Integration across the MIS and finance curriculum--a case study of team teaching.
In today's global market place traditional boundaries between the different disciplines are becoming blurred. Employers expect their recruited graduates to understand how business operates across all functions due to the nature of the real-world business problem. However, the gap still exists between the expectations from the industry employers and what business schools teach. The issue of "cross-functional integration... not receiving the attention it deserves" in business schools (Porter & Mckibben, 1988, p. 82) has drawn attentions from both educators and practitioners (Athaide & Desai, 2005; Kennedy, Lawton, & Walker, 200l).
One of the more noticeable motions to address the issue is the formation of Management Education Task Force by the Association to Advance Collegiate Schools of Business (AACSB) in 2001 (Smith, Ducoffe, Tromley, & Tucker, 2006). The major goal of the taskforce was to examine and explore critical issues to management education. According to its final report, "curricular relevance" was identified as a "critical priority" (AACSB, 2002, p. 2). Furthermore, the Task Force called for business schools to "blur boundaries between educational disciplines. Cross-disciplinary programs facilitate market relevance by encouraging boundary spanning teaching and thinking" (AACSB, 2002, p. 2).
Since the publication of the above recommendation, cross-disciplinary, team-teaching has emerged as one of the effective approach embodying the idea of "blurring disciplinary boundaries" (AACSB, 2002, p. 2). In order to succeed in the fastpaced globalization wave today, business schools have to respond to the ensuing challenges and opportunities. According to a recent AACSB publication, "many globalization topics do not fit well in the functional or disciplinary orientation of business school.." (AACSB International, 2011, p.6), which echoed its proposal of cross-disciplinary, integrative teaching ten years ago. One of the motivations of this paper is to share the authors' practices of team-teaching in the disciplines of finance and MIS. By presenting one integrative class project designed for one undergraduate finance class, we aim to illustrate how Information Technology (IT) and Finance could be integrated to stimulate learning, while at the same time, make both subjects more interesting and appealing to students.
The authors observe that most of our students lack the capability to integrate knowledge and skills from the different disciplines. Though they perfectly complement each other, IT and finance are often viewed by students as two separate and abstract subjects. Students who do not have appropriate problem-solving skills are "intimidated" by the challenging topics and course projects, thus lose their interests in the subjects in their early college years. How could IT and Finance be integrated to stimulate learning and engage students? The authors tackle these perceptions and engage students by using integrative, hands-on projects in their team-teaching approach.
Team teaching, in a broad sense, refers to "a model that involves two or more faculty members who collaborate on teaching materials, course activities, and student evaluations" (Zhang & Keim, 1993). Sometimes it is interchangeable with other terms such as "collaborative teaching", "co-teaching," or "shared teaching" (Booth, Dixon-Brown, & Kohut, 2003). This article illustrates the practices of team teaching by showing one integrative class projects designed for the undergraduate finance classes. The projects require knowledge of the core finance concepts of portfolio creations, risk/return analysis, and capital budgeting analysis. Furthermore, we extend the Decision Support System (DSS) concept introduced in traditional Management Information Systems (MIS) curriculum to real-world business problems. Students need to master the basic concept and usage of DSS and learn how to apply it to solve the finance questions.
CASE: INTEGRATING DECISION SUPPORT SYSTEM (DSS) IN FINANCE CLASS
In this section we first introduce the concept of Decision Support System and its architecture. Then one integrative finance class project will be covered and discussed.
Decision Support Systems (DSS)
Decision making is one of the most significant and important activities in business. In general, business has to make two types of decisions: a structured decision and unstructured decision. A structured decision is relatively straightforward and recurring almost every day. People could follow certain procedures and routines to make such kind of decisions. However, for an unstructured decision, few or no specified or pre-defined procedure could be followed. Such type of decisions requires experiences, judgment, insights and visions. A decision support system (DSS) "is a highly flexible and interactive IT system that is designed to support decision-making..." (Haag, Cummings, & McCubbrey, 2002, p. 131). Many decision analysis tools are available in market. One of the most commonly used DSS environment is Microsoft Excel.
Like any system, a DSS consists of input, process, and output components as shown in Figure 1 (Jessup & Valacich, 2009). When the finance instructor assigned the project in class, the MIS instructor joined the class and introduced the fundamentals of DSS. The following figure was presented to the students to help them understand the architecture of DSS.
[FIGURE 1 OMITTED]
The Wansi-Liu Exotic Delights Inc., Case Study
Wansi-Liu Exotic Delights Inc., a food processing company located in Herndon, VA is considering adding a new division to produce fresh ginger juice. Given the recent research on the health benefits of ginger, the owners believe the drink will be in high demand, however, they are unsure whether it will be a profitable venture given the high costs involved. To address the concerns, you have been hired as the new manager of capital budgeting to evaluate the new project and present a report to the board of directors. The main equipment required is a commercial food processor which cost $150,000. The shipping and installation cost of the processor from China is $50,000. Additionally, a net working capital of $15,000 ($25,000 increase in current assets, and $10,000 increase in payables) will needed at the start. The processor will be depreciated under the MACRS system using the applicable depreciation rates are 33%, 45%, 15%, and 7% respectively. Production is estimated to last for three years, and the company will exit the market before intense competition sets in and erode profits. The market value of the processor is expected to be $20,000 after three years. The juice will be packaged in 20 oz container that sells for $3.00 each. The company expects to sell 230,000 units per year. Cost of goods sold is expected to total 75% of dollar sales. The company's tax rate is 40%, and its WACC is 15%.
