UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

Information systems analysis for the computerization of a long range financial planning model : a case… Argyle, Janice Elaine 1971

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Notice for Google Chrome users:
If you are having trouble viewing or searching the PDF with Google Chrome, please download it here instead.

Item Metadata

Download

Media
831-UBC_1971_A4_5 A73a.pdf [ 4.24MB ]
Metadata
JSON: 831-1.0101739.json
JSON-LD: 831-1.0101739-ld.json
RDF/XML (Pretty): 831-1.0101739-rdf.xml
RDF/JSON: 831-1.0101739-rdf.json
Turtle: 831-1.0101739-turtle.txt
N-Triples: 831-1.0101739-rdf-ntriples.txt
Original Record: 831-1.0101739-source.json
Full Text
831-1.0101739-fulltext.txt
Citation
831-1.0101739.ris

Full Text

INFORMATION SYSTEMS ANALYSIS FOR THE COMPUTERIZATION A LONG RANGE FINANCIAL PLANNING MODEL: A CASE STUDY by JANICE ELAINE ARGYLE A T h e s i s S u b m i t t e d i n P a r t i a l F u l f i l m e n t o f the R e q u i r e m e n t s f o r t h e Degree o f M a s t e r o f B u s i n e s s A d m i n i s t r a t i o n We a c c e p t t h i s t h e s i s as c o n f o r m i n g to the r e q u i r e d s t a n d a r d THE UNIVERSITY OF BRITISH COLUMBIA A u g u s t , 1971 In p r e s e n t i n g t h i s t h e s i s in p a r t i a l f u l f i l m e n t o f the requirements f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia , I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r reference and study . I f u r t h e r agree t h a t permiss ion f o r e x t e n s i v e copying o f t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the Head of my Department o r by h i s r e p r e s e n t a t i v e s . I t i s understood that copying or p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l ga in s h a l l not be a l lowed without my w r i t t e n p e r m i s s i o n . Department of C o m m e r c e a n d B u s i n e s s A d m i n i s t r a t i o n The U n i v e r s i t y o f B r i t i s h Columbia Vancouver 8, Canada D a t e A u g u s t 1 8 . 1 9 7 1 Information systems analysis was done for the computeri-zation of an ex i s t ing long range f i n a n c i a l planning model, in case study form. The model, that of Lockheed Petroleum Services L imited , was analyzed and recommendations for model soph i s t i ca t ion were made. Computerization was j u s t i f i e d by projected cost reduction and several other advantages which were judged to outweigh the disadvantages of computerization. Implications of computerization and d i f f i c u l t i e s of information systems analysis were described. Results of the study were the design of a deta i led algorithm and of a n c i l l a r y documents making future computer programming, v e r i f i c a t i o n , and imple-mentation eas i ly achievable. \ C h a p t e r Page I. INTRODUCTION . 1 I I . CASE DESCRIPTION OF THE COMPANY 3 A. The Company ; 3 B. The Company's I n f o r m a t i o n System: D e s c r i p t i o n and Computer Use . ... 4 C. I n s i g h t s G a i n e d 7 I I I . THE LONG RANGE FINANCIAL PLANNING MODEL 9 A. P u r p o s e s o f t h e Model 9 B. G e n e r a l Model F e a t u r e s 9 C. S p e c i f i c Model P a r t s 12 D. Recommendations 17 IV. COMPUTERIZING THE MODEL . 19 A. A d v a n t a g e s and D i s a d v a n t a g e s o f C o m p u t e r i z a t i o n 19 B. I m p l i c a t i o n s o f C o m p u t e r i z a t i o n 22 C. D i f f i c u l t i e s E n c o u n t e r e d D u r i n g t h e A n a l y s i s Phase 22 V. THE ALGORITHM 25 A. M o d e l - t o - A l g o r i t h m M e t h o d o l o g y 25 B. A l g o r i t h m F e a t u r e s 25 C. A l g o r i t h m and A n c i l l a r y Documents 26 D. A l g o r i t h m L i m i t a t i o n s 104 V I . CONCLUSIONS 105 Page I PRESENT FINANCIAL REPORTS 6 I I NET COST SAVING BY•COMPUTERIZATION 20 Page 1 MODEL RELATIONSHIPS 11 2 FLOW CHART OF THE SECTIONS OF THE ALGORITHM 29 Page 1 ALGORITHM FORMULATION 30 2 FORMULATION OF ROUTINES 57 3 DICTIONARY OF VARIABLES 58 4 DICTIONARY OF VARIABLE SUBSCRIPTS 73 5 INPUT REQUIRED 75 6 OUTPUT PRODUCED 79 The a u t h o r w i s h e s to t h ank the s t a f f o f L o c k h e e d P e t r o l e u m S e r v i c e s L i m i t e d f o r o f f e r i n g e x t e n s i v e c o o p e r a t i o n and f r e e a c c e s s to t h e i r f a c i l i t i e s , w i t h o u t w h i c h t h i s t h e s i s would not have been p o s s i b l e . E s p e c i a l l y a p p r e c i a t e d were t h e e n c o u r a g e -ment, i n f o r m a t i o n , and h e l p g i v e n . b y t h e company's f i n a n c i a l a n a l y s t , Mr. Toby M. Symes. The a u t h o r w i s h e s to thank a l s o Dr. H. W i l l and.Dr. W. W i n i a t a f o r t h e i r c o n s t r u c t i v e a d v i c e and c r i t i c i s m . v l i i INTRODUCTION The p r o b l e m t h i s s t u d y i s c o n c e r n e d w i t h i s t h e computer-i z a t i o n o f a p a r t i c u l a r company's e x i s t i n g l o n g range f i n a n c i a l p l a n n i n g m o d e l . T h i s t h e s i s a t t e m p t s t o answer s e v e r a l q u e s -t i o n s i n t h e p r o c e s s o f s o l v i n g the p r o b l e m ; t h e s e q u e s t i o n s a r e l i s t e d b e l o w , t o g e t h e r w i t h the r e a s o n s f o r a s k i n g them. 1. What i s the n a t u r e o f the company? Because t h i s i s a c a s e s t u d y , a d e s c r i p t i o n o f t h e company i s n e c e s s a r y . 2. What i s t h e n a t u r e o f the company's i n f o r m a t i o n system? The l o n g r a n g e f i n a n c i a l p l a n n i n g model s h o u l d be s t u d i e d i n the c o n t e x t o f t h e company's i n f o r m a t i o n s y s t e m . 3. What i s the company's p r e s e n t d e g r e e o f computer use? C o m p u t e r i z a t i o n o f the model s h o u l d be more r e a d i l y a c c e p t e d i n an e n v i r o n m e n t o f p r e s e n t computer u t i l i z a t i o n . 4. What a r e t h e p u r p o s e s o f the model and does the model a c h i e v e i t s p u r p o s e s ? The e x i s t e n c e and use o f the model s h o u l d be j u s t i f i e d b e f o r e i t s c o m p u t e r i z a t i o n i s j u s t i f i e d . 5. What a r e t h e methods by w h i c h t h e model a c h i e v e s i t s p u r p o s e s ? The f e a t u r e s o f t h e model must be u n d e r s t o o d b e f o r e d e s i g n o f t h e means o f i t s c o m p u t e r i z a t i o n . 6. A r e t h e r e p o t e n t i a l a r e a s f o r improvement o f t h e model? The d e s i g n p r o c e s s f o r means o f c o m p u t e r i z a t i o n p r o v i d e s an o p p o r t u n i t y f o r recommendations f o r t h e f u t u r e . 7. What are the advantages, disadvantages, and i m p l i c a t i o n s of c omputerization of the model? Computerization should be j u s t i f i e d - i n terms of both current use of the model and also any d i f f e r e n t use of the model expected a f t e r c o m p u t e r i z a t i o n . 8. What d i f f i c u l t i e s were encountered during the i n f o r m a t i o n systems a n a l y s i s phase? B r i e f mention of a n a l y s i s d i f f i c u l t i e s helps e x p l a i n how the problem was f i n a l l y d e f i n e d . 9. In what form should the means f o r computerization be de-signed? Documents prepared should make implementation of the computerized model s t r a i g h t f o r w a r d ; computer output should be e a s i l y comparable with s i m i l a r output of the e x i s t i n g manually processed model. This t h e s i s attempts to answer the above questions i n sequence, with a summary of the r e s u l t s appearing i n the f i n a l chapter. CASE DESCRIPTION OF THE COMPANY A. The Company A b r i e f company d e s c r i p t i o n i s n e c e s s a r y . The s u b j e c t o f t h i s c a s e s t u d y i s L o c k h e e d P e t r o l e u m S e r v i c e s L i m i t e d ( L P S ) , a w h o l l y - o w n e d s u b s i d i a r y o f the A m e r i c a n f i r m L o c k h e e d A i r c r a f t C o r p o r a t i o n . LPS was i n c o r p o r a t e d i n 1969 t o e x p l o i t the t e c h n o l o g i c a l s k i l l s o f L o c k h e e d ' s d i v i s i o n s and s u b s i d i a r i e s f o r the p e t r o l e u m i n d u s t r y . "The Company i s a l r e a d y w o r k i n g toward i t s u l t i m a t e g o a l o f becoming a l e a d e r i n t h e s o l u t i o n o f a b r o a d s p e c t r u m o f e n v i r o n m e n t a l p r o b l e m s r e l a t e d t o t h e p e t r o l e u m industry."-'- W o r k i n g from i n i t i a l d e v e l o p m e n t a t L o c k h e e d M i s s i l e and Space Company i n C a l i f o r n i a , LPS has d e s i g n e d and s u c c e s s f u l l y t e s t e d p r o t o t y p e components o f a manned a t m o s p h e r i c s u b s e a s y s t e m f o r p r o d u c i n g and s e r v i c i n g o f f s h o r e o i l w e l l s . The L o c k h e e d program u t i l i z e s a s e r i e s o f i n d i v i d u a l w e l l -head c e l l a r s , each w i t h i t s p r e s s u r e chamber c a p a b l e o f s u p p o r t i n g L o c k h e e d s e r v i c e p e r s o n n e l i n a s h i r t - s l e e v e s e n v i r o n m e n t ( a t m o s p h e r i c ) f o r i n s t a l l a t i o n o f w e l l h e a d h a r d w a r e , and p e r i o d i c s e r v i c i n g . Workmen a r e t r a n s p o r t e d by a u t i l i t y c a p s u l e , e q u i p p e d w i t h i t s own l i f e s u p p o r t s y s t e m , w h i c h o p e r a t e s from a s u r f a c e s u p p o r t v e s s e l and mates to t h e w e l l h e a d ( o r m a n i f o l d c e n t e r ) . U m b i l i c a l s s u p p l y e l e c t r i c power and f r e s h a i r from t h e s u p p o r t s h i p . x U n t i t l e d company f o r company b r o c h u r e s . l e a f l e t p r e p a r e d i n 1970 as an i n s e r t The p r o d u c t i o n o f t h e v a r i o u s w e l l s f l o w s to t h e m a n i f o l d c e n t e r s where i t i s c o n t r o l l e d and c o m i n g l e d . The m a n i f o l d c e n t e r s a l s o c o n t a i n th.e c o n t r o l s n e c e s s a r y to d i v e r t i n d i v i d u a l w e l l s f o r t e s t i n g . I n i t i a l p r o d u c t i o n w i l l u t i l i z e a f i x e d o r f l o a t i n g s u r f a c e p l a t f o r m f o r s e p a r a t i o n , a l t h o u g h the m a n i f o l d c e n t e r w i l l e v e n t u a l l y accommodate s e p a r a t i o n and pumping e q u i p m e n t , c o n t a i n i n g t h e e n t i r e p r o d u c t i o n s y s t e m on the s e a f l o o r w i t h e i t h e r s u r f a c e o r deep w a t e r s t o r a g e , o r p i p e l i n e s to s h o r e f a c i l i t i e s . 