Intending to capture and convey the architectural decisions that have been made in order to implement ProjectPlace, the Software Architecture Design Document (SADD) formally provides a comprehensive overview of the proposed system. It uses a number of architectural decompositions to depict the different aspects, corresponding with the requirements of the Client as portrayed in the SRS.
All requirements with be incorporated into this architectural design, depicting at a high level the appropriate modules, data structures, databases and interfaces. This document serves as a basis for the detailed design, which will establish the design in increased detail.
Most firms do not make explicit use of real option techniques in evaluating investments. Nevertheless, real option considerations can be a significant component of value, and firms which approximately take them into account should outperform firms which do not. This paper asks whether the use of seemingly arbitrary investment criteria, such as hurdle rates and profitability indexes, can proxy for the use of more sophisticated real options valuation. We find that for a variety of parameters, particular hurdle-rate and profitability index rules can provide close-to-optimal investment decisions. Thus, it may be that firms using seemingly arbitrary “rules of thumb” are approximating optimal decisions.
Suppose that a manager must decide whether to invest $500 million for a manufacturing facility which can be built today or at some later time. If the present value of cash flows from the facility is estimated at $500.001 million, NPV is $1000; hence by the NPV criterion the investment should be undertaken. Finance students often find the decision to invest $500 million in order to earn $1000 troubling, though they are often unable to articulate a reason. This lack of comfort may extend to managers: it appears common for firms to use investment criteria which do not strictly implement the NPV criterion.
Does the degree of information a central bank releases to the public have any effect on the financial underpinnings of an economy? Does it actually matter whether Alan Greenspan explains the findings of an FOMC meeting to the American media, or remains quiet, letting the public ascertain the outcome on its own? Blinder [1998] argues that more open public disclosure of central bank policies may enhance the efficiency of markets. First, greater information about how a central bank makes policy decisions helps to reduce financial speculation. Second, clearer decision rules would help to reduce the volatility of markets, and thus enhance the predictability of future movements of financial assets. However, not everyone shares this view. Arguments have been made, claiming that too much information in the hands of the public could lead to, among other events, destabilizing speculation, and thus excess market volatility.
This issue is not confined solely to the United States. Australia has had in recent years an extremely transparent disclosure policy, and Japan has followed suit, to the point where weekly meetings are held between the head of the Central Bank and the press. The United Kingdom switched to a more open framework in 1992, citing a need to enhance the credibility of monetary policy. However, both France and the U.S. refuse to divulge too much information, such as the minutes of the actual meetings, citing possible financial instability.
