IGNACIO VELEZ-PAREJA, Universidad Tecnologica de Bolivar School of Business
Email: ivelez@unitecnologica.edu.co

In this teaching note the reader finds a simplified financial model. In reality, financial models are huge and cumbersome. This is a very simplified model compared with what is found in practice.

We present some basic principles for constructing the financial statements needed for valuation. The reader is encouraged to construct the financial statements for herself on a spreadsheet. The relevant financial statements are: the Balance Sheet (BS), the Income statement (IS) and the Cash Budget (CB). The construction of the financial statements starts from policies and/or targets (i.e. accounts receivable policy or target). With these targets or policies we can construct the financial statements.

The first table to be constructed is the table of parameters. This table organizes all of the relevant information. The subsequent tables are linked to the table of parameters via formulas. We construct other supplementary tables that will be used in the construction of the main financial statements. We indicate the formulas that have to be utilized in the construction of the financial model. In the first line and in the first column the reader finds the letters and numbers corresponding to the Excel spreadsheet in order to make it easier the localization and the construction of the formulas. In the last two columns we have written those formulas. Usually they correspond to the year 0 and/or year 1. When necessary, we show the formulas for other years and we indicate it. Shaded cells are for the input data. If the reader wishes to construct the model exactly as we did, she will be able to do that step by step.

The contribution of this work is double: one is to show that we can construct financial statements without the use of plugs and circularity and the second is that we can use a very simple approach to construct cash flows and to value them.

The model shown has two parts. One is the proper financial statements forecast. The second one is a simple cash flow calculation and valuation exercise using the Capital Cash Flow and assuming the risk of the tax savings equal to Ku, the cost of unlevered equity.

AMELIA CARR, Bowling Green State University
Email: ascarr@bgsu.edu
SENTHIL KUMAR MUTHUSAMY, Bowling Green State University - Department of Management
Email: smuthu@cba.bgsu.edu

This paper is a study of the coordination capability between operations and other functional areas within the firm. The paper examines a number of relationships with respect to cross-functional coordination and performance. Using a random sample of 231 firms, five hypotheses are tested. Structural equation modelling is used to test the relationships depicted in the research model. The results indicate that firms can benefit from the cross-functional coordination between operations, marketing, engineering and purchasing.

R. KANSAL, Madhav Institute of Technology and Science
Email: rkansal19@rediffmail.com
M. C. GUPTA, Rajiv Gandhi Proudyogiki Vishwavidyalaya
Email: mcgupta2000@yahoo.co.in

The problem of delay in the construction industry is a global phenomenon. The schedule overrun leads to cost overrun of the projects which results in a loss of revenue to the promoter. This paper presents the factors affecting the schedule performance of the construction projects in India. To identify these factors and study their significance, the opinion of the three major players - contractor, consultant and owner - involved in any construction project was sought through postal survey.

SAYED FARRUKH AHMED, United International University
Email: munna99185@yahoo.com

Leadership and leadership skills of a project manager are essential for successful implementation of a project. A project manager has to deliver quality outputs in time through efficient utilization of allocated resources for a project. A project manager has to resolve diverse complex implementation issues which need sound knowledge and proven skills. Some key skills include relationship and communication, adaptability to change initiative, negotiation and conflict resolution, building team spirit and morale, managing corporate culture and matrix management, credibility and cared responsibility, above all full commitment to achieve project objectives.

IGNACIO VELEZ-PAREJA, Universidad Tecnologica de Bolivar School of Business
Email: ivelez@unitecnologica.edu.co

In this work we explain the proper use of perpetuities and the value of them. We consider two cases: calculating the value on period zero when the perpetuity starts with a given cash flow in period 1 and when it starts from a cash flow in period zero and it grows in period 1 at a given rate (as when we calculate a terminal or continuing value). We derive the proper expressions for the two cases.

In particular we focus the analysis when there is no real growth and expected inflation is positive.

We conclude that depending on which is the case we can use or not the Constant Growth Model (Gordon Model).

GONÇALO PACHECO-DE-ALMEIDA, New York University - Department of Management and Organizational Behavior
Email: gpacheco@stern.nyu.edu
PETER B. ZEMSKY, INSEAD - Strategy, Centre for Economic Policy Research (CEPR)
Email: peter.zemsky@insead.edu

While there is an extensive body of theory on R&D, the literature predominantly focuses on the uncertain nature of research activities. In contrast, we study the time-consuming and costly, but more certain, process of technology development. We analyze the effect of imitation and the resulting knowledge spillovers from technology leaders to technology followers on competitive dynamics such as the rate of technology diffusion in an industry, the sustainability of technology-based competitive advantages, and performance differences across firms. Our results challenge the widely accepted view that inter-firm spillovers are beneficial to technology followers but detrimental to technology leaders. We show that leaders may have incentives to increase spillovers to induce followers to switch from concurrent to imitative technology development strategies. Conversely, follower firms may be worse off with more spillovers because leaders expect to be imitated faster and have fewer incentives to develop a new technology, which delays its diffusion into the industry. In addition, we characterize the incentives of technology leaders and followers to invest in development capabilities. Our model derives testable relationships between important competitive and financial variables that are often empirically observable.