Your task is to evaluate the project and present a report with the analysis and recommendations if the project should be undertaken. You are required to us all the six capital budgeting techniques (Net Present Value, Profitability Index, Internal Rate of Return, Modified in Internal Rate of Return and Payback) in the analysis.
The Decision Support System below for the case has three components the: Input, Process and Output sections. The input is the capital budgeting data entered in excel. The process includes the projected cash flow computations, cash flows evaluation using the capital budgeting techniques, sensitivity and scenario analysis which are all done on Excel. Both the input and the process are presented in figure 2. The output is the report with the recommendations on whether to accept or reject the project.
Results from all the capital budgeting analysis above all show that this project should be accepted. The project's Net Present Value (NPV) is $100,816.72 which implies a good profit within such a short time period. The Internal Rate of Return (IRR) of 41 % and the Modified Internal Rate of Return (MIRR) of 31 % are both greater than the cost of capital of 15%. Furthermore, the project pays back within two years following the Discounted payback approach. The profitability Index (PI) is 1.47 indicates that the present value of cash inflow is 1.47x the initial investment. So, following all the capital budgeting techniques, the project should be accepted.
In this article we presented an integrative class project created for one undergraduate finance course. The example illustrates the concept of team-teaching and how it helps students develop deeper understandings of knowledge from both IT and finance disciplines. The project was designed to let the students develop skill sets such as how to critically assess information and examine the consequences of different decisions. By integrating DSS in capital budgeting, team-teaching method enhances the students' learning experiences. IT students can see how an IT concept like DSS is applied in real life; at the same time finance students can learn how to extend class concepts by retrieving and analyzing real data. More integrative class projects will be created and used in IT courses as one of the future research direction. We will also use the focus group and pre- and post-course surveys to obtain useful feedback from students, which help us for future team-teaching practices.
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Theresia Atanga Wansi, Marymount University
Michelle (Xiang) Liu, Marymount University
TABLE 1 Common Dss Models for Specific Organizational Areas (Adopted From Jessup & Valacich 2009) Area Common DSS Models Accounting Cost analysis, discriminant analysis, brcak-even analysis, auditing, tax computation and analysis, depreciation methods, budgeting Corporate Level Corporate planning, venture analysis, mergers and Finance acquisitions Discounted cash flow analysis, return on investment, buy or lease, capital budgeting, bond refinancing, stock portfolio management, compound interest, after-lax yield, foreign exchange values Marketing Product demand forecast, advertising strategy analysis, pricing strategies. market share analysis, sales growth evaluation, sales performance Human Resources Labor negotiations, labor market analysis, personnel skills assessment. employee business expense, fringe benefit computations, payroll and deductions Production Product design, production scheduling, transportation analysis, product-mix, inventory level, quality control, plant location, material allocation, maintenance analysis, machine replacement, job assignment, material requirements planning Management Linear programming, decision trees, simulation, Science project evaluation and planning, queuing, dynamic Statistics programming, network analysis Regression and correlation analysis, exponential smoothing, sampling. time-series analysis, hypothesis testing FIGURE 2 Input and Process for the Wansi-Liu Exotic Delight Inc. Project Output = recommendations INPUT = DATA SECTION Equipment cost $ 150,000.00 Shipping & installation $ 50,000.00 Current Assets (Inv) $ 25,000.00 Current liabilities $ 10,000.00 Project life 3 $ Yrs Salvage value 20,000 Unit sales 230,000 $ Unit price 3.00 COGS 75% of sales Tax rate 40% WACC 15% PROCESS a. Year 0 cash Equipment cost $ 150,000 flow Shipping & installation $ 50,000 NWC $ 15,000 b. Depreciation Equipment cost $ 150,000 schedule Shipping & installation $ 50,000 $ 200,000 Book value at $ 14,000 the end c. After-tax $17,600.00 Salvage value d. OCF = EBIT - T + Dep e. OCF Rev COGS EBITDA DA EBIT Tax OCF f. Projected Year 0 Free Cash Flows OCF Initial Inv $(200,00 0) NWC $ (15,000) $(215,00 0) Total PV of cash inflows $315,816. 72 NPV $100,816.72 IRR 41.05% PI 1.47 MIRR 31% Payback 2.37 years Discounted 1.97 years payback PROCESS a. Year 0 cash flow b. Depreciation year 1 2 schedule 33% 45% $ 66,000 $ 90,000 Book value at the end c. After-tax Salvage value d. OCF = EBIT - T + Dep e. OCF year 1 2 $ 690,000 $ 690,000 $ 517,500 $ 517,500 172,500 172,500 $ 66,000 $ 90,000 $ 106,500 $ 82,500 $ 42,600.00 $ 33,000.00 $ 129,900.00 $ 139,500.00 f. Projected 1 2 Free Cash Flows $ 129,900.00 $ 139,500.00 $ 129,900 $ 139,500 $ 112,956.52 $ 105,482.04 NPV IRR PI MIRR Payback $ (85,100) $ 54,400 Discounted $ (102,043) $ (0.9674) payback PROCESS a. Year 0 cash flow b. Depreciation 3 4 schedule 15% 7% $ 30,000 $ 14,000 Book value at the end c. After-tax Salvage value d. OCF = EBIT - T + Dep e. OCF 3 $ 690,000 $ 517,500 172,500 $ 30,000 $ 142,500 $ 57,000.00 $ 115,500.00 f. Projected 3 Free Cash Flows $ 115,500.00 $ 17,600.00 $ 15,000 $ 148,100 $ 97,378.15 PV of CF NPV IRR PI MIRR Payback 0.367319379 Discounted payback
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|Author:||Wansi, Theresia Atanga; Liu, Michelle (Xiang)|
|Date:||Jun 1, 2012|
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