Capital budgeting and optimal timing of investments in flexible manufacturing systems

This paper investigates the financial-economic decision process for investments in flexible manufacturing systems (FMS). Contrary to popular belief, we show that conventional capital budgeting techniques can be used to make such investment decisions. First, we identify theoverall impact of installing an FMS and present guidelines for a cash flow forecasting model. We then present ways in which to incorporate uncertainty in these cash flows within a risk-adjusted discount rate. These expected cash flows and the discount rate are used in calculating the net present value (NPV). Once the capital budgeting analysis is completed, a critical issue facing the firm is the optimal timing of the installation. We reinterpret the general results on optimal timing of investments within the special context of an FMS project. Finally, we illustrate the above technique via a stylized example.     

Prioritization of organizational capital measurement indicators using fuzzy AHP

Organizational capital is a sub-dimension of the intellectual capital which is the sum of all assets that make the creative ability of the organization possible. To control and manage such an important force, the companies must measure it first. This study aims at defining a methodology to improve the quality of prioritization of organizational capital measurement indicators under uncertain conditions. To do so, a methodology based on the extent fuzzy analytic hierarchy process (AHP) is applied. Within the model, three main attributes; deployment of the strategic values, investment to the technology and flexibility of the structure; their sub-attributes and 10 indicators are defined. To define the priority of each indicator, preferences of experts are gathered using a pair-wise comparison based questionnaire. The results of the study show that “deployment of the strategic values” is the most important attribute of the organizational capital.     

The Financial Attractiveness of a Project: A Method of Assessing it

A generalization of the Discounted Cash Flow method of measuring return on investment is shown to provide a well-defined and useful measure for all cash flow series which can be regarded as relating to an investment project. Problems of multiple solutions and of inadmissible implicit assumptions that can arise with the standard DCF method are thus overcome, while the essential features of the method are retained. In a large proportion of cases met in practice the generalized procedure reduces to the standard one. The possibility of a time-dependent cost of capital is included in the analysis.     

期权理论在风险投资项目评估中的应用

本在对传统的现金流折现法DCF法分析基础上，引进Block-Scholes期权定价模型，对传统的DCF方法进行改进，克服了DCF方法局限性，增加了风险投资项目决策的科学性。     

Insurance valuation: A computable multi-period cost-of-capital approach

We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is fixed. Then the residual cash flow is managed by repeated one-period replication using only cash funds. The latter part takes capital requirements and costs into account, as well as limited liability and risk averseness of capital providers. The cost-of-capital margin is the value of the residual cash flow. We set up a general framework for the cost-of-capital margin and relate it to dynamic risk measurement. Moreover, we present explicit formulas and properties of the cost-of-capital margin under further assumptions on the model for the liability cash flow and on the conditional risk measures and utility functions. Finally, we highlight computational aspects of the cost-of-capital margin, and related quantities, in terms of an example from life insurance.     

企业最优投资决策研究

提高企业效益的一个很重要方面是提高企业的投资效益.针对这一问题,运用动态规划的方法,提出了一个决策模型,使该模型得出的投资方案产生最大的贴现现金流(DCF).     

Economic justification of modern computer-based factory automation equipment: A status report

This paper provides a status report on the economic justification of modern computer-based factory automation equipment. Such equipment, although offering improved productivity and flexibility, is nevertheless oftentimes difficult to justify using traditional discounted cash flow evaluation methodologies. In this paper, we first establish and explain four different categories into which most of the literature on this subject generally falls. We then present the results of interviews with executives in manufacturing companies that have experienced varying degrees of success in justifying automation. During these interviews, we sought to determine how the automation was justified as well as the difficulties encountered. Finally, we consolidate the information obtained from our examination of the literature and our interviews, and we synthesize a set of options available to todays manager attempting to justify the introduction of automation systems. We present these options in terms of immediate, near-term and long-term managerial alternatives.     

A framework for evaluating remote diagnostics investment decisions for semiconductor equipment suppliers

With advances in information technology, service activities for expensive equipment used in semiconductor manufacturing can be performed from a remote location. This capability is called remote diagnostics (RD). Currently, there are intense development efforts in the semiconductor industry for implementing RD in wafer fabrication facilities to reduce maintenance and capital costs and improve productivity. In this paper, we develop a queueing-location model to analyze the capacity and location problem of after sales service providers, considering the effects of RD technology. Our model optimizes the location, capacity and the type of service centers while taking congestion effects into consideration. We solve this model using a simulation optimization approach in which we use a genetic algorithm to search the solution space. We demonstrate how our methodology can be used in strategic investment planning regarding the adoption of RD technology and service center siting through a realistic case study.     