2 C e r t a i n company c h a r a c t e r i s t i c s a f f e c t t h e company's i n f o r m a t i o n s y s t e m needs i n t h e f o l l o w i n g ways: 1. LPS i s i n i t s i n i t i a l growth s t a g e s ; 3 p r e d i c t i o n i s d i f f i -c u l t ; a s o p h i s t i c a t e d model i s n o t y e t j u s t i f i e d . 2. LPS i s an o f f s h o o t o f a l a r g e r company; i t s r e p o r t i n g r e q u i r e m e n t s must be met by LPS' i n f o r m a t i o n s y s t e m . Computer-i z a t i o n might be j u s t i f i e d by p r e s e n t p l a n n i n g model use. 3. The company e x p e c t s r a p i d market growth and an e v e n t u a l w o r l d - w i d e s c a l e o f o p e r a t i o n s . T h e r e f o r e , t h e p r e s e n t i n f o r -m a t i o n s y s t e m s h o u l d be e a s i l y e x p a n d a b l e . C o m p u t e r i z a t i o n i s c o n s i d e r e d , b e c a u s e o f t h e f l e x i b i l i t y and economies o f s c a l e c h a r a c t e r i s t i c o f computer u s e . B. The Company's I n f o r m a t i o n System: D e s c r i p t i o n and Computer Use T h i s s e c t i o n p r e s e n t s o b s e r v a t i o n s on t h e company's i n f o r m a t i o n s y s t e m and computer u s e ; the f o l l o w i n g s e c t i o n ( I I C.) p r e s e n t s r e l a t e d c o n c l u s i o n s and i m p l i c a t i o n s f o r t h e p r o b l e m o f model c o m p u t e r i z a t i o n . 2 L o c k h e e d M i s s i l e s & Space Company, Subsea P e t r o l e u m : An  Advanced O f f s h o r e P r o d u c t i o n System f o r Deeper Waters ( S u n n y v a l e , C a l i f . , 1 9 6 8 ) , p. 4. 3As o f A p r i l 1971, 63 p e r s o n n e l were employed. LPS' p r e s e n t i n f o r m a t i o n s y s t e m c o n s i s t s o f a r e p o r t i n g s y s t e m s t i p u l a t e d by the p a r e n t company. These r e p o r t s can be d i v i d e d i n t o t h r e e c a t e g o r i e s : f i n a n c i a l r e p o r t s , p r o j e c t e d and c o m p a r a t i v e ; a c c o u n t i n g r e p o r t s , a c t u a l and c o m p a r a t i v e ; and a c t i v i t y r e p o r t s , p r o j e c t e d and a c t u a l . O n l y t h e f i n a n c i a l r e p o r t s w i l l be c o n s i d e r e d h e r e , as a framework f o r u n d e r -s t a n d i n g the r o l e o f the l o n g r a n g e f i n a n c i a l p l a n n i n g model. T a b l e I on page 6 i n d i c a t e s t h e p r e s e n t f i n a n c i a l r e p o r t s , t h e i r f r e q u e n c y o f p r e p a r a t i o n , the t o t a l p e r i o d d e s c r i b e d by the report., and t h e p e r i o d c o v e r e d by each p o i n t e s t i m a t e . 1. The P r e m i s e s d e s c r i b e , i n words, management's assump-t i o n s a bout the company's p r o d u c t s and s e r v i c e s and t h e r e l a -t i o n s h i p s o f c r i t i c a l v a r i a b l e s d e s c r i b i n g t h e company's p l a n n e d a c t i v i t i e s . 2. The Long Range F i n a n c i a l P l a n n i n g Model t r a n s l a t e s the P r e m i s e s i n t o p r o j e c t e d n u m e r i c a l d a t a . 3. The Management F o r e c a s t r e s t a t e s s e v e r a l s c h e d u l e s d e r i v e d i n t h e Long Range F i n a n c i a l P l a n n i n g M o d e l , s u c h a s : Income S t a t e m e n t ; B a l a n c e S h e e t ; F i x e d A s s e t s S c h e d u l e ; C o s t s o f New B u s i n e s s ; D i r e c t , I n d i r e c t , and Ov e r h e a d C o s t s ; and R e c e i p t s and D i s b u r s e m e n t s . 4. The Management Budget b r e a k s down most o f t h e s c h e d u l e s i n t h e Management F o r e c a s t i n t o m o n t h l y f i g u r e s f o r the f i r s t y e a r . 5 . The F i n a n c i a l F o r e c a s t i s s i m i l a r to the Management F o r e c a s t b u t i s p r e p a r e d f o r p o t e n t i a l l e n d e r s w i t h more c o n s e r v a t i v e s a l e s e s t i m a t e s . TABLE I PRESENT FINANCIAL REPORTS T i t l e o f R e p o r t P r e m i s e s Long Range F i n a n c i a l P l a n n i n g M odel Management F o r e c a s t Management Budget F i n a n c i a l F o r e c a s t Some s c h e d u l e s : F i x e d A s s e t s Budget and F o r e c a s t M i d - Y e a r and Y e a r - E n d P e r f o r m a n c e Budget p o r t i o n : C o m p a r a t i v e p o r t i o n : F r e q u e n c y T o t a l o f P r e p a r a t i o n P e r i o d 6 months 6 months 6 months 1 y e a r 1 y e a r 1 y e a r 6 months 10 y e a r s 10 y e a r s 1 y e a r 5 y e a r s y e a r s 1-2 y e a r s 3-5 10 y e a r s 1 y e a r Remainder o f y e a r E l a p s e d p o r t i o n o f y e a r P o i n t  Es t imat e P e r i o d 1 y e a r 1 y e a r 1 month 1 y e a r 3 months 6 months 1 month 1 month 6. The F i x e d A s s e t s Budget and F o r e c a s t complements the Management Fqr.eca.st~j w h i c h does n o t p r o j e c t f i x e d a s s e t s . 7. The M i d - Y e a r and Y e a r - E n d P e r f o r m a n c e R e p o r t s compare a c t u a l p e r f o r m a n c e f i g u r e s , , combined w i t h r e v i s e d p r o j e c t i o n s f o r t h e months r e m a i n i n g i n t h e y e a r , w i t h t h e Management Budget f i g u r e s . The l o n g r a n g e f i n a n c i a l p l a n n i n g model, w h i c h may be r e f e r r e d to as " t h e m o d e l , " i s t h e most c o m p r e h e n s i v e o f t h e r e p o r t s and t h e most complex. From i n t e r v i e w s w i t h t h e s t a f f , i t a p p e a r e d to be a common b e l i e f t h a t p r e p a r i n g r e p o r t s was o c c u p y i n g too much t i m e , w h i c h c o u l d be d e v o t e d t o more p r o d u c t i v e management t a s k s . P r o p o s a l s f o r i n f o r m a t i o n s y s t e m changes s h o u l d c o n s i d e r the company's p r e s e n t l e v e l o f d a t a p r o c e s s i n g s k i l l s . LPS has employed the computer i n s e v e r a l a p p l i c a t i o n s , i n c l u d i n g : 1. A c c o u n t i n g c o s t l e d g e r . 2. P a r t s l i s t i n g s and p u r c h a s i n g r e c o r d s . 3. Cash f l o w a n a l y s i s . 4. C r i t i c a l p a t h s c h e d u l i n g . 5 . E n g i n e e r i n g a n a l y s i s o f s t r e s s . 6. Dynamic s t r u c t u r e a n a l y s i s . T h i s work has been done by p e r s o n n e l i n d i f f e r e n t d e p a r t m e n t s . T h e r e i s a t p r e s e n t no management i n f o r m a t i o n s y s t e m s d e p a r t m e n t . C. I n s i g h t s G a i n e d The f o l l o w i n g g e n e r a l c o n c l u s i o n s can be drawn w i t h r e l a t i o n t o t h e p r o b l e m o f t h i s s t u d y . 1. The r e p o r t i n g r e q u i r e m e n t s must be met; r e p o r t i n g i s s u f f i c i e n t l y t i m e - c o n s u m i n g t h a t c o m p u t e r i z a t i o n s h o u l d be c o n s i d e r e d . 2. W h i l e c o m p u t e r i z a t i o n i n v o l v e s p e r s o n n e l t i m e , p a r t i c u l a r l y i n i t i a l l y , i t w i l l save t i m e o f p e r s o n n e l who would o t h e r w i s e be p l a n n i n g and managing. The t r a n s f e r r a l o f r e l a t i v e l y r o u t i n e d u t i e s away f r o m managers c o u l d r e s u l t i n i n c r e a s e d p r o d u c t i v i t y and r e d u c e d c o s t s . 3. The company's e x p e c t e d l a r g e - s c a l e growth w i l l r e q u i r e a long range f i n a n c i a l planning model which may be eas i ly expanded and modified; a computerized model is more eas i ly a l t e red , e spec ia l ly i f designed in modular fashion. 4. Because the long range f i n a n c i a l planning model is the most comprehensive report , i t is considered for computeri-zation f i r s t . Although i t is unsophist icated, i t i s complex enough to be d i f f i c u l t to process data through manually. 5. Although LPS has no management information systems department,, the company's use of the computer in several a p p l i -cations provides an environment for acceptance of further computerization. 6. Although the model projects revenues on the basis of a required rate of re turn , prices j u s t i f i e d from the customer's point of view were estimated previously to determine what rate of return LPS could reasonably expect to rece ive . Thus the product and service prices generated by the model serve to va l idate the previous marketing study. The above are the major considerations prompting this study of the problem: the computerization of LPS' ex i s t ing long range f i n a n c i a l planning model. CHAPTER I I I THE LONG. RANGE FINANCIAL PLANNING MODEL 4 A. P u r p o s e s o f t h e Model The m a j o r p u r p o s e s o f the model a r e t w o f o l d : to s a t i s f y r e p o r t i n g r e q u i r e m e n t s ; and to a i d i n making f i n a n c i a l d e c i -s i o n s . B o t h i n t e r n a l and e x t e r n a l management ( t h e p a r e n t company) r e v i e w t h e model f o r t h e g e n e r a l p i c t u r e i t p r e s e n t s . Top management use the a g g r e g a t e f i n a n c i a l s t a t e m e n t s to make d e c i s i o n s on f i n a n c i n g to be s o l i c i t e d . T h e r e a r e two o t h e r b e n e f i t s o f model u s e . F i r s t , p a r t i c i p a t i o n i n the d e s i g n o f the model e n c o u r a g e d r i g o r o u s c o n c e p t u a l t h i n k i n g about the b u s i n e s s on t h e p a r t o f managers. Second, e x p e r i m e n t a t i o n w i t h t h e model p r o v o k e d u n e x p e c t e d c o n c l u s i o n s a b o u t the i n t e r a c t i o n s o f the model's v a r i a b l e s . A l t h o u g h t h e s e b e n e f i t s o f model use c a n n o t be q u a n t i f i e d , i t was f o u n d t h a t management c o n s i d e r e d t h e model w o r t h w h i l e f o r the r e a s o n s o u t l i n e d above. B. G e n e r a l Model F e a t u r e s The lon;g range.. f i i r a n c i a l - p l a n n i n g model i s a r e c o r d o f " the t r a n s f o r m a t i o n ' o f d a t a i n p u t s w h i c h d e s c r i b e s m a t h e m a t i c a l l y t h e b e h a v i o u r c h a r a c t e r i s t i c s of t h e r e a l s y s t e m the model The model was d e s i g n e d i n mid-1970 a t LPS. r e p r e s e n t s . The model c o n t a i n s a s e r i e s o f t a b l e s o f a n n u a l d a t a o v e r t e n y e a r s , c u l m i n a t i n g i n pro forma f i n a n c i a l s t a t e -ments. I n f o r m a t i o n on o p e r a t i o n s p l a n s i s c o l l e c t e d i n f o r m a l l y by t h e f i n a n c i a l p l a n n i n g and a n a l y s i s p e r s o n n e l and i s made i n t o a f i n a n c i a l p l a n t w i c e p e r y e a r . I t i s e x p e c t e d t h a t f u r t h e r model