D's Case
2013
Team Members:
2013
Team Members:
1. Executive Summary
A report with results of geological tests in the south of Argentina determined that the area explored seemed to be rich in oil. A cost-benefit analysis needed to be done to make an investment decision for production facilities to extract oil from the ground. Evaluating investment opportunities in emerging markets is a mix of art and science. Unlike CAPM for developed markets, there is no standard pricing model for emerging markets that serves as a benchmark. The proposed models are many and varied, but none has gained wide acceptance and use. Currently, investors, companies, and investment banks use different models, based on different assumptions, and consider different variables. The confusion and controversy that follows is therefore unsurprising. The four models reviewed in the article and the case study underscores at least one important point. Lacking a good underlying theory, it is important to have good reasons to choose one model over the many competing alternatives. Therefore, when evaluating investment opportunities in emerging markets, it is essential to be clear about the factors considered and ignored by each model; to carefully balance the pros and cons of each model; and to evaluate the overall plausibility of each model. And of course, it is essential to perform a thorough sensitivity analysis, which is critical in any project evaluation, but even more so in emerging market.
2. Statement of the Problem:
Objectives
* The primary problem in the case requires finding out whether Exxon Mobil should invest in an opportunity with an initial investment of $130 million. * Investment opportunity evaluation is different for emerging markets. Apart from the traditional methods like CAPM, there are few other models used for evaluation such as Lessard, Godfrey and Espinosa, Goldman Sachs, and SalomonSmithBarney. Deciding which methodology to adopt for
Team Members:
2013
Team Members:
1. Executive Summary
A report with results of geological tests in the south of Argentina determined that the area explored seemed to be rich in oil. A cost-benefit analysis needed to be done to make an investment decision for production facilities to extract oil from the ground. Evaluating investment opportunities in emerging markets is a mix of art and science. Unlike CAPM for developed markets, there is no standard pricing model for emerging markets that serves as a benchmark. The proposed models are many and varied, but none has gained wide acceptance and use. Currently, investors, companies, and investment banks use different models, based on different assumptions, and consider different variables. The confusion and controversy that follows is therefore unsurprising. The four models reviewed in the article and the case study underscores at least one important point. Lacking a good underlying theory, it is important to have good reasons to choose one model over the many competing alternatives. Therefore, when evaluating investment opportunities in emerging markets, it is essential to be clear about the factors considered and ignored by each model; to carefully balance the pros and cons of each model; and to evaluate the overall plausibility of each model. And of course, it is essential to perform a thorough sensitivity analysis, which is critical in any project evaluation, but even more so in emerging market.
2. Statement of the Problem:
Objectives
* The primary problem in the case requires finding out whether Exxon Mobil should invest in an opportunity with an initial investment of $130 million. * Investment opportunity evaluation is different for emerging markets. Apart from the traditional methods like CAPM, there are few other models used for evaluation such as Lessard, Godfrey and Espinosa, Goldman Sachs, and SalomonSmithBarney. Deciding which methodology to adopt for
References: Books * Project Management Book of Knowledge Guide by PMI 2000 Edition * Project Management Book of Knowledge Guide by PMI 4th Edition * Project Management in Practice By Mantel and Meredith 4th Edition Articles http://www.investopedia.com/terms/i/internal-rate-of-return-rule.asp#axzz2J7PaqZRR http://www.accenture.com/us-en/blogs/accenture-trading-blog/Media/accenture_challenge_9_-_maturing_in_emerging_markets.pdf http://dspace.mit.edu/bitstream/handle/1721.1/42011/226316453.pdf