Long term capacity decisions in uncertain markets for advanced manufacturing systems incorporating scope economies

By examining the literature in the field of manufacturing flexibility many researchers have located several form of flexibility by distinguishing them into strategic and operational flexibility forms. Furthermore, many measures and design methods have been proposed for flexible manufacturing systems. Surely scope economies are one of the most important strategic form of flexibility in manufacturing systems and their strategic impact has been acknowledged by the very beginning of the flexible manufacturing era. However, despite several researches are available to address scope economies measurement and design methodologies, very few researches investigate their economic convenience in front of dedicated manufacturing systems depending on the competitive market conditions.This paper proposes a theoretical model whose main aim is the general understanding of the convenience conditions of scope economies-based manufacturing systems. The results of the theoretical model are very interesting, because they locate market conditions that make scope economies manufacturing systems less profitable than dedicated manufacturing ones; moreover, the proposed model sets some general criteria to guide the entrepreneur in making right investment decision regarding this kind of manufacturing investments. Such results can explain the reason of many failures of flexible manufacturing systems and it suggests the use of this kind of approach to investigate other flexibility forms of manufacturing systems. The ultimate goal of this research is the construction of a Decision Support System for supporting the entrepreneur in making decision on Advanced Manufacturing Systems investment decisions.     

Fuzzy part coding for group technology

Contemporary Group Technology (GT) methods apply coding schemes as a popular method for capturing the design and manufacturing information pertinent to the parts to be grouped. Coding schemes are very popular and many different coding systems are commercially available. The main disadvantage of current coding systems, however, is their generality and lack of informative representation of the parts.This paper presents a new methodology for coding parts using fuzzy codes. The methodology is general and applies to attributes that have a crisp value (e.g., “length”, “ratio of length to diameter”), an interval value (e.g., “tolerance”, “surface roughness”) or a fuzzy value (e.g., “primary shape”). The methodology considers the range of attributes' values relevant for the grouping, and therefore, is tuned and adjusted to the specific collection of parts of interest. This method creates a more informative coding scheme which leads to improved variant process planning methods, scheduling and inventory control as well as other manufacturing functions that utilize GT.     

营运资本与公司综合治理对公司价值影响研究

拓展Faulkender和Wang(2006)模型,引入公司综合治理水平变量,分析了公司综合治理水平和营运资本对公司价值的影响.运用我国A股市场2008~2013年数据进行实证,证实公司综合治理水平与营运资本对企业价值影响显著;边际营运资本价值小于边际现金价值,企业在现有营运资本水平下增加营运资本投资,将降低企业超额收益率,减少企业投资价值;商业性企业比工业性企业、高治理效率企业比低治理效率企业、受融资约束企业比不受融资约束企业具有更高的边际营运资本价值.     

The Effect of Discounted Cash Flow on Replacement Analysis

In this paper, the effect of discounted cash flow (DCF) on replacement policy is expressed in terms of the undiscounted quantities normally used in standard replacement analysis. This is useful to an operator who already uses the standard analysis and wishes to know quickly what effect DCF will have on his policy. Simple formulae are provided to determine the optimum delay in replacement required by DCF, and the consequent saving in real costs. A numerical example illustrates the application of the formulae to vehicle replacement.     

Strategies and flexibility in mental calculation

This article focuses on issues around flexibility in mental calculation. When calculating a subtraction or multiplication mentally, it is desirable for students to use a method that suits the problem—to be flexible—but is it fair to describe this as “strategic flexibility”? What exactly is it that happens when someone ‘decides’ to tackle a mental calculation in a particular way? In the article, I make some distinctions among strategies and strategic flexibility in mental calculation to explore and try to clarify the terms and associated ideas. At the heart of the article is an argument that the model of strategic choice is not able to give an adequate account of strategic flexibility in all aspects of mental calculation, and an alternative is proposed.     

Multi-period mean–variance portfolio selection with regime switching and a stochastic cash flow

This paper investigates a non-self-financing portfolio optimization problem under the framework of multi-period mean–variance with Markov regime switching and a stochastic cash flow. The stochastic cash flow can be explained as capital additions or withdrawals during the investment process. Specially, the cash flow is the surplus process or the risk process of an insurer at each period. The returns of assets and amount of the cash flow all depend on the states of a stochastic market which are assumed to follow a discrete-time Markov chain. We analyze the existence of optimal solutions, and derive the optimal strategy and the efficient frontier in closed-form. Several special cases are discussed and numerical examples are given to demonstrate the effect of cash flow.     