d e v e l o p m e n t w i l l l e a d to g r e a t e r i n p u t f o r m a l i -z a t i o n and s t a n d a r d i z a t i o n . Model r e l a t i o n s h i p s a r e d i s p l a y e d g r a p h i c a l l y i n F i g u r e 1 on page 11. T h e r e a r e f i v e f u n c t i o n a l c l a s s i f i c a t i o n s : p r o d u c t r e s e a r c h and de v e l o p m e n t i s s e p a r a t e d i n t o I n d e p e n d e n t R e s e a r c h ( I . R . ) and I n d e p e n d e n t Development ( I . D . ) ; work r e l a t e d to the company's s e r v i c e c o n t r a c t s i s d i v i d e d i n t o S e r v i c e O p e r a t i o n s (S.O.) and S e r v i c e Hardware ( S . H . ) , such as the u t i l i t y c a p s u l e s and s u r f a c e s u p p o r t e q u i p m e n t ; work r e l a t e d to the s e l l i n g o f h a r d w a r e , 'such as w e l l h e a d c e l l a r s , p i p e l i n e c o n n e c t o r s , and m a n i f o l d m o d u l e s , i s c l a s s i f i e d u nder Hardware f o r R e s a l e (H.R.). The b a s i s f o r most o f t h e c o s t and r e v e n u e p r o j e c t i o n s i s the market e s t i m a t e (number o f f i e l d s and number o f hardware u n i t s ) and t h e p e r u n i t c o s t s . D i r e c t l a b o u r c o s t s a r e b a s e d on numbers o f p e r s o n n e l , w h i c h a r e d e r i v e d i n l a r g e p a r t f r o m the demands o f the market f o r e c a s t . M a t e r i a l s and d i r e c t l a b o u r c o s t a r e d e t e r m i n e d s e p a r a t e l y f o r each o f t h e f i v e c o r p o r a t e f u n c t i o n s . Some o f t h e i n d i r e c t o v e r h e a d c o s t s a r e d e t e r m i n e d i n d e p e n d e n t l y and a l l o c a t e d to the f i v e f u n c t i o n s on the b a s i s o f d i r e c t l a b o u r c o s t s . The s e r v i c e o p e r a t i o n s f u n c t i o n has a l s o i t s own d i r e c t s e r v i c e o v e r h e a d . New b u s i n e s s (N.B.) r e v e n u e b e a r s the i n d e p e n d e n t r e s e a r c h c o s t and the I n d i r e c t O v erhead D i r e c t L a b o u r M a t e r i a l s D i r e c t S e r v i c e O v erhead W a r r a n t y Independent Development Independent R e s e a r c h S e r v i c e O p e r a t i o n s S e r v i c e Hardware Hardware For R e s a l e New Hardware F o r R e s a l e F i x e d A s s e t S c h e d u l e flew B u s i n e s s Revenue S e r v i ce Revenue Hardware Revenue O t h e r Revenue F i g u r e 1 - Model R e l a t i o n s h i p s A f i g u r e t a k e n from LPS' Long Range F i n a n c i a l P l a n n i n g M o d e l document i n d e p e n d e n t d e v e l o p m e n t c o s t s o f p r e s e n t l y u n d e f i n e d p r o d u c t s . I n d e p e n d e n t d e v e l o p m e n t c o s t s o f c u r r e n t l y d e f i n e d p r o d u c t s i s a p p o r t i o n e d between s e r v i c e h ardware and h ardware f o r r e s a l e . F i x e d a s s e t s c o n s i s t o f s e r v i c e h ardware and o f f i c e f u r n i t u r e . C o s t s o f s e r v i c e o p e r a t i o n s and s e r v i c e h a r d w a r e d e t e r m i n e , a l o n g w i t h a r e q u i r e d p r o f i t m a r g i n , the s e r v i c e r e v e n u e . S i m i l a r l y , c o s t s o f h ardware f o r r e s a l e d e t e r m i n e h a r d w a r e r e v e n u e . Revenues from new b u s i n e s s , s e r v i c e c o n t r a c t s , h a r d w a r e s o l d , and o t h e r s o u r c e s combine w i t h t h e i r s e p a r a t e c o s t s to y i e l d t h e a g g r e g a t e r e v e n u e p i c t u r e . The a g g r e g a t e f i n a n c i a l s t a t e m e n t s a r e r e g e n e r a t e d w i t h f i n a n c i n g c o s t s a p p l i e d to the s e r v i c e f u n c t i o n . T h i s i t e r a t i o n i s r e p e a t e d u n t i l the d e s i r e d a c c u r a c y i s a c h i e v e d . C. S p e c i f i c M odel P a r t s Model p a r t s a r e d e s c r i b e d h e r e w i t h i n t h e framework o f the a l g o r i t h m ( d e l i n e a t e d i n C h a p t e r V) des.igned i n the s o l u -t i o n o f t h e c o m p u t e r i z a t i o n p r o b l e m . The a l g o r i t h m i s a t r a n -s l a t i o n o f t h e model i n t o a s e r i e s o f a l g e b r a i c f o r m u l a e w h i c h a r e e a s i l y computer programmable. The f o r m u l a e a r e g r o u p e d i n s e c t i o n s , s u c h t h a t t h e c a l c u l a t i o n s w i t h i n each s e c t i o n a r e p e r f o r m e d i n s e q u e n c e , and s u c h t h a t t h e s e c t i o n s a r e e x e c u t e d i n s e q u e n c e . F i g u r e 2 on page 29 shows a f l o w c h a r t o f t h e s e s e c t i o n s o f t h e a l g o r i t h m . P r e l i m i n a r y S e c t i o n . C e r t a i n i n p u t v a r i a b l e s v a l u e d i n y e a r - z e r o d o l l a r s a r e t r a n s l a t e d , by compounding a t a g i v e n r a t e o f i n f l a t i o n , i n t o a n n u a l v a l u e s w i t h i n the g i v e n t i m e h o r i z o n . S e c t i o n A - Ma r k e t F a c t o r s . M a r k e t v a r i a b l e s a r e cumula-t e d and t o t a l l e d . S e c t i o n B - L a b o u r . T o t a l d i r e c t l a b o u r and t o t a l l a b o u r c o s t s a r e f o u n d . S e c t i o n C - I n d i r e c t O v e r h e a d . D e p r e c i a t i o n on o f f i c e f u r n i t u r e i s c a l c u l a t e d a c c o r d i n g to a g i v e n d e p r e c i a t i o n method, w i t h t h e c a p i t a l e x p e n d i t u r e on o f f i c e f u r n i t u r e p r o p o r t i o n a l to a n n u a l i n c r e a s e s i n n o n - f i e l d e m p l o y e e s . F r i n g e b e n e f i t s a r e a p e r c e n t a g e o f t o t a l l a b o u r c o s t c l a s s i -f i e d as i n d i r e c t o v e r h e a d . A d v e r t i s i n g and s a l e s p r o m o t i o n a r e a p e r c e n t a g e o f s a l e s ; s a l e s i s the p r o d u c t o f the number of employees and an a r b i t r a r y m u l t i p l i e r , b e c a u s e at t h i s p o i n t i n t h e model s a l e s a r e n o t d e t e r m i n e d . O t h e r i n d i r e c t o v e r h e a d i s a p e r c e n t a g e o f home l a b o u r . These c o s t s a r e combined w i t h i n d i r e c t l a b o u r c o s t and b i d and p r o p o s a l c o s t t o o b t a i n t o t a l i n d i r e c t o v e r h e a d . T h i s i s t h e n a l l o c a t e d t o the f i v e c o r p o r -a t e f u n c t i o n s i n p r o p o r t i o n to t h e i r d i r e c t l a b o u r c o s t . S e c t i o n D - I n d e p e n d e n t R e s e a r c h and I n d e p e n d e n t D e v e l o p - -ment. I.R. m a t e r i a l s a r e d e f i n e d as a p e r c e n t a g e o f l a b o u r c o s t . I.D. m a t e r i a l s i s an i n p u t . T o t a l c o s t s o f I.R. and o f I.D. a r e t h e sums o f t h e i r m a t e r i a l s , l a b o u r , and i n d i r e c t o v e r h e a d . When i n p u t d a t a i s p r e p a r e d , i t i s n o t known what the t o t a l c o s t o f I.D. w i l l be i n d o l l a r s ; t h e r e f o r e p e r c e n t a g e s a r e g i v e n i n i n p u t f o r a l l o c a t i o n o f I.D. to S.H. and t o H.R., w i t h the b a l a n c e r e m a i n i n g g o i n g to new b u s i n e s s . S e c t i o n E - New B u s i n e s s . New b u s i n e s s income s t a t e m e n t i t e m s a r e d e r i v e d from c o s t s o f i n d e p e n d e n t r e s e a r c h and i n d e -p e n d e n t d e v e l o p m e n t . One y e a r o f i n d e p e n d e n t r e s e a r c h i s assumed to y i e l d a g i v e n number o f y e a r s o f i n d e p e n d e n t d e v e l -opment and a g i v e n number of y e a r s o f r e v e n u e f o r p r o d u c t s r e s e a r c h e d . S e c t i o n F - S e r v i c e Hardware. The s e r v i c e h ardware -downwinch u t i l i t y c a p s u l e (DUC), m a n o e u v r a b l e u t i l i t y c a p s u l e (MUC), and s u r f a c e s u p p o r t equipment (SSE.) - a r e to be b u i l t o u t s i d e LPS. C o s t s o f s u b c o n t r a c t i n g , d i r e c t l a b o u r , i n d i r e c t o v e r h e a d , and i n d e p e n d e n t d e v e l o p m e n t a r e combined and d i v i d e d by t h e t o t a l number o f s e r v i c e h a r d w a r e u n i t s o f each t y p e to d e t e r m i n e t h e i r u n i t c o s t . S e c t i o n G - F i x e d A s s e t s . F i x e d a s s e t s c o n s i s t o f s e r v i c e h a rdware and o f f i c e f u r n i t u r e . S e r v i c e h a r d w a r e , w h i c h i s hardware u s e d i n t h e company's o p e r a t i o n s r a t h e r t h a n b e i n g s o l d , i n c l u d e s t h e DUC, MUC, SSE, r e f u r b i s h m e n t DUC and MUC ( m a j o r r e - o u t f i t t i n g and a l t e r a t i o n o f a c a p s u l e ) , and DUC and MUC s p a r e s ( s p a r e p a r t s ) . The numbers o f each o f t h e s e a s s e t s p u r c h a s e d i n each y e a r a r e m u l t i p l i e d by t h e i r compounded u n i t c o s t s to o b t a i n a s c h e d u l e o f s e r v i c e h ardware a d d i t i o n s i n each y e a r . A c o r r e s p o n d i n g d e p r e c i a t i o n s c h e d u l e i s p r e p a r e d u s i n g a d e p r e c i a t i o n c a l c u l a t i o n r o u t i n e . T h i s i s combined w i t h o f f i c e f u r n i t u r e * d e p r e c i a t i o n to y i e l d t o t a l d e p r e c i a t i o n . S e c t i o n H - S e r v i c e Hardware D e p r e c i a t i o n p e r F i e l d . O i l f i e l d s to be s e r v i c e d by LPS a r e d i v i d e d i n t o U.S. f i e l d s and non-U.S. f i e l d s . Non-U.S. f i e l d s w i l l g e n e r a l l y i n v o l v e g r e a t e r d e p l e t i o n due t o l a r g e r d e p l e t i o n a l l o w a n c e s and to g r e a t e r p o s s i b i l i t y o f f u t u r e government i n t e r f e r e n c e . B e c a u s e non-U.S. f i e l d s w i l l be i n r e l a t i v e l y d i v e r s e l o c a t i o n s , i t i s assumed t h a t each f i e l d w i l l r e q u i r e one s e t o f s p a r e s . U.S. f i e l d s w i l l s h a r e s p a r e s f a c i l i t i e s . A p e r c e n t a g e o f non-U.S. f i e l d s a r e assumed to be p a r t i a l - s i z e d f i e l d s , w h i l e a l l U.S. f i e l d s a r e assumed to be f u l l f i e l d s . The t o t a l d e p r e -c i a t i o n i s c a l c u l a t e d f o r each of t h e t h r e e c l a s s i f i c a t i o n s : U.S. f i e l d s ; non-U.S. f u l l f i e l d s ; and non-U.S. p a r t i a l f i e l d s . T h i s c l a s s i f i c a t i o n o f f i e l d s i s o v e r s i m p l i f i e d due t o the u n c e r t a i n t y about what w i l l be t h e a c t u a l f i e l d s i z e s . S e c t i o n I - V e s s e l R e n t a l . A n n u a l r e