining spreadsheet modelling, written analysis and a management-style report. The coursework consists of two parts: Task I (65%-70%) and Task II (30%-35%).
Task I contains a number of subtasks, in which students are asked to conduct intensive Excel modelling, to answer questions, to provide analysis, and to give intuitive business interpretations.
Task II is a short presentation and is assessed by a set of criteria: intuition (business implication), prioritising information (structure), clarity and use of visual aids such as charts and graphs, and language.
Answer Sheet, Presentation Document and Excel Files
The coursework will be carried out during Michaelmas/Lent term break and will be submitted right before the beginning of the Lent term in January 2019.
Marks will be available in three-four weeks after the submission date.
Please see the Booklist for Group I Courses for references for this module.
To be advised: https://www.vle.cam.ac.uk/course/view.php?id=83341
TPE6 Strategic Valuation
The following are available in multiple copies in the Judge Business School Information Centre:
de Neufville, R. and Scholtes, S. (2011)
Flexibility in Engineering Design. Cambridge, MA: MIT Press
E-book via Dawsonera (Click on ‘institutional login’)
Printed book at:
Brealey, R. A, Myers, S. C. and Allen, F. (2011)
Brealey, R. A, Myers, S. C. and Allen, F. (2008)
Principles of Corporate Finance. 10th ed. Boston, Mass.: Irwin McGraw Hill
N.B. For Brealey and Myers, any edition from 6th ed. onwards is fine.
Printed books at:
HG4026.B73 P7 2011
HG4026.B73 P7 2008
Savage, S. L. (2003)
Decision Making with Insight. Belmont, CA: Brooks/Cole
Printed book at:
Luenberger, D. G. (1998)
Investment Science. Oxford: Oxford University Press
Printed book at:
Please refer to Form & conduct of the examinations.
The UK Standard for Professional Engineering Competence (UK-SPEC) describes the requirements that have to be met in order to become a Chartered Engineer, and gives examples of ways of doing this.
UK-SPEC is published by the Engineering Council on behalf of the UK engineering profession. The standard has been developed, and is regularly updated, by panels representing professional engineering institutions, employers and engineering educators. Of particular relevance here is the 'Accreditation of Higher Education Programmes' (AHEP) document which sets out the standard for degree accreditation.
The Output Standards Matrices indicate where each of the Output Criteria as specified in the AHEP 3rd edition document is addressed within the Engineering and Manufacturing Engineering Triposes.
Last modified: 05/06/2019 10:45