IE 516 Homework 4
(due by 5pm on Wednesday, October 24)
Problem 1: Exercise 12.2 (from C&Rs Book, pp.518-519)
Calculate the EVPI (Expected Value of Perfect Information) for the decision shown in
Fig.1.
(0.1)
(0.2)
A
(0.6)
( 0 .1 )
20
10
5
0
B
6
Problem 2:
ISYE 516
HW-2 Solutions
PROBLEM 1 & SOLUTIONS
Problem 1
A dapper young decision maker has just purchased a new suit for
$200. On the way out the door, the decision maker considers
taking an umbrella. With the umbrella on hand, the suit will be
protected i
IE 516 Homework 3
(due on Tuesday, October 9)
Problem 1: Exercise 3.4 (from C&Rs Book, p.99)
Before making an unsecured load to an individual, a bank orders a report on the
applicants credit history. To justify making the loan, the bank must find the appl
IE 516 Homework 2
(due on Tuesday, September 25)
Problem 1: Exercise 3.3a (from C&Rs Book, p.39)
A dapper young decision maker has just purchased a new suit for $200. On the way out
the door, the decision maker considers taking an umbrella. With the umbre
ISyE 516 Introduction to Decision Analysis
Homework 3 (Due 06/30/15)
Rakesh Sasidharan Pillai
[email protected]
Question 1 (12.11)
a)
The EV P I = 0.17 5 + 0.5 4.56 + 0.33 4.56 = 4.635, Which is same as the EMV of
the decision tree. Intuitively, this
ISyE 513: Analysis of Capital Investments
More CAPM
October 8, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
October 8, 2012
233 / 279
Coming up
Homework #2, Due on 10/15.
Homework #2 Answers Posted on 10/15.
Its Coming! Quiz #1
4PM-5:15PM.
ISyE 513: Analysis of Capital Investments
The Capital Asset Pricing Model (CAPM)
October 3, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
October 3, 2012
214 / 268
What We
Hopefully
Learned Last Time
Two fund theorem
Optimization for Modern
ISyE 513: Analysis of Capital Investments
Lecture 8: Portfolio Theory
October 1, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
October 1, 2012
185 / 232
What We
Hopefully
Learned Last Time
Dynamic Programming Review
Portfolio Theory Markowit
ISyE 513: Analysis of Capital Investments
Lecture 7: Dynamic Programming Wrap-up and
Mean-Variance Portfolio Theory
September 26, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
September 26, 2012
159 / 214
Dynamic Programming
In a Nutshell
1
ISyE 513: Analysis of Capital Investments
Lecture 6: Dynamic Programming
September 24, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
September 24, 2012
132 / 178
What We
Hopefully
Learned Last Time
Optimization examples:
Cash Matching (but p
ISyE 513: Analysis of Capital Investments
Lecture 5: Optimization Examples and Dynamic
Programming
September 19, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
September 19, 2012
113 / 168
What We
Hopefully
Learned Last Time
Weighted Average
ISyE 513: Analysis of Capital Investments
Cost of Capital and Introduction to Optimization
September 17, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
September 17, 2012
88 / 157
What We Learned Last Time
npv calculation in spreadsheet
Using
ISyE 513: Analysis of Capital Investments
Lecture 3: Ideal Bank and Funding for Capital Investment
September 12, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
September 12, 2012
58 / 102
Review
What We Learned Last Time
How to move money in
ISyE 513: Analysis of Capital Investments
Theory of Interest and Cash Flow Analysis
September 10, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
September 10, 2012
26 / 66
Interest
Compound Interest
Most bank accounts and loans have compound
ISyE 513: Analysis of Capital Investments
Odds, Ends, and Examples
October 10, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
October 10, 2012
258 / 287
Homework #2, Due on 10/15.
Quiz #1
4PM-5:15PM. Wednesday, October 17.
In 1106 ME Building
ISyE 513: Analysis of Capital Investments
Valuation Methods
October 24, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
October 24, 2012
277 / 298
Finishing the Exam
Id like to spend a bit of time nishing up going over the exam
Je Linderoth (U
American Finance Association
A Programming Approach to Corporate Financial Management
Author(s): Stewart C. Myers and Gerald A. Pogue
Reviewed work(s):
Source: The Journal of Finance, Vol. 29, No. 2, Papers and Proceedings of the Thirty-Second
Annual Meet
ISyE 513: Analysis of Capital Investments
Review
October 13, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
October 13, 2012
270 / 276
Quiz #1
4PM-5:15PM. Wednesday, October 17.
In 1106 ME Building
You will use your computers. Exam will be op
ISyE 513: Analysis of Capital Investments
Abandonment
November 12, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
November 12, 2012
351 / 403
Abandonment
This is an appropriate title for this lecture, as I will be out of
town starting Tuesday
Valuation of abandonment option (C&A, Ch 5)
Parameters
Initial project NPV
Exercise price of put
Project volatility
Continuous risk-adj rate
Continuous risk-free rate
Time to expiration (yrs)
Time step t (yrs)
$1,000
$900
12%
15%
5%
0.50
0.25
Computed Qua
ISyE 513: Analysis of Capital Investments
Valuation Methods, Cont.
October 31, 2012
Je Linderoth (UW-Madison)
ISyE513: Capital Investments
October 31, 2012
302 / 361
Recall: Another Example
We have N = 2 assets, S = 2 states.
D=
1.08 1.08
1
,q =
, v T = [