n t a l to be p a i d f o r t h e v e s s e l s u s e d on f u l l f i e l d s i s d e r i v e d f r o m a p r e s e n t v a l u e a n a l y s i s o f t h e v e s s e l c o s t , d e p r e c i a t i o n t a x s a v i n g , and s a l v a g e value."' S e c t i o n J - D i r e c t S e r v i c e O v e r h e a d . U.S., non-U.S., and t o t a l d i r e c t s e r v i c e o v e r h e a d a r e d e r i v e d f r o m v e s s e l r e n t a l and o t h e r d i r e c t s e r v i c e o v e r h e a d c o s t s (an i n p u t i t e m ) . S e c t i o n K - W a r r a n t y . ' I t i s assumed t h a t a g i v e n f r a c -t i o n o f h ardware f o r r e s a l e i t e m s w i l l at some time need to be r e p l a c e d . The c o r r e s p o n d i n g f r a c t i o n o f t h e r e p l a c e m e n t c o s t i s assumed by each hardware f o r r e s a l e i t e m ( w e l l h e a d c e l l a r , p i p e l i n e c o n n e c t o r , and m a n i f o l d module) and i s c a l l e d w a r r a n t y c o s t . S e c t i o n L - Hardware f o r R e s a l e . C o s t s o f d i r e c t l a b o u r , i n d i r e c t o v e r h e a d , i n d e p e n d e n t d e v e l o p m e n t , and w a r r a n t y a r e a l l o c a t e d to h ardware f o r r e s a l e i t e m s i n p r o p o r t i o n to t h e i r s u b c o n t r a c t c o s t s . T o t a l r e v e n u e and o t h e r h ardware f o r r e s a l e ^ S u b s e q u e n t to t h e t i m e o f i n f o r m a t i o n s y s t e m s a n a l y s i s t h e a u t h o r l e a r n e d t h a t v e s s e l r e n t a l q u o t a t i o n s were b e i n g r e c e i v e d by t h e company, t h u s o b v i a t i n g t h e need f o r a v e s s e l r e n t a l c a l c u l a t i o n p r o c e d u r e . Income s t a t e m e n t i t e m s a r e c a l c u l a t e d . S e c t i o n M - Cash O u t f l o w S e r v i c e (MUC). The p r e s e n t v a l u e s o f t o t a l i n v e s t m e n t , t o t a l c o s t s , and t o t a l d e p r e c i a t i o n a r e c a l c u l a t e d f o r a U.S. f i e l d ( f u l l ) , a non-U.S. f i e l d ( f u l l ) , and.a non-U.S. f i e l d ( p a r t i a l ) . I n v e s t m e n t i s composed p f c a p s u l e , r e f u r b i s h m e n t a f t e r a c e r t a i n number o f y e a r s , SSE, and s p a r e s . T o t a l c o s t s a r e t h e sum o f s h o r e s u p p o r t , crew, i n d i r e c t o v e r h e a d , v e s s e l r e n t a l , and d i r e c t s e r v i c e o v e r h e a d . ( S e c t i o n J ) S e c t i o n N - S e r v i c e Revenue and Pay-Out A n a l y s i s . The a n n u a l and d a i l y s e r v i c e r e v e n u e f o r t h e t h r e e t y p e s o f MUC f i e l d i s a v e r a g e d o v e r t h e l i f e o f a c o n t r a c t b a s e d on a p r e s e n t v a l u e a n a l y s i s o f c o s t s . F o r s i m p l i f i c a t i o n , a n n u a l r e v e n u e i s a v e r a g e d f o r U.S. and non-U.S. f i e l d s . A n n u a l and d a i l y r e v e n u e s c h e d u l e s a r e g e n e r a t e d o v e r t h e c o n t r a c t l i f e w i t h p e r i o d i c r e v e n u e i n c r e m e n t s . The y e a r i n w h i c h p r o f i t b e g i n s i s shown i n a p a y - o u t a n a l y s i s . S e r v i c e income s t a t e -ment i t e m s a r e p r e p a r e d . S e c t i o n 0 - O t h e r Income and A g g r e g a t e Income S t a t e m e n t . O t h e r income comes from t h r e e s o u r c e s o f g o v e r n m e n t a l a i d , some of w h i c h must be r e p a i d a f t e r p r o t o t y p e s a r e u s e d to d e r i v e r e v e n u e . O t h e r income i s combined w i t h r e v e n u e and c o s t s o f s e r v i c e h a r d w a r e , hardware f o r r e s a l e , and new b u s i n e s s to p r o d u c e t h e a g g r e g a t e income s t a t e m e n t , a t o o l commonly r e q u e s t e d by management as a b a s i s f o r making d e c i s i o n s . S e c t i o n P - B a l a n c e Sheet and Cash Flow S t a t e m e n t . B e c a u se a c c o u n t s r e c e i v a b l e -and p a y a b l e .are p a i d some' time a f t e r t h e y a r e i n c u r r e d , time l a g s a r e i n c o r p o r a t e d i n t o a c c o u n t s payable, accounts rece ivable , and sa lar ies payable to derive c o l l e c t i o n s and payments for use in the cash flow statement. The balance sheet and cash flow statement are derived as the culmination of a l l the preceding ca lcula t ions and provide information for management to evaluate di f ferent f inancing p o s s i b i i i t i e s . This concludes an out l ine of the methods by which the model achieves i t s purposes of s a t i s fy ing report ing require-ments and a iding in f i n a n c i a l decision-making. D. Recommendations After the successful computerization of the present model, considerat ion should be given to sophi s t i ca t ion which would allow the model to answer better the questions of manage-ment. The modular nature of the algorithm proposed i n Chapter V allows sophis t icat ions to be implemented by changes to ex i s t -ing sections or additions of new sect ions . The fol lowing l i s t of possible changes i s presented with the r e a l i z a t i o n that the i r costs and benefits would have to be evaluated before implementation. 1. S e n s i t i v i t y analys is showing effects of incremental changes in cer ta in va r i ab le s , reveal ing key var iables produ-cing greatest e f fec t s . 2. P r o b a b i l i s t i c analysis wherein a l ternat ive var iable values (for example, three-point estimates) are assigned p r o b a b i l i t i e s of occurrence and assumed to occur in various combinations according e i ther to independent p r o b a b i l i t i e s or to interdependency r e l a t i o n s h i p s . 3. Ca lcu la t ion of ranges within which prices may l i e to y i e l d acceptable rates of return for both the company and customers, thus ind ica t ing l i m i t s of contract negot ia t ion . 4. Comparison of budgeted and actual figures or of resul t s of various assumptions (within one computer run.) 5. Comparison of leas ing and owning surface support vessel to determine r e l a t i v e p r o f i t a b i l i t y . 6. Comparison of subcontracted hardware production and of in-house hardware production, where c a p i t a l resources might be made ava i lab le for the l a t t e r innovation i f j u s t i -f ied by i t s p r o f i t a b i l i t y . 7. Generation of price schedules as a function of f i e l d , product, and service c h a r a c t e r i s t i c s . 8. Introduction of the concept of r i s k , with higher p ro f i t s required in areas of greater r i s k . 9. More r e a l i s t i c non-l inear d i s t r i b u t i o n over time of new business revenue.. 10. Addit ion of graphic computer output where desired (and perhaps already being produced manually) for more eas i ly understood presentation to in te rna l or external management. In deciding whether a cer ta in model soph i s t i ca t ion should be made, management has the poss ibly d i f f i c u l t task of estimating the value of the information to be yielded., with r e l a t i o n to the predicted cost of model a l t e r a t i o n . Another poss ibly d i f f i c u l t task for management i s precise d e f i n i t i o n of the terms and complexity of the proposed a l t e r a t i o n in communication with the management information systems persons involved. COMPUTERIZING THE MODEL A. Advantages and Disadvantages of Computerization This sect ion considers the benefits and o f f se t t ing factors of computerization of LPS' long range f i n a n c i a l plan-ning model. 1. Cost Reduction. If computerization is combined with the semi-annual report preparat ion, the costs incurred in i n i t i a l computerization w i l l be offset by reduced requirements in personnel time. This is supported by the estimates in Table II on page 20, based on the mid-1970 report ing experience, in which input data reforecasts necessitated approximately eight model i t e r a t i o n s . 2. Reduction in Ca lcu la t ion Time. Input data entry from an on-premises terminal to a centra l computer containing the stored program w i l l generate computer output in minutes. 3. Ease of Experimentation. Mul t ip le runthroughs, poss ibly i n a s ingle computer terminal sess ion, allow various input data sets to. be entered for comparison, and possible unexpected ins ights upon analysis of r e s u l t s . 4. Ease of Model Revis ion. A well-documented computer program w i l l enable easier model r ev i s ion than the non-computerized model. A l t e r a t i o n of one formula can be as simple as changing one statement in both program and algorithm ( w h i c h documents th.e f o r m u l a e v e r b a l l y and a l g e b r a i c a l l y . ) B o t h a l g o r i t h m and program s h o u l d be u p d a t e d s i m u l t a n e o u s l y . V e r y s i m p l e changes a r e sometimes more e a s i l y made m a n u a l l y , b u t t h e s e c a s e s w i l l be i n the m i n o r i t y . TABLE I I NET COST SAVING BY COMPUTERIZATION C o m p u t e r i z a t i o n C o s t " I n i t i a l programming b a s e d on an a l g o r i t h m w i t h d e t a i l e d d o c u m e n t a t i o n ( s u c h as the one p r o p o s e d i n C h a p t e r V) f o r ease of t e s t i n g and v e r i f i c a t i o n : T a sk Time Cost Programming ( p e r s o n n e l t i m e ) 1 month $1000 Computer ( c o s t s i n c u r r e d ) 500 T o t a l : 1500 C o s t S a v i n g due to Reduced P e r s o n n e l Time^ Task Time C o s t F i n a n c i a l a n a l y s t : manual c a l c u l a t i o n 1 month $1000 and c h e c k i n g t i m e s a v e d M a n a g e r s : c h e c k i n g t i m e s a v e d 1 month 1500 T y p i s t s : t y p i n g and c h e c k i n g time s a v e d 2 months 10 00 T o t a l : 3500 L e s s : 1500 Net s a v i n g : $2000 " E s t i m a t e d by the a u t h o r . ^ E s t i m a t e d by LPS' f i n a n c i a l a n a l y s t , T. M. Symes. 5. E l i m i n a t i o n o f T y p i n g P r o b l e m s - When n u m e r i c a l r e p o r t s a r e t y p e d , e r r o r s i n t r a n s c r i p t i o n might be d i f f i c u l t to f i n d and i n c o n s i s t e n c i e s i n f o r m a t d i f f i c u l t to overcome. With c o m p u t e r i z a t i o n , human f a l l i b i l i t y i n t r a n s c r i p t i o n i s a v o i d e d and a l l f i n a n c i a l and i n t e r m e d i a t e s c h e d u l e s can be p r o d u c e d i n s t a n d a r d f o r m a t , a u t o m a t i c a l l y c o n s i s t e n t on each r u n t h r o u g h . M anual t y p i n g may be needed o n l y f o r f i n a l i z e d r e p o r t s r e q u i r e d e x t e r n a l l y . I t i s c o n c e i v a b l e t h a t a manager might d i s l i k e t h e a p p e a r a n c e o f computer o u t p u t , b u t c o n f i d e n c e i n t h e new f o r m a t s h o u l d r e s u l t f r o m f a m i l i a r i t y and a p p r e -c i a t i o n o f c o m p u t e r i z a t i o n b e n e f i t s . 