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required, is it better to rent or purchase the facility? When should managers give their
workers a pay increase? These are a few examples of the kinds of choices managers
face every day.
Our objective in this book is to explain how to make decisions that increase the
value of the firm to its investors. In principle, the idea is simple and intuitive: For good
decisions, the benefits exceed the costs. Of course, real-world opportunities are usually complex, and so the costs and benefits are often difficult to quantify. Quantifying
them often involves using skills from other management disciplines, as in the following
Marketing: to determine the increase in revenues resulting from an advertising
Economics: to determine the increase in demand from lowering the price of a
Organizational behaviour: to determine the effect of changes in management
structure on productivity
Strategy: to determine a competitor’s response to a price increase
Operations: to determine production costs after the modernization of a manufacturing plant
For the remainder of this text, we will assume that we can rely on experts in these different areas to provide this information so that the costs and ben...
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- Spring '07