The Contingent-Claims Approach to Investment Decisions*

This paper presents a contingent-claims approach to project valuation when capital expenditures are made sequentially over time. It focuses on an important facet of sequential investment projects that the firm can undertake—or pass up projects—as more information becomes available. The contingent-claims approach takes account of this important feature of firms' investment decision process, whereas the traditional capital budgeting procedure does not. Since the traditional method does not reflect the options nature of investment opportunities, it underestimates the value of sequential investment projects. As a result, a naive implementation of the traditional capital budgeting procedure could result in rejecting profitable projects. The extent of undervaluation associated with the traditional capital budgeting procedure is greater when the correlation between the random component of the future asset value and that of the required capital expenditure is smaller and/or when the growth rate of the required capital expenditure is higher.     

Urinary Excretion of Chromium Following Ingestion of Chromite-Ore Processing Residues in Humans: Implications for Biomonitoring

Biomonitoring programs for urinary chromium (Cr) typically attempt to evaluate occupational exposure via the inhalation route. This study investigated whether Cr can be detected in the urine of people following the ingestion of soils that contain relatively high concentrations of chromium in chromite ore processing residue (COPR). To evaluate the reasonableness of using urinary monitoring to assess environmental exposure, six volunteers ingested 400 mg of soil/day (low-dose group), two others ingested 2.0 g of soil/day (high-dose group) for 3 consecutive days, and one person ingested a placebo on each of 3 days. The soil and COPR mixture contained concentrations of total chromium (Cr) and hexavalent chromium [Cr(VI)] of 103 ± 20 and 9.3 ± 3.8 mg/kg, respectively. Therefore, the low-dose group ingested 41 μg Cr/day [including 3.7 μg Cr(VI)] and the high-dose group ingested 206 μg Cr/day [including 18.6 μg Cr(VI)] on each of 3 consecutive days. All urine samples were collected and analyzed individually for total Cr on the day prior to dosing, during the 3 days of dosing, and up to the first void 48 h after the last dose. No significant increases in urinary Cr excretion were found when background excretion data were compared with data following each of the 3 days of dosing or in daily mean urine concentrations of the high- vs the low-dose groups. It appears that Cr present in a soil and COPR mixture at Cr doses up to 200 μg/day is not sufficiently bioavailable for biomonitoring of urine to be informative. These results are consistent with previously published findings suggesting that incidental exposure to dusts and soils containing comparable levels of Cr will not result in increased concentrations of Cr in urine.     

Assembly Line Balancing Using Genetic Algorithms with Heuristic-Generated Initial Populations and Multiple Evaluation Criteria*

We use genetic algorithms (GA) to solve the assembly line balancing (ALB) problem. Inparticular, we show how this technique can be used to generate feasible line balances, improve upon solutions obtained by other heuristics reported in the literature, and utilizeany one or more evaluation criteria that can be expressed in functional form. The procedure is demonstrated with two examples: (1) intimating the improvement of heuristic-generated ALB solutions by including them in the GA initial population, and (2) the possibility of balancing assembly lines with multiple criteria and side constraints. These examples suggest that GA can be a powerful tool in ALB. To investigate the utility of GA on single-criterion problems, an experiment is conducted that compares both the GA approach and conventional heuristics. Results indicate that the GA solutions are significantly improved over the heuristic solutions under the conditions studied. It is also found that the presence of heuristic-generated conventional solutions in the GA initial population leads to statistically preferred results.     

Does IO Economics Really Make the Case for Investments in IT: A Rejoinder

The preceding critique [1] of the paper “The Information Problems in Organizations: A Research Model for the Value of Information and Information Systems” [3], reaches general conclusions with respect to the original paper and the applicability of economics to MIS research. These conclusions are based on arguments developed at a different level of analysis than that used in the original paper, and without considering the goals and intent of the original paper. The differences between the critique and the original paper are highlighted.     

THE EFFECTS OF LEAD TIME ON PLANT TIMING AND SIZE

An important issue in planning capacity expansion under uncertain demand is the effect of lead time on the timing of plant construction. Our model helps decide whether (1) plant construction is initiated after a certain deficit is accumulated, or (2) plant construction is initiated ahead of demand when a certain capacity surplus is reached. In addition to our analytical results, we present computational results to show that it is economically attractive to delay plant construction beyond the time when existing excess capacity becomes fully absorbed, with relatively short construction lead time.     

SHIFTING PRODUCTION BOTTLENECKS: CAUSES,CURES, AND CONUNDRUMS

We examine the phenomenon of shifting production bottlenecks from an analytic perspective. We quantify the propensity of a work center to be a bottleneck, defined as maximal queue length, using a simple Jackson production network model. Comparison of the analytic model against an empirical simulation-based model shows that the two are in good agreement. A scalar measure of bottleneck shiftiness is proposed and used to investigate several policies for mitigating shiftiness. Simulation experiments show that several commonly observed managerial policies for coping with shifting bottlenecks actually increase shiftiness, but that shiftiness declines when the capacity of nonbottleneck resources is increased.     

The Career Advancement Prospects of Managers and Professionals: Are MIS Employees Unique?

The present study examined the career advancement prospects of MIS and non-MIS employees, as well as the relationships of career advancement prospects with job performance evaluations, job satisfaction, career satisfaction, and organizational commitment for MIS and non-MIS professionals and managers. Participants included 134 MIS professionals and managers and 397 non-MIS professionals and managers of a large communications company. The results provided no evidence that MIS employees experience more restricted career advancement prospects than non-MIS employees. In addition, job performance evaluations generally had positive effects on career advancement prospects; career advancement prospects had a number of positive effects on job satisfaction, career satisfaction, and organizational commitment; and job satisfaction and career satisfaction had positive effects on organizational commitment. These findings are related to prior research, suggestions for future research are offered, and implications for the management of MIS employees are identified.     

The Positive Effects of Easy Goals on Decision Quality and Risk Propensity in an MCPLP Task

In this study the potential performance benefits of easy goals were examined within the multiple cue probability learning paradigm (MCPLP). Specifically, the effects of varying levels of goal difficulty on performance and risk propensity (used to define a form of commitment) were investigated. With few exceptions, previous studies demonstrated support for difficult goals. In this study, contrary to the majority of past evidence, as goals became easier decision quality significantly improved. Moreover, risk propensity increased with easier goals and, as suggested by a post-hoc analysis, had more direct impact on decision makers’ behaviors than goal levels. Goal-related behavior in complex MCPLP tasks appears to significantly differ from the majority of goal evidence in other types of research due to the tendency for subjects to view complex task properties in the same context as goal levels.     

Constrained Forecasting: Some Implementation Guidelines

Constrained forecasting has become a popular approach to the complex task of predicting future sales. Mixed performance results have been obtained by companies employing constrained forecasting systems software packages which probably reflects the lack of any clear system implementation guidelines. A number of important operational parameters such as the number of product families, criterion used to define product families, number of system levels, etc. must be specified. This study reports on an investigation of two of these parameters: product group size and appropriate grouping criterion. Different tests are performed with the constrained forecasting system and compared to a traditional forecasting approach using product data from the Cummins Engine Company of Columbus, Indiana.