6. Use by V a r i o u s P e r s o n n e l . E d u c a t i o n o f p e r s o n n e l i n u s i n g t h e computer program a t an o n - p r e m i s e s t e r m i n a l w i l l be f a s t e r t h a n e d u c a t i o n i n u s i n g the manual model. In b o t h c a s e s , meaning o f i n p u t v a r i a b l e s must be u n d e r s t o o d . I n the c a s e o f t h e manual model, model f o r m u l a e must be u n d e r s t o o d and c a l c u l a t i o n and c h e c k i n g t i m e can t a k e s e v e r a l h o u r s or days . 7. Model C r u d e n e s s . I t i s p o s s i b l e t h a t management might f e e l t h e e x i s t i n g model i s too c r u d e to j u s t i f y computer-i z a t i o n . However, the model i s complex enough t h a t f o l l o w i n g i t t h r o u g h m a n u a l l y to make a l t e r a t i o n s o r c a l c u l a t i o n s i s a v e r y monotonous and e r r o r - p r o n e p r o c e s s . 8. U n c e r t a i n t y o f C o m p u t e r i z a t i o n S t e p . Management may be r e l u c t a n t to c o m p u t e r i z e b e c a u s e o f t h e u n c e r t a i n t y i n h e r e n t i n s y s t e m change. T h i s i s t h e m a j o r drawback to c o m p u t e r i z a t i o n . I t i s c o n c l u d e d by the a u t h o r t h a t model c o m p u t e r i z a t i o n i s j u s t i f i e d s u f f i c i e n t l y , a s s u p p o r t e d b y t h e p o i n t s p r e s e n t e d a b o v e , t o o f f s e t t h e u n c e r t a i n t y o f c h a n g e . B. I m p l i c a t i o n s o f C o m p u t e r i z a t i o n I n a d d i t i o n t o t h e a d v a n t a g e s a n d d i s a d v a n t a g e s c o v e r e d i n .the p r e v i o u s s e c t i o n , s e v e r a l i m p l i c a t i o n s o f c o m p u t e r i -z a t i o n s h o u l d b e c o n s i d e r e d . 1. O r g a n i z a t i o n a l F a c t o r s . I f m o d e l c o m p u t e r i z a t i o n i s p e r f o r m e d b y p r e s e n t o r n e w l y - h i r e d c o m p a n y p e r s o n n e l , t h i s w o r k c o u l d f o r m a b a s e o f e x p e r i e n c e f r o m w h i c h a m a n a g e m e n t i n f o r m a t i o n s y s t e m s d e p a r t m e n t c o u l d b e f o r m e d . A l s o , p e r s o n s f r e e d o f m o n o t o n o u s m a n u a l c a l c u l a t i o n s h o u l d b e a b l e t o d e v o t e m o r e t i m e t o a n a l y s i s o f t h e f i n a n c i a l s t a t e m e n t s a n d t h o u g h t t o w a r d i n n o v a t i o n s i n f i n a n c i a l m a n a g e m e n t . 2. S y s t e m s A n a l y s i s . I n c o m p u t e r i z i n g f r o m a n a l g o -r i t h m s u c h a s t h e o n e d o c u m e n t e d i n C h a p t e r V, t h e c o m p a n y c a n t a k e a d v a n t a g e o f t h e a l g o r i t h m ' s s t r e a m l i n i n g , m o d u l a r i t y , a n d s e q u e n t i a l l y e x e c u t a b l e d e s i g n . 3. M o d e l F o r m a l i z a t i o n . E x p r e s s i o n o f t h e m o d e l ' s r e l a t i o n s h i p s i n a s e r i e s o f v e r y s p e c i f i c a l g e b r a i c f o r m u l a e , w i t h s u p p o r t i n g d o c u m e n t a t i o n , m i g h t n o t h a v e b e e n i n i t i a t e d w e r e i t n o t f o r t h e m o t i v a t i o n o f f u t u r e c o m p u t e r i z a t i o n . T h e a b o v e i m p l i c a t i o n s a r e a l l b e n e f i t s w h i c h a c c o m p a n y t h e c o m p u t e r i z a t i o n p r o c e s s . C. D i f f i c u l t i e s E n c o u n t e r e d D u r i n g t h e A n a l y s i s P h a s e Some d i f f i c u l t i e s w e r e e n c o u n t e r e d d u r i n g t h e p r o c e s s o f s o l v i n g t h e c o m p u t e r i z a t i o n p r o b l e m . I t w a s i n i t i a l l y t h e i n t e n t i o n o f t h e a u t h o r t h a t t h e c o m p u t e r i z a t i o n a l g o r i t h m c o u l d be d e s i g n e d i n an e x t r e m e l y g e n e r a l i z e d f o r m . T h i s would have meant t h a t t h e a l g o r i t h m c o u l d be u s e d f o r l o n g range f i n a n c i a l p l a n n i n g by o t h e r c o m p a n i e s . However, i t was f o u n d t h a t t h e m a j o r i t y o f t h e model's v a r i a b l e s and r e l a t i o n s h i p s d e s c r i b e d c o r p o r a t e f u n c t i o n s and market c l a s s i f i c a t i o n s w h i c h would n o t be d u p l i c a t e d , o r even a p p r o x i m a t e d , by a n o t h e r company. On l y th e p o r t i o n o f the model d e a l i n g w i t h the f i n a n c i a l s t a t e m e n t s d e s c r i b e s g e n e r a l l y a c c e p t e d v a r i a b l e s and r e l a t i o n s h i p s . T h e r e f o r e , a g e n e r a l i z e d a l g o r i t h m was Q n o t d e s i g n e d . One d i f f i c u l t y o f the a n a l y s i s phase can be c o n s i d e r e d o f b e n e f i t i n t h e c o m p u t e r i z a t i o n p h a s e . T h i s i s t h e f a c t t h a t t h e company f e l t changes i n t h e model were not y e t n e e d e d . T h e r e f o r e , p o t e n t i a l changes a r e p r o p o s e d a t t h e end 9 o f C h a p t e r I I I but n o t i n c o r p o r a t e d i n t o t h e a l g o r i t h m . T h i s means t h a t t h e o u t p u t a f t e r c o m p u t e r i z a t i o n can be compared d i r e c t l y to the manual model to v e r i f y t h a t the a l g o r i t h m and computer program a r e c o r r e c t . The a l g o r i t h m i m p r o v e s on the model i n ways o t h e r t h a n s o p h i s t i c a t i o n , as d e s c r i b e d i n C h a p t e r V, S e c t i o n B. Q °The p r i c e o f g e n e r a l i z a t i o n i s h i g h : the computer program must p r o v i d e c a p a c i t y f o r t h e maximum number o f v a r i a b l e s d e s i r e d by any u s e r ; t h e p r o g ram must c o n t a i n formu-l a e f o r a l l r e l a t i o n s h i p s p o s s i b l y needed; p r o g r a m i n p u t s p e c i f i c a t i o n s must i n c l u d e o p t i o n s f o r r e l a t i o n s h i p s needed; and a v a r i e t y o f o u t p u t s c h e d u l e s must be p r o v i d e d f o r i n the p r o g r am and r e q u e s t e d i n t h e i n p u t s p e c i f i c a t i o n s . ^ T h i s company's l o n g range f i n a n c i a l p l a n n i n g model i s "as s i m p l e as p o s s i b l e and as complex as n e c e s s a r y . " (The s o u r c e o f t h i s q u o t a t i o n i s unknown.) During the analysis phase, some errors were discovered and corrected , with the help of the company's f i n a n c i a l analyst . At some places in the model, i t was d i f f i c u l t to determine exactly how a var iable was derived. The help of company personnel was needed to obtain formalized de f in i t ions of a l l the var iables and re la t ionships between var iab le s . In summary, i t was d i f f i c u l t at f i r s t to define the prob-lem to be solved in this study. The so lut ion could be attempted once the problem was defined as the computerization of a p a r t i c u l a r company's long range f i n a n c i a l planning model. CHAPTER V THE ALGORITHM -A. M o d e l - t o - A l g o r i t h m M e t h o d o l o g y The c e n t r a l document n e c e s s a r y f o r c o m p u t e r i z a t i o n i s the a l g o r i t h m , w h i c h i s a s e t o f f o r m u l a e d e s c r i b i n g t h e . d a t a t r a n s f o r m a t i o n s i n the model. I t was d e s i g n e d w i t h t h e g o a l i n mind o f b e i n g c o n v e r t i b l e i n t o a computer program w i t h a minimum o f e d u c a t i o n time f o r t h e programmer. The a l g o r i t h m was w r i t t e n w i t h r e f e r e n c e p r i m a r i l y to the l o n g r a n g e f i n a n c i a l p l a n n i n g model document and, s e c o n d -a r i l y , to f l o w d i a g r a m s drawn up to h e l p p i c t u r e v a r i a b l e r e l a t i o n s h i p s i n m o d u l a r f o r m . In s e v e r a l i n s t a n c e s , r e l a t i o n -s h i p s were s t r e a m l i n e d , and t h e numbers o f v a r i a b l e s and t a b l e s to be p r i n t e d out were r e d u c e d . T h e r e f o r e , computer o u t p u t s c h e d u l e s w i l l not be i d e n t i c a l to model s c h e d u l e s , but w i l l p r o v i d e s u f f i c i e n t i n f o r m a t i o n to e n a b l e v e r i f i c a t i o n o f the c o r r e c t n e s s o f the d a t a t r a n s f o r m a t i o n s . B. A l g o r i t h m F e a t u r e s The f o l l o w i n g a l g o r i t h m f e a t u r e s a r e t h e r e s u l t s o f t h e r i g o r o u s model r e - d e f i n i t i o n w h i c h i s t h e r e s u l t o f i n f o r m a t i o n s y s tems a n a l y s i s f o r c o m p u t e r i z a t i o n p u r p o s e s . 1. P r e c i s i o n . The model r e l a t i o n s h i p s a r e e x p r e s s e d i n p r e c i s e f o r m u l a e w h i c h can be e a s i l y r e f e r r e d to o r a l t e r e d . 2. Modulari ty . The model i s separated into discrete sect ions , or modules, which can be ea s i ly referred to or a l -tered. 3. Sequent ia l i ty . Calculat ions appear in the sequence in which they are performed, making i t more obvious which variables affect other var i ab le s . 4. Variable Names. Variables are given mnemonic names and e x p l i c i t d e f i n i t i o n s , preventing confusion as to ident i ty of va r i ab le s . 5. Exogeneous and Endogeneous Var iab les . Variables are separated into exogeneous (external) and endogeneous ( internal ) va r i ab le s , thus d i s t ingui sh ing between environ-mental parameters, which .must be quanti f ied by the model user, and model parameters, which are quanti f ied within the model. 6. Routines. Commonly used sets of c a l c u l a t i o n s , re-ferred to here as " r o u t i n e s , " are not repeated within the algo-r i thm, but are merely referenced where needed. Routines are separated from the rest of the algorithm, and, as program subroutines, can be a l tered at less computer expense. C. Algorithm and A n c i l l a r y Documents This sect ion contains introductory remarks on the documents which define the algorithm, followed by the docu-ments themselves. 