R&D投资规模的统计规律性研究

徐士钰．Ｒ＆Ｄ投资规模的统计规律性研究．数理统计与管理，１９９８，１７（３），３１～３６．本文应用国家工业化发展阶段理论［１］及基于Ｒ＆Ｄ投资规模须和国家工业化发展水平的需要和可能相适应的认识，把所述发达国家和部分先进的发展中国家在不同工业化发展阶段上Ｒ＆Ｄ投资规模的变化过程，都看成是某一非平稳随机过程的一个实现（样本），并用皮尔（Ｐｅａｒｌ）生长曲线模型近似描述该非平稳随机过程均值的变化规律，结果与现实情况符合程度较高，本文揭示的Ｒ＆Ｄ投资规模的这一统计规律，对于发展中国家及我国在制订宏观科技投资政策时，具有较高的参考价值     

An Organizational Model of Integrated Budgeting for Short-Run Operations and Long-Run Investments

In managerial finance, the short run usually refers to multiperiod models which involve operating plans and cash flow analysis. Long-run models are for capital investment or capital budgeting. Their essential link is the emphasis on cash flow and budgets. This relation is explored with an integrated model and its decompositions by budgets. The decomposition yields subunit models for the short run and long run which are related to earlier models, but yields insight into the organizational use of budgets for coordination and control. To obtain relative efficiency measures on two alternatives organizational budgeting mechanisms, a simulation was performed and analyzed.     

Continuing value in firm valuation by the discounted cash flow model

The discounted cash flow model, like other firm valuation models, proceeds in two periods. For each year in the explicit forecast period, there is an individual forecast of free cash flow. On the other hand, all of the years in the post-horizon period are represented through one single continuing value formula, being the steady-state value of the firm’s productive assets at the horizon. Continuing value is typically derived by applying the Gordon formula to a simple extrapolation of free cash flow at the end of the explicit forecast period. This paper examines the components of continuing value, in particular capital expenditures and tax savings due to depreciation of property, plant and equipment (PPE). The estimation of two somewhat elusive parameters related to capital expenditures, equipment economic life and capital intensity, is discussed. A further analysis indicates that a substantial part of continuing value derives from cash flow associated with already acquired equipment. Also, the error resulting from assuming steady-state rather than lumpy capital expenditures is identified. Implementation issues relating to the explicit forecast period are also commented on.     

Minimizing the ruin probability allowing investments in two assets: a two-dimensional problem

We consider in this paper that the reserve of an insurance company follows the classical model, in which the aggregate claim amount follows a compound Poisson process. Our goal is to minimize the ruin probability of the company assuming that the management can invest dynamically part of the reserve in an asset that has a positive fixed return. However, due to transaction costs, the sale price of the asset at the time when the company needs cash to cover claims is lower than the original price. This is a singular two-dimensional stochastic control problem which cannot be reduced to a one-dimensional problem. The associated Hamilton–Jacobi–Bellman (HJB) equation is a variational inequality involving a first order integro-differential operator and a gradient constraint. We characterize the optimal value function as the unique viscosity solution of the associated HJB equation. For exponential claim distributions, we show that the optimal value function is induced by a two-region stationary strategy (“action” and “inaction” regions) and we find an implicit formula for the free boundary between these two regions. We also study the optimal strategy for small and large initial capital and show some numerical examples.     

独立项目的久期预估与融资优化研究

项目投资与融资匹配程度,不仅关系到项目资金成本的大小,还体现对项目利率风险的对冲。基于债券久期的概念内涵,提出了项目久期与融资结构久期的概念及计算方法。以具体项目的投融资为案例进行研究,对案例公司已拟定的针对独立项目的债券融资方案进行投融资久期匹配、各期现金流匹配评价,并从市场利率曲线中发现融资成本优化空间,从投融资久期差及各期投融资现金流量差中找到优化融资的方案。以此提出结论:项目久期与融资结构久期的匹配是降低项目利率风险的重要手段;应综合融资结构久期与项目久期、现金流大小选择融资结构。     

Formation of a strategic manufacturing and distribution network with transfer prices

We propose a profit maximization model for the decision support system of a firm that wishes to establish or rationalize a multinational manufacturing and distribution network to produce and deliver finished goods from sources to consumers. The model simultaneously evaluates all traditional location factors in a manufacturing and distribution network design problem and sets intra-firm transfer prices that take account of tax and exchange rate differentials between countries. Utilizing the generalized Benders decomposition approach, we exploit the partition between the product flow and the cash allocation (i.e., the pricing and revenue assignment) decisions in the supply chain to find near optimal model solutions. Our proposed profit maximizing strategic planning model produces intuitive results. We offer computational experiments to illustrate the potential valuable guidance the model can provide to a firm's supply chain design strategic planning process.