Hi, my name is Ric Lambert. I'm a professor of accounting at the Wharton School. This is my colleague, Professor Bob Holthausen. Bob and I have worked together for many years here at Wharton, taught in several programs. And we want to talk to you about our new course that we've developed online. >> So the name of the course that we developed is Decision Making and Scenarios, and we thought we would tell you a little bit about the details of what's in that course. So the overriding objective of the course is to help you learn how to evaluate projects. And the kinds of projects that we're talking about are the kinds of projects where the firm invest resources today, and the benefits associated with that investment accrue back to the firm over time. So these are projects that are not instant gratification where you invest and get all the money back right away, but you're investing and the benefits are going to come back over multiple years. And we want to give you a framework for thinking about how to evaluate those projects, whether to accept those projects or reject those projects. So some examples, if you're curious about what kinds of projects that would be, they could be as simple as replacing a machine that's part of a production line. So the machine is worn out, you need to replace it. You're going to invest in that machine. And maybe you're looking at a couple alternative machines, and what you want to do is evaluate which is the best machine to put in that production line. Or maybe you have a production facility that is running it close to capacity and you need more capacity so you're actually going to look at the decision about whether to build brand new manufacturing facility or not in order to increase capacity. So those are some examples of some of the types of projects that we're talking about. Ric, you want to talk about a couple of others? >> Sure, there's lots of examples here so you could also think about establishing a marketing campaign to try to increase the value of your brand or something much broader creating, producing and selling a whole new product that we've never sold before. So we've got to develop it in addition to figuring out how we're going to make it, who we're going to sell it to, what the price is going to be, etc. So there's a whole range of activities so we can think about in terms of projects from fairly narrow to very broad and ambitious. And we want to try to develop a framework for being able to talk about any of those, so that we can evaluate them and also improve them. >> So the course is going to divided up into four modules. And in the first module we're going to talk about the time value of money to make sure that you understand what the time value of money is. And we're going to be talking about why net present value is the appropriate criteria for evaluating projects. Once we finish that module, we'll then go on to actually thinking about how you evaluate projects in more detail and more specificity. So we'll spend a lot of time actually talking about what are the cash flows that you have to forecast associated with a particular project. And in particular what we're going to be interested in is asking the question of, how does the cash flows of the organization change on an after tax basis because of that project? And I'll be covering those first two modules, and then Ric will cover modules three and four. >> So in module three, we want to talk more explicitly about how to express business strategies in financial terms. To do this, you have to be able to think about what business activities, transactions with other parties and other events have to happen in order for our strategy to play out over time. This often can involve the coordination of a lot of different activities and we're going to talk about how financial systems can help you keep track of all that. Balance sheets, income statements and cash flow statements to ultimately forecast out the future cash flows associated with the project. Then, in module four, we're going to apply this to a fairly ambitious example. A new product venture. So we're going to be talking about the development stage, the operation stage, and then the termination stage of the project, laying out the future financial statements that we think are going to play out, developing a spreadsheet to help us do that. Applying the net present value calculation that Bob had talked about in the first two sections. And then, use our spreadsheet to be able to change things, so that we can consider the risk of what might go along. How wrong they might go, so that we're still okay when we start to get into trouble. And different scenarios that we're going to potentially face and how we might deal with those. So the whole idea is to develop a framework so that we can assess an initial strategy, but be able to consider alternative scenarios as well. >> By the time you're done with the course, you should have a pretty good understanding of how we think about evaluating projects and whether or not you would be interested in taking a project or rejecting it based upon the fundamentals of the project. We think the course will be very useful for you in terms of your careers, and we hope that you get a lot out of it.