1. Algorithm Formulation. The modules of the algorithm are ca l l ed "Sec t ions , " l abe l l ed A to Q, and are preceded by the Prel iminary Sect ion. These sections are shown i n flow chart form in "Figure 2 on page 29 • The var iables used in each s e c t i o n a r e c l a s s i f i e d a t t h e b e g i n n i n g o f e ach s e c t i o n i n t o Exogeneous V a r i a b l e s R e q u i r e d , Endogeneous V a r i a b l e s R e q u i r e d , V a r i a b l e s Used E l s e w h e r e , and O t h e r V a r i a b l e s Used. Exogeneous v a r i a b l e s a r e g i v e n i n t h e i n p u t (Document 5 ) ; endogeneous v a r i a b l e s a r e d e r i v e d w i t h i n t h e a l g o r i t h m . The s e c t i o n o f o r i g i n o f e ach endogeneous v a r i a b l e r e q u i r e d and the s e c t i o n o f d e s t i n a t i o n o f each v a r i a b l e used e l s e w h e r e a p p e a r i n p a r e n -t h e s e s a f t e r the v a r i a b l e name. The f o r m u l a e i n each s e c t i o n a r e to be e x e c u t e d s e q u e n t i a l l y and a r e p r e c e d e d by a d e s c r i p -t i o n i n E n g l i s h . The s e c t i o n s t h e m s e l v e s a r e a l s o to be e x e c u t e d s e q u e n t i a l l y . Each o u t p u t s c h e d u l e i s named a t t h e p o i n t i n t h e s e c t i o n where a l l v a r i a b l e s needed have been d e f i n e d . A l l o u t p u t s c h e d u l e s a r e d e s c r i b e d i n Document 6. C a l c u l a t i o n r o u t i n e s a r e i n Document 2, d e f i n i t i o n o f v a r i a b l e s i n Document 3, and d e f i n i t i o n o f v a r i a b l e s u b s c r i p t s i n Document 4. 2. F o r m u l a t i o n o f R o u t i n e s . R o u t i n e s a r e s e t s o f c a l c u -l a t i o n s employed i n v a r i o u s s e c t i o n s o f t h e a l g o r i t h m . 3. D i c t i o n a r y o f V a r i a b l e s . T h i s i s an a l p h a b e t i c l i s t o f t h e mnemonic v a r i a b l e s y m b o l s , o r v a r i a b l e names, and t h e i r m e a n i n g s . Where a v a r i a b l e i s an " a r r a y , " t h a t i s , a s e t o f v a r i a b l e s h a v i n g the same name and same g e n e r a l meaning, the v a r i a b l e ' s s u b s c r i p t r a n g e i s g i v e n . The a l g o r i t h m s e c t i o n i n w h i c h a v a r i a b l e i s d e f i n e d i s shown w i t h a s l a s h (/) r e f e r r i n g vt,o t h e i n p u t d a t a o r P r e l i m i n a r y S e c t i o n . Where the members o f an a r r a y a r e n o t a l l d e f i n e d i n the same a l g o r i t h m s e c t i o n , the s u b s c r i p t v a l u e s a r e shown i n p a r e n t h e s e s a f t e r t h e s e c t i o n i n w h i c h t h e y a r e d e f i n e d . 4. D i c t i o n a r y o f V a r i a b l e S u b s c r i p t s . The meanings a s s i g n e d to i n d i v i d u a l s u b s c r i p t s a r e shown, t o g e t h e r w i t h t h e v a r i a b l e s t a k i n g on t h e s e meanings. 5. I n p u t R e q u i r e d . The i n p u t v a r i a b l e s a r e s e p a r a t e d i n t o t h r e e i n p u t t a b l e s : (1) d e c i m a l f r a c t i o n s and i n t e g e r numbers; (2) d o l l a r f i g u r e s ; and (3) d a t a a r r a y s o v e r t i m e . Based on t h e s e t a b l e s , s o p h i s t i c a t i o n can be u n d e r t a k e n to d i v i d them a c c o r d i n g to t h e p e r s o n r e s p o n s i b l e f o r s u b m i t t i n g the i n p u t d a t a . T h i s d i v i s i o n can be r e w o r k e d whenever management r e s p o n s i b i l i t i e s a r e t r a n s f e r r e d f r o m one p e r s o n to a n o t h e r . 6. O u t p u t P r o d u c e d . These o u t p u t s c h e d u l e s a r e s t r e a m -l i n e d w i t h r e l a t i o n to t h o s e i n the Long Range F i n a n c i a l P l a n n i n g M o d e l , and a d a p t e d to the a l g o r i t h m ' s s equence o f o p e r a t i o n s . The s c h e d u l e s a r e d e s c r i b e d i n terms o f t h e v a r i a b l names and s u b s c r i p t s , t h e r a n g e s o v e r w h i c h th e s u b s c r i p t s v a r y , and t h e h e a d i n g s i d e n t i f y i n g the v a r i a b l e s ' meanings w i t h i n t h e c o n t e x t o f t h e t a b l e . These s i x documents a p p e a r below. (START ) [ PRELIMINARY SECTION J, A MARKET FACTORS J/ B LABOUR I C INDIRECT OVERHEAD J, D INDEPENDENT RESEARCH AND INDEPENDENT DEVELOPMENT J, E NEW BUSINESS J, F SERVICE HARDWARE | 1 G FIXED ASSETS H SERVICE HARDWARE DEPRECIATION PER FIELD I I VESSEL RENTAL J, J DIRECT SERVICE OVERHEAD | WARRANTY HARDWARE FOR RESALE | J, M CASH OUTFLOW SERVICE (MUC) N SERVICE REVENUE AND PAY-OUT ANALYSIS 0 OTHER INCOME AND AGGREGATE INCOME STATEMENT 1 P BALANCE SHEET AND CASH FLOW STATEMENT Q INCOME STATEMENT AND BALANCE SHEET WITH BOOK DEPRECIATION END F i g u r e 2 Flow C h a r t o f t h e S e c t i o n s o f t h e A l g o r i t h m Document 1 - Algorithm Formulation P r e l i m i n a r y S e c t i o n Input: A l l v a r i a b l e s (Input Tables 1,2,3) C a l c u l a t i o n s : Number of year. N i = i , i = - l , . . . , T Year. Yi=YZ+i, i = - l , . . . , T Compunding Inputs. 0 I k i = C ( 0 I k i , R I ) , i=0,...,T, k=l,...,3 SCSHki=CBASE(SCSHB k,RI), i=0,. UCSH k i=CBASE(UCSHB k,RI), i=0,. SCWHCki=CBASE(SCWHCBk,RI), i=0 SCHR k i=CBASE(SCHRB k,RI), i=0,. DSOHF k i=CBASE(DSOHFB k,RI), i=0 SS i=CBASE(SSB,RI), i=0,.. . ,T CFii=CBASE(CFB,RI), i=0,...,T S k i=CBASE(SB k,RI), i = - l , . . . , T , k = l, RHi=CBASE(RHB,RI), i=0,...,T OFNFEi=CBASE(OFNFEB,RI), i=0,...,T DUCDi=CBASE(DUCDB,RI), i=0,...,T Wi=CBASE(WBk,RI), i=0,...,T, k=l,.. S e c t i o n Execution: X y k 1 y • • • j 3 T, k=4,...,7 .,T, k=l,2 T, k=2,3 • y T y rC 1 } • > • ,3,3 Execute Sections A, B, C, D, E, F, G, H, I , J , K, L, M, N, 0, P, Q ( i n order, once each). Exogeneous Variables Required: NF ki> k=l,2, NHRj. . , k=l,...,3, 3 = 1,2, NSH^i, k=l,2,4,5, j = l,2, TNSH k i, k=3,6,7,8, Y i } a l l i=0,...,T, T. Endogeneous Variables Required: None. Variables Used Elsewhere: NFY I T(H ,M), NFY 2 T(M), NFC^i, k=l,2(J,N), TNSH1:L.(F,G,N), TNSH 2.(F), TNSH.4i(G), TNSH 5 i(G), TNHR^^(K), TNHR ki, k=2,3(K, L) , a l l i=0,...,T. 1 Other Variables Used: TNSH 2 l-Calcu l a t i o n s : Cumulative number of f i e l d s . NFCk;L=CUM(NFk;L), k=l,2, i=0,...,T Number of f i e l d - y e a r s . NFYki=CUM!(NFCki), k=l,2, i=0,. .. ,T Total numbers of hardware. TNHRki=A.(NHRkji, j = l , 2 ) , k=l,...,3, i=0,...,T TNSH k i=A(NSH kji, j = l , 2 ) , k=l,2,4,5, i=0,...,T Output 1 - Market Exogeneous Variables Required: S k i , k=l,...,6, i=-l,...,T, NE k^, k=l,...,6, i=-l,...,T, RLCA, Y ±, i=0,...,T, T. Endogeneous Variables Required: None. Variables Used Elsewhere: TLi(C,P), TNE-^(C) , TDL ±(C) , LC 1 ; L(C,D), LC 2 i(C,D), L C 3 i ( C , F ) , LC4i(C,N.)., L C 5 i ( C , L ) , L C 6 i ( C ) , a l l i=0,...,T. Other Variables Used: LCB k i,i=0,...,T. Calculations: Labour cost base (100%). LCBki=(S k ixNE k i+Sk,i-lxNE k } i_l)/2, k=l,...,6, i=>0,...,T TNEi=AXNE ki) Labour cost. LCki==RLCAxLCBki Tot a l d i r e c t labour cost. TDLi=A(LC k i, k=l,...,5) T o t a l labour cost. TL j_=TDLl+LC"6 j; -;'' Output 2 - Labour Exogeneous Variables Required: NENF., i=-l,...,T, OFNFE.-, i=0,...,T, DMOF, OFOB, RDOF, RFTTLC, BP i 5 i=0,.^.,T, RATR, RHi, i=0,...,T, ROIOH, Y ±, i=0,...,T, T. Endogeneous Variables Required: TL±(B), TNEi(B), TDL-j_(B), L C k i , k=l,... a l l i=0,...,T. Variables Used Elsewhere: DOFi(G), IOHn(D), IOH 2i(D), IOH 3 i(F), IOH4i(M,N), IOH 5 i(L), a l l i=0,...,T. Other Variables Used: NENFIi, OFl±, F±, OIOHi, ASP i 5 TIOH--, a l l i=0,... Calc u l a t i o n s : Depreciation on o f f i c e f u r n i t u r e as a function of annual increases i n number of non-field employees. NENFIi=INCR(NENFi), i=0,...,T OF'li=OFNFEixNENFIi, i=0,...,T DOFi=D(DMOF,OFOB,OFIi,RDOF), i=0,...,T Output 3 - Depreciation On O f f i c e Furniture Fringe as a percentage of t o t a l labour cost. Fi=RFTTLCxTLi, i=0,...,T Advertising and sales promotion as a function of a rule-of-thumb amount of sales per head. ASPi=RATRxRHixTNEi, i=0,...,T Other i n d i r e c t overhead as a percentage of home labour. OIOH 1=ROIOHx(LCii+LC2i+LC3i+LC6i), i=0,...,T Total i n d i r e c t overhead TIOH^LCei+Fi+BPi+DOFi+ASPi+OIOHi, i=0,. . . ,T Allocated to the corporate functions according to t h e i r d i r e c t labour co IOHki=LCkixTIOHi/TDLi, k=l,...,5, i=0,...,T Output 4 - Indirect Overhead Exogeneous Variables Required: RMTLIR, M 2 i, RIDASH k i, k=l,2,3, RIHAHRki, k=l,2,3, Y i , a l l i=0,...,T, T. Endogeneous Variables Required: LC k^, k=l,2(B), IOH ki, k=l,2(C), a l l i=0,...,T. Variables Used Elsewhere: TIDANB ±(E), TC 1 : L(E), IDASH k i, k=l,. ..,3 (F) , TIDAHR^(L), M 1 ± ( P ) , TIDASH^CN), a l l i=0,...,T. Other Variables Used: TC2i, IDAHR k i, k=l,...,3, a l l i=0,...,T. Calc u l a t i o n s : I. R. materials as a percentage of labour cost. M^RMTLIRxLCii, i=0,... ,T Total cost of I. R. and I. D. as the sum of materials, labour, and i n d i r e c t overhead.• T C k i = M k l + L C k i + I O H k l , k=l,2, i=0,...,T I. D. a l l o c a t i o n to service hardware according to percentages inputted. IDASH k i=RIDASH k lxTC 2 i, k=l,...,3, i=0,...,T TIDASHi=A(IDASH k l, k=l,...,3), i=0,...,T I. D. a l l o c a t i o n to hardware for resale according to percentages inputted. IDAHR k i=RIDAHR k ixTC 2 i, k=l,...,3, i=0,...,T TIDAHR-j=A(IDAHRki, k= 1,. .. ,3) I. D. a l l o c a t i o n (balance remaining) to new business. TIDANBi=TC 2 i-TIDASH i-TIDAHRi, i=0,...,T Output 5 - Independent Research And Independent Development Exogeneous Variables Required: NYNPID, NYNPP, NTNBP, RNBSCR, RR, RT, ONE, Y i 5 i=0,...,T,T. Endogeneous Variables Required: TC 1 : i(D), TIDANBjiCD), both i=0,...,T. Variables Used Elsewhere: R3 i(0), COS 3 ±(0), both i=0,...,T. Other Variables Used: NBA^, j = l,...,n+l, TPNBi, COSST 3 i, PBT 3 ±, F T 3 i , NP 3 i, a l l i=0,...,T, PVNBi, NBAPi, both i=0,...,T-n-l. Calculations: Each year of Independent Research y i e l d s n years of Independent Development and m years of p r o f i t . n=NYNPID m=NYNPP New business a l l o c a t i o n NBA^ i s the I. R. cost i n year i . NBA u=TCii, i=0,. . . ,T I. D. costs a l l o c a t e d to new business i n year i , TIDANB^, are divided into NBA21,..., NBA n+l si according to I. R. investments NBA^ ±-±,...,NBAi i - n -NBAj -L=NBAI } i-j+ixTIDANB^/A(NBAi k, k=i-n*,. . . , i - l ) , j=2,!..,n+l *or k=0 i f i i s less than n The cost of the projects researched i n year i i s equal to the sum of NBA^ --, NBA 2 ) 1+1, up to NBA n+l, n+l. PVNB±=A(PV(NBAj,RR,m), j=1,...,n+1), i=0,...,T-n-l NBAPi i s the annual p r o f i t which w i l l s t a r t coming i n the year a f t e r the stream of one year of I. R. i n year i and n years of I. D. NBAPi i-s t n e same every year f o r m years and i t produces the firm's required rate of r e -turn with respect to the present value of the expenditures (the NBA's). NBAP^PVNBi/ACPVCONEjRRJ), j =i+n+l,. .. , i+n+m) , i=0,. .. ,T-n-l The t o t a l p r o f i t from new business investment i n each year i s the sum of the annual p r o f i t s from the research and development streams ended within the l a s t m yars. TPNB±=0 TPNBi=A('NBAPk, k=i-n-l,. .., i-n-m) Revenue i s a multiple of p r o f i t generated from investment. R3i=NTNBPxTPNBi Cost of sales as a percentage of sales revenue. COSST3i=RNBSCRxR3i Other income statement c a l c u l a t i o n s . COS 3 i=COSST 3 i+TCi i+TIDANB i PBT 3 i=R 3i-COS 3 i FT 3i=RTxPBT 3i NP 3 i=PBT 3 l-FT 3 i Exogeneous Variables Required: TNSH k i, k=3,8, SCSH k l, k=l,...,3, Y ±, a l l i=0,...,T, T. Endogeneous Variables Required: LC-.CB), IOH 3 i(C), TNSHii(A), TNSH2i(A), IDASH k l, k=l,...,3(D), a l l i=0,...,T7 Variables Used Elsewhere: UCSHBk, k=l,2(G), UCSHB3(G,M), TNMIS±(G,N), M 3 i ( P ) , both i=0,...,T, TNMISS(H). Other Variables Used: MCSH k i, k=l,...,3, MCSHDki, k=l,...,3, LCDi, IOHD^, IDASHD k i, k=l,...,3, TNSHSk, k=l,3, a l l i=0,...,T, MCSHSk, k=l,...,3, MS3, LCS3, IOHS3, LCA3 k, k=l,...,3, IOHA 3 k, k=l,...,3, IDASHS3 k, k=l,...,3, TCSH k, k=l,...,3. Calculations: Total number of MUCs including spares. TNMISi=TNSH2i+TNSH8i, i=0,...,T Ma t e r i a l cost f or service hardware. MCSH k i=SCSH k ixTNSH k i, k=l,3, i=0,...,T MCSH 2 1=SCSH2ixTNMIS i, i=0,...,T "De-compounded" or "discounted" material cost summed over time forms basis f or a l l o c a t i o n of other costs to service hardware items. MCSHDki=PV(MCSHfe".';Ri;i):;-i==0,. .;,T, k=l,. .. ,3 LCDi=PV(LC3i,RI,i), i=0,...,T IDASHD ki=PV(IDASH k i,RI,i), i=0,...,T, k=l,...,3 MCSHSk=A(MCSHDki,k=l,...,3), i=0,...,T Discounted material costs f o r a l l service hardware, summed. MS3=A(MCSHSk, k=l,...,3) T o t a l number of service hardware items summed over time. TNSHS k=A(TNSH k ±, i=0,...,T), k=l,3 TNMISS=A(TNMIS1, i=0,...,T) Discounted labour costs summed over time. LCS 3=A(LCD i, i=0,...,T) Discounted i n d i r e c t overhead summed over time. IOHS3=A(IOHDi, i=0,...,T) A l l o c a t i o n of costs to service hardware. LCA 3 =MCSHSkxLCS3/MS3, k=l,...,3 IOHA^ =MCSHSkxIOHS3/MS3, k=l,...,3 IDASH5 3 k=A(IDASHD k i, i=0,...,T), k=l,...,3 TCSH k=MCSHS k+LCA 3 k+IOHA 3 k+IDASHS 3 k, k=l,...,3 Unit cost of service hardware items. UCSHBk=TCSHk/TNSHSk, k=l,3 UCSHB2=TCSH2/TNMISS Exogeneous Variables Required: UCSHk^, k=4,...,7, 0B k, k=l,...,7, TNSHk^, k=3,6,7, DMSHk, RDSHk, both k=l,...,7, RRS, Y ±, a l l i=0,...,T, T. Endogeneous Variables Required: UCSHBk, k=l,...,3(F), TNMIS i 5 i=0,...,T(F), TNSH k i, k=l,4,5, i=0,...,T(A), DOF±, i=0,...,T(C). Variables Used Elsewhere: FAI j L(P,Q), TD i(P,Q), SD i(N), a l l i=0,...,T. Other Variables Used: UCSH k i, k=l,...,3, DSH k i, k=l,...,7, SHI k i, k=l,..., 7, RSC k i, a l l i=0,...,T. Calc u l a t i o n s : Service Hardware increase (fixed assets acquired). UCSHki=C(UCSHBk), i=0,...,T, k=l,...,3 SHl2i=TNMISixUCSH2i, i=0,...,T SHI ki=TNSH kixUCSH k i, i=0,...,T, k=l,3,4,5,6,7 Fixed assets increase FAIi=A(SHI k i,k=l,...,7), i=0,...,T Depreciation on service hardware assets. DSHki=D(DMSHk, 0B k, SHI k i, RDSH }), i=0,...,T, k=l,...,5 DSHki=DR(DMSHk, 0B k, SHI k l, RDSHk, RRS, RSC k i ) , i=0,...,T, k=6,7 SDi=A(DSHki, k=l,.'. .,7), i=0,...,T Tot a l depreciation including depreciation on o f f i c e f u r n i t u r e . TDi=SDi+D0Fi Output 8 - Fixed Assets Exogeneous Variables Required: NYCR, NSSUS, UCSHB7, RT, RU k, k=l,...,3, U C S H5,NYCR+1> DMSHk, k=2,3,5,7, RDSHk=2,3,5,7, RDPF, Y ±, i=0,...,T, T. Endogeneous Variables Required: NFY l T(A), UCSH2 ,o( G)> TNMISS(F). Variables Used Elsewhere: RSF k ±, k=l,...,3(M), TDF k i, k=l,...,3(M), both i=0,...,T, UCC(M). Other Variables Used: RSB, D F k j i 5 k=l,...,3, j=l,...,3, DCi, OBC, CVi, OBR, RVi, OBSSE, SSEVi, OBS, SV i 9 a l l i=0,...,T. Calc u l a t i o n s : n=NYCR While non-U.S. f i e l d s have one set of spares per f i e l d , the cost of spares replenishment per U.S. f i e l d i s determined by a l l o c a t i n g t o t a l cost accor-ding to the number of spares (MUC) shared f o r a l l U.S. f i e l d years. RSB=NSSUSx(UCSHB7+RTxRU].xUCSHB7)/NFYlT RSFi i=C(RSBi), i=0,...,T Depreciation on spares per U.S. f i e l d . D F1,3,0 = N S S U S x(RTXRUIXUCSHB7)/NFYi T  D F 1 ^ 3 ' i = C ( D F l , 3 , 0 ) , i =0,...,T Cost of spare capsule i s included i n determining unit cost of capsule. UCC=UC SH2,oxTNMISS/TNSHS2 Depreciation on capsule, not including refurbishment. OBC=0 CVi=0, i=0,...,T CV]=UCC DCi=D(DMSH2,0BC,CVi,RDSH2), i=0,...,T Depreciation on refurbishment of capsule. OBR=0 RV-i=0, i=0,...,T RV n + 1=UCSH5 5 n +i DR-[=D(DMSH5,OBR,RVj[,RDSH5) , i=0,. .. ,T Depreciation on capsule and refurbishment i s same for U.S. and non-U.S., f u l l and p a r t i a l . DF kli=DRi+DCi, k=l,...,3, i=0,...,T Depreciation on SSE. OBSSE=0 SSEV±=0, i=0,...,T SSEVi=UCSH 3 j 0 DFl,2,i=D(DMSH3,OBSSE,SSEVi,RDSH3), i=0,...,T DFk!2'i=DFl,2,i, k=2,3 Depreciation on spares OBS=0 SV-j=0, i=0,...,T SVi=UCSH7 DF 2 3 i=DR(DMSH7,OBS,SVi,RDSH7,RU2, R S F 2 i ) , i=0,...,T DF3|3'i=DR(DMSH7,OBS,SV1,RDPF,RU3,RSF3i), i=0,...,T Total depreciation on each type of f i e l d . TDF k i=A(DFkji, j = l , . . . , 3 ) , k=l,...,3, i=0,...,T Output 9 - Service Hardware Depreciation Per F i e l d Exogeneous Variables Required: V, DMV, RDV, RT, RR, T, Y ±, i=0 ,...,T. Endogeneous Variables Required: None. Variables Used Elsewhere: AVR(J,M)-. Other Variables Used: V I i } DVis VTS i 5 PWTSi, i=0,...,T, OBV, DVS, PVVTSS, PVVR, VSV. Calculations: Depreciation on vessel (purchased at beginning of year 1 ) . OBV=0 Vli=0, i=0,...,T VI]=V DVi=D(DMV,OBV,VIi,RDV), i=0,...,T DVS=A(DVi, i=0,...,T) Tax saving due to vessel depreciation. VTS±=RTxDVi, i=0,..,,T Present value of vessel tax saving. PWTSi=PV(VTSi,RR,i), i=0,...,T PVVTSS=A(PWTSi, i=0,...,T) Vessel salvage value. • '• VSV=(V-DVS)/(1+RR)T Present value of vessel rental i s equal to cost less tax saving and salvage value. PWR=V-PVVTSS-VSV Annual vessel rental. AVR=PVVR/A((1+RR)_1, i=0,...,T) Output 10 - Vessel Rental Exogeneous Variables Required: T, DSOHF k :«, k=l,...,3, NFk:-, k=l,2, Y.-, i=0,...,T, RPF, RFYS. Endogeneous Variables Required: AVR(I), NFCki, k=l,2, i=0,...,T(A). Variables Used Elsewhere: TDSOHl5 i=0,...,T(N). Other Variables Used: ADSFki, k=l,2, DSOH k i, k=l,2, DSOHST kji, k=l,2, 3=1,2, i=0,...,T. Calculations: Average d i r e c t service overhead per f i e l d - includes v e s s e l r e n t a l and other items. ADSFii=AVR+DSOHFli, i=0,...,T. ADSF2i=(l-RPF)x(AVR+DS0HF2i)+RPFxDS0HF3i, i=0,...,T. Dir e c t service overhead subtotal f o r f i r s t years of f i e l d s . DSOHSTkii=NFkixRFYSxADSFk, k=l,2, i=0,...,T Dir e c t service overhead subtotal for other years of f i e l d s . DS0HSTk2i=X'NFCki-NFki)xADSFk, k=l,2, i=0,...,T T o t a l d i r e c t service; overhead. DSOH ki=A(DSOHST kji,j=l,2) TDSOHi=A(DSOHki, k = = 1> 2) Output 11 - Direct Service Overhead Exogeneous Variables Required: W ki, k=l,...,3, T, Y-^ , i=0,...,T. Endogeneous Variables Required: TNHR ki, k=l,...,3, i=0,...,T(A). Variables Used Elsewhere: TWj., i=0,..,,T(L). Other Variables Used: WCk-£, k=l,...,3, i=0,...,T. Calc u l a t i o n s : Cost of warranties i s derived from numbers of items of hardware f o r res a l e . WCkl=WkixTNHRki, k=l,...,3, i=0,...,T TWi=A(WCki,k=l,...,3) Output 12 - Warranty Exogeneous Variables Required: T,: RR, RT, NWHCki, SCWHCki, k=l,2, SCHR ki, lc 253 j J l 0j • • • )Tt Endogeneous Variables Required: TNHRkl, k=2,3(A), LC5i(B), I0H5i(C), TIDAHRi(D), TWi(K), i=0,...,T. Variables Used Elsewhere: M 5 i ( P ) , R2i(0), COS 2 i(0), i=0,...,T. Other Variables Used: HRC ki, HRCSk, LCAHRk, IOHAHRk, IDHRk, TWAHRk, TCHRk, NWHCSk, k=l,2, TNHRSk, k=2,3, UC k, UPBTk, UT k, UP k, USPB k, USP k l, R P k i , k=l,...,4, COSST 2i, P B T 2 i , F T 2 i , NP 2 i, i=0,:. ,T, MS5, LCS5, IOHS5, TIDHRS, TWS. Calcu l a t i o n s : Subcontract cost of hardware f o r resale (H. R.). HRCkl=NWHCkixSCWHCki, k=1,2, i=0,...,T HRC ki=TNHR k_l sixSCHR k_i 9i, k=3,4, i=0,...,T Subcontract costs become a cost of sales subtotal. COSST 2i=A(HRC ki, k=l,...,4), i=0,...,T Cost of sales of H. R. COS2i=COSST2i+LC5i+IOH5i+TIDAHRi+TWi, i=0,...,T Subcontract costs, summed for each H. R. item. HRCS k=A(HRC k i,i=0,...,T), k=l,...,4 MS 5=A(M 5 i, i=0,...,T) Other costs, summed for a l l H. R. items. LCS5=A(LC5i, i=0,...,T) I0HS5=A(I0H 5 i,,i=0,...,T) TIDHRS=A(TIDAHRi, i=0,...,T) TWS=A(TW±, i=0,...,T) A l l o c a t i o n of costs to H. R. items i n proportion to subcontract costs. LCAHRk=HRCSkxLCS5/MS5, k=l,...,4 IOHAHRk=HRCSkxIOHS5/MS5, k=l,...,4 IDHRk=HRCSkxTIDHRS/MS5, k=l,...,4 TWAHRk=HRCSkxTWS/MS5, k=l,...,4 Total cost of H. R. items. TCHRk=HRCSk+LCAHRk+IOHAHRk+IDHRk+TWAHRk, k=l,...,4 Unit cost of H. R. items. NWHCSk=A(NWHCki, i=0,...,T), k=l,2 TNHRSk=A(TNHRk., i=0,...,T), k=2,3 UCk=TCHRk/NWHCSk, k=l,2 UCk=TCHRk/TNHRSk_i, k=3,4 UPBTk=(UCkxRR)/(1-RR-RT), k=l,...,4 UTk=RTxUPBTk, k=l,...,4, UPk=UPBTk-UTk," k=l,...,4 Unit s e l l i n g p r i c e (base) f o r H. R. items. USPBk=UCk+UTk+UPk, k=l,...,4 Output 13 - Hardware f o r Resale Revenue from each H. R. item as a function of un i t p r i c e and number of items produced. USP ki=CBASE(USPB k), k=l,...,4, i=0,...,T RP k i=USP k ixNWHC k i, k=1,2, i=0,...,T RP k i=USP k ixTNHR k_l }i, k=3,4, i=0,...,T Tot a l revenue from H. R. R2i=A(RP k i, k=l,...,4), i=0,...,T Other income statement c a l c u l a t i o n s . PBT2i=R2i-C0S2i, i=0,...,T FT 2i=RTxPBT 2i, i=0,...,T NP 2i=PBT 2i-FT2i, i=0,...,T Output 14 - H. R. Income Statement Exogeneous Variables Required: T, NYCR, UCSH 5 i, RR, RPF, RPFITF, AVR, C F i i , SSi, DSOHFfci, k=l,...,3, Y i , i=0,...,T. Endogeneous Variables Required: UCC.(H) , UCSHB3(F), RSF k i, k=l,. .. ,3(H) , NFYi T(A), NFYi T(A), N F Y 2 t ( A ) , IOH 4 i(C), AVR(I), TDF k i, k=l,...,3(H), i=0,...,T. Variables Used Elsewhere: PVCFS k(N), PVTDFS k(N), PVTIFS k(N), k=l,...,3, TCFii(N), TDFH(N), i=0,...,T. Other Variables Used: I C k i , I S S E k i , T I F k i , PVTIF k i, IOHF k i, PVCF k i, PVTDF ki, a l l k=l,...,3, TCF k i, C F k ± , VR±, a l l i=0,...,T, IOHFBk, k=l,...,3, NPF, NFF, IOHS4. Calculations: n=NYCR Investment i n capsule and refurbishment. IC k i=0, i=l,...,T, k=l,...,3 IC k 0=UCC, k=l,...,3 ICk,n+l=UCSH 5 j t t fi, k=l,...,3 Investment i n SSE. ISSE k l=0, i=l,...,T, k=l,...,3 ISSEkQ=UCSHB3, k=l,...,3 Total investment per f i e l d . TIFii=ICii+ISSEii+RSFli, i=l,...,T TIF ki=IC ki+ISSE ki+RSFki, k=2,3, i=l,...,T Present value of t o t a l investment per f i e l d . PVTIF ki=PV(TIF ki,RR,T), i=0,...,T, k=l,...,3 PVTIFS k=A(PVTIF k i, i=0,...,T), k=l,...,3 Number of p a r t i a l f i e l d s . NPF=RPFxNFY2T Number of f u l l f i e l d s ( a l l U.S. f i e l d s are f u l l f i e l d s ) . NFF=NFY1x+NFY2T-NPF The i n d i r e c t overhead costs of a p a r t i a l f i e l d are a c e r t a i n ratio^'of that of a f u l l f i e l d . I0HS4=A(I0H4-:, i=0,...,T) I0HFB1=I0HS4/(NFF+RPFITFxNPF) I0HFB2=RPFITFxI0HFB1 I0HF k ±=CBASE(I0HFB k,T), k=l,...,3, i=0,...,T Other costs of service to a f i e l d include v e s s e l r e n t a l , crew, shore support. VRi=AVR, i=0,...,T CF2i=CFii, i=0,...,T TCF k i=SSi+CFki+DSOHF ki+IOHFki+VRi, k=l,2, i=0,...,T P a r t i a l f i e l d s bear no shore support or vessel r e n t a l costs. CF3i=RPFITFxCFli, i=0,...,T TCF31=CF3i+DSOHF3i+IOHF3;L, i=0,. . . ,T Present value. PVCF k i=PV(TCF k i,RR,T), 1=0,...,T PVCF k 0=0 PVCFS k=A(PVCF k i, i=0,...,T), k=l,...,3 Service hardware depreciation over f i e l d was calculated i n a previous section. PVTDF k i=PV(TDF k i,RR,i), i=0,...,T, k=l,...,3 PVTDF k 0=0 PVTDFS k=A(PVTDF k i, i=0,...,T), k=l,...,3 Output 15 - Cash Outflow Service (MUC) Section N - Service Revenue and Pay-Out Analysis Exogeneous Variables Required: T, RR, TNSH 3 i, Y i } i=0,...,T, RPF, NYSC, NFki, k=l,2, i=l,...,T, RFYSRF, RFYSR, RT, DUCDi5 i=l,...,T, NFDD. Endogeneous Variables Required: PVCFS k(M), PVTDFS k(M), PVTIFS k(M), k=l,...,3, NFC k i, k=l,2(A), TCFn(M), TDFn(M), a l l i=l,...,T, L C 4 i ( B ) , IOH 4 i(C), TDSOHi(J), TIDASH ±(D), SD.- (G), a l l i=0,...,T, TNMIS-- (F), T N S H H (A), i=0,...,T. Variables Used Elsewhere: R i i ( O ) , C O S ^ O ) , both i=0,...,T. Other Variables Used: ONE, PVOS, ARF k, ARFDk, both k=l,...,3, ARFAk, k=l,2, RFM k i, RFMDki, SRFYki, SROYkl, a l l k=l,2, TR ±, Di, ?±, PC l 5 PVP±, a l l i = l , ...,T, PVPS, COSSTn, TIDSHS, AID.-, PBT 1 ; L, F T n , NP l i 5 a l l i=0,...,T. Calc u l a t i o n s : Annual revenue per f i e l d (MUC) averaged over l i f e of contract. 0NE=1 PVOS=A(PV(ONE,RR,i), i=l,...,T) ARF k=((l-RT)xPVCFS k-RTxPVTDFS k+PVTIFS k)/((l-RT)xPVOS), k=l,...,3 Annual revenue per f i e l d per day based on 365 days. ARFDk=ARFk/365 Annual revenue per f i e l d per year - average for U. S. f i e l d s . ARFA]=ARFi Annual revenue per f i e l d - average f o r non-U.S. f i e l d s . ARFA2=RPFxARF 2+(1-RPF)xARF 3 Revenue i s l e v e l f o r a c e r t a i n number of years, i s incremented, and then i s l e v e l f o r the same number of years, and so on. n=NYSC RFMki=ARFAk, k=l,2 RFM k j h x n + i=RFM k l(l+RI)2h ) k=l,2, h=0,...,NCRI, i = l , . . . , n Revenue per f i e l d (MUC) per day based on 365 days. RFMDki=RFMki/365, i=l,...,T Service revenue, f i r s t year of a f i e l d i s a c e r t a i n portion of revenue for other years, and i s a d i f f e r e n t portion i n the case of the f i r s t f i e l d s i n year 1. SRFY k l=RFYSRFxNF k lxRFM k i, k=l,2 SRFY k i=RFYSRxNF k ixRFM k i, k=l,2, i=2,...,T SROY k i=(NFC k i-NF k i)xRFM k i, k=l,2, 1=1,...,T To t a l revenue from a l l f i e l d s . TR i=A(SRFY k i+SROY ki, k=l,2), i=l,...,T Discount on DUC r e n t a l begins i n a c e r t a i n year and i s a function of the number of DUC f i e l d s . Di=0, i=l,...,NYBDD-1 Di=DUCDiXNFDD, i=NYBDD,...,T Net revenue a f t e r discount. R l i = T R i - D i > i=l,...,T Ri,o=o Pay-out analysis of the net cash flow a f t e r tax for a U.S. f i e l d . P i=(l-RT)x(RFM 1 ; L-TCF 1 1)+RTxTDFli, i=l,...,T PC^CUMCPi) , i = l , . . . ,T PVP^PVCPi), i=l,...,T PVPS=A(PVP i,i=l,...,T) Output 16 - Service Revenue and Pay-Out Analysis Cost of sales subtotal before depreciation and adjustment of I. D. COSST11=LC4i+IOH4i+TDSOHi, i=0,...,T TIDSHS=A(TIDASHi, i=0,...,T), i=0,...,T Adjustment of I. D. according to number of units as products developed come on stream. AID 1=(TNMIS i+TNSHi i+TNSH 3 i)xTIDASH i/TIDSHS, i=0,...,T Cost of sales COS^COSSTii+SDi+TIDASHi-AID-;., i=0,...,T Other income statement c a l c u l a t i o n s . PBTj^Ri-j-COSii, i=0,...,T FT 1 ±=RTxPBTi ±, i=0,...,T N P i ^ P B T i i - F T x i , i=0,...,T Output 17 - Service Income Statement Exogeneous Variables Required: T, RT, RRP, Y i , 0 I k i , k=l,...,3, both i=0, • • » j T y SL_ • Endogeneous Variables Required: R i i ( N ) , R2i(L), R3i(E), COSii(N), C 0 S 2 i ( L ) , C0S3i(E), i=0,...,T. Variables Used Elsewhere: RAi(P), COSAi(P), FTAi(P,Q), RSTi(P), SLi(P), NPA ±(P), PBTAi(Q), a l l i =0,...,T. Other Variables Used: T O I ^ PAITR i 5 NOIi, TPAi, a l l i=0,...,T. Cal c u l a t i o n s : Three sources of other income. TOI^ACOIfci, k=l,...,3), i=0,...,T PAIT repayment f o r use of prototypes. PAITR±=0, i=0,...,NYLRP-1 PAITR^OIlxRRP, i=NYLRP, . . . , T Net other income a f t e r PAIT repayment. NOIj^TOI-j-PAITRi, i=0,...,T Output 18 - Other Income Sales revenue forms revenue subtotal. RSTi=A(R k l, k=l,...,3), i=0,...,T Revenue aggregate a f t e r other income. RA ±=RSTi+N0Ii, i=0,...,T Cost of sales aggregate. C0SAi=A(C0S ki, k=l,...,3), i=0,...,T Other income statement c a l c u l a t i o n s . PBTA-j^RA-j-CQSAi, i=0,. . . ,T Surplus or l o s s . SL^SLl-l+PBTAi, i=0,. . . ,T Taxable p r o f i t i s equal to surplus. TPAi=0, i=0,...,T If SLi i s greater than 0, TPA i=SL i, i=0,...,T FTA ±=RTxTPAi, i=0,...,T NPA i=TPA i-FTA 1, i-0,...,T Output 19 - Aggregate Income Statement Exogeneous Variables Required: T, NDLAR, M 2 i, i=0,...,T, NDLAP, NDIHR, NDLSP, PE ±, i=-l,...,T, Y ±, i=0,...,T, AR_i, AP_i, RCTS, C_ l s S L _ i , FA I _ i , TD_i, Sk_i, E l i , i=-l,...,T. Endogeneous Variables Required: RAi(O), Mii(D), M 3 i ( F ) , M5i(L), NFAi(0), TLi(B), COSAi(O), FTAi(O), FAI ±(G), TDi(G), RST.^0), SLi(O), a l l i=0,...,T. Variables Used Elsewhere: FACi(Q), i=-l,...,T, CAi(Q), TCI^CO), Ci(Q), ARi(Q), I ± ( Q ) , APi(Q), SAi(Q), i=0,...,T. Other Variables Used: CAR±, CCRi, TRCi, MPi, PAP i 5 PCP ±, a l l i=0,...,T, TDCi, NFAi, T A i » E i > D R i » a 1 1 i=-l,.-.,T, 1 1 ^ PEIi , CP^ A P I i 5 SAIi, STi, NCPi, NCFi, C I ± , NCR i 5 CRCi, a l l i=0,...,T, CA_i, TCL_i. C a l c u l a t i o n s : Accounts receivable are expressed i n terms of number of days l a g . ARi=RA±x NDLA:/365, i=0,...,T Co l l e c t i o n s of accounts receivable. CARi=ARi_i, i=0,...,T C o l l e c t i o n s of current receivables. CCRi=RAi-ARi, i=0,...,T Tot a l revenue c o l l e c t i o n s i s the sum of current c o l l e c t i o n s and c o l l e c t i o n s of accounts receivable from the previousvyear. TRCi=CCRi+CARi, i=0,...,T Materials purchases. MPi=Mli4M2i4M3i+M5i, i=0,.. . ,T Accounts payable are expressed i n terms of number of days lag. APi=MPixNDLAP/365, i=0,...,T Payments of accounts payable. PAP 1=AP i_ 1,,i=0,...,T Payments f o r current purchases. PCPi=MPi-APi, i=0,...,T Inventory i s expressed i n terms of number of days of H. R. purchases. Ii=M5ixNDTHR/365, i=0,...,T Salaries accrued are expressed i n terms of number of days of t o t a l labour cost. SAi=TLixNDLSP/365, i=0,...,T Output 20 - Notes on Cash Flow Cash i s a percentage of sales revenue. Current assets. CA-j=Ci+ARi+Ii+PEi, i=-1,. ..,T Fixed assets and depreciation are cumulated annual amounts. FACi=CUM(FAI i), i = - l , . . . ,T TDC±=CUM(TDi), i=-l,...,T Net f i x e d assets (after depreciation). NFAi=FAC i-TDC i, i=-1,...,T Total assets. TA i=CA i+NFAi, i=-1,...,T To t a l current l i a b i l i t i e s . TCL i=APi+SA i, i=-1,...,T Set surplus/loss equal to net p r o f i t (aggregate) i f NPA i s greater than 0. If NPAi i s greater than 0, SLi=*NPAi5 i=0,...,T Equity. Ei=EIi+SLi, i=-l,...,T Debt required i s balancing item to make t o t a l l i a b i l i t i e s and equity equal to t o t a l assets. DR i=TA i-TCL 1-Ei, i=-l,...,T Output 21 - Balance Sheet Inventory increment. I I i = I i - I i - l , i=0,...,T Prepaid expenses increment. PEI-^PE-j-PEi-i, i=0,...,T Cash payments. CPi=COSA i+FTAi+FAI 1+II i+PE i, i=0,...,T Accounts payable increment. API-APi-APi.!, i=0,...,T Salari e s accrued increment. SAI-^SAj-SAi.i, i=0,". ..,T Subtotal. ST^TDi+APIi+SAIi, i=0,. .., T Net payments. NCP^CPi-STi, i=0,...,T Net cash flow. NCFi=TRCi-NCPi, i=0,...,T Cash increment. Net cash required. NCRi=NCFi+CIi, i=0, . . . , T Cumulative cash required. CRC^CUM (NCRi) , i=0 , . . . , T Output 22 - Aggregate Cash Flow Statement - Income Statement and Balance Sheet With Book Depreciation Exogeneous Variables Required: T, RBD, S L _ i , RT, E I i } Y i s P E i 5 i=0,...,T. Endogeneous Variables Required: FAI ±(G), PBTA-j^(0) , TD^(G) , FAC-j^P), CAi(P), FTAi(O), TCL ±(P), C i ( P ) , AR ±(P), AP ±(P), I ± ( P ) , SA i(P>, i=0,...,T, FAC_x(P). Variables Used Elsewhere: None. Other Variables Used: TFA±, NPA^, NFA^, 1A±, E±, T>R± ( a l l redefined here), BDi, FTABDi, -BDCi, DT i s DTC ±, i=0,..,T. Cal c u l a t i o n s : BDM=1 Book depreciation. BDi=D(BDM,FAC_i, F A I i , RBD), i=0,...,T P r o f i t before tax (aggregate). PBTAi=PBTAi+TDi-BDi, i=0,...,T Surplus or l o s s . SL^SLj-^+PBTAi, i=0,...,T Taxable p r o f i t s i s equal to surplus. TPAi=0, i=0,...,T If SL i s greater than 0, TPAi=SLi, i=0,...,T FTABDi=RTxTPA1, i=0,...,T NPAi=TPAi-FTABD1, i=0,...,T Output 23 - Income Statement with Book Depreciation Book depreciation cumulated. BDCi=CUM(BDi), i=0,...,T Net f i x e d assets. NFAi=FAC i-BDCi, i=0,...,T Total assets. TA =CA.j_+NFAi, i=0,. . . ,T Deferred taxes. DTi=FTABDi-FTAi, i=0,...,T Deferred taxes cumulated. DTCi=CUM(DTi), i=0,...,T Set surplus/loss equal to net p r o f i t (aggregate) i f NPA.- i s greater than 0'. If NPA± i s greater than 0, SLi=NPAi, i=0,...,T E q u i t y . E i = E I i + S L 1 , i=0,...,T Debt R e q u i r e d . DR i=TA 1-TCL i-DTC i-E : L, i=0,...,T Output 24 - B a l a n c e Sheet w i t h Book D e p r e c i a t i o n Sample Formula Z=A(Xk, k=l,...,n) Z^CXi . R C ) Zi=CBASE(X,RC) Z=CUM(Xi) Z^DCDM.B.AIi.RD) Definition Addition: Z=Xj+X2+. .+Xn Compounding: Z=Xix(l+RC)i Compounding a base: Zi=Xx(l+RC)i Cumulation: Z=Xi+Xi_i+...+x0 Depreciation: If DM=1 (straight l i n e ) : Zi=RDx(A(AI1, j=0,...,i)+B) If DM=2 (diminishing balance): If i=0: UDA 0=AIo+B Z O = R D X U D A Q If i is greater than 0: UDAi=UDAi_i+AIi-Zi_i Zi=RDxUDAi Zi=DR(DM,B,AIi,RD,ROR,RS) Depreciation with replenishment (assume DM=2 for diminishing balance) If i=0: RS=RORx(AI0+B) UDA0=AIo+B+RS ZO=RDXUDAQ If i is greater than 0: RS=R0Rx (UDAj.jL+AIi-Zi.x ) UDAi=UDAi_i+AI±-Zi_i+RS Zi=RDxUDAi Z=INCR(X±) Z=PV(X±,RR) Increment: Z=X±-Xi_1 Present value: Z=Xix(l+RR)"i Value Set i n Section Variable Symbol Variable D e f i n i t i o n Routines D, DR N / ( - l ) , P(O-T) / ( - l ) , P(O-T) Routines D, DR Q Q / / ( - l ) , P(C-T) ADSF k i k=l,2 i=0,...,T A I ± AIDi i=0,...,T AP ± i = - l , . ..,1 APIi i = - l , . . . , 1 ARi i = - l , . . . , l ARF k k. 1 y • • • } 3 ARFA k k=l,2 ARFD k lc-— 1 y • • • 9 3 ASPi i=0,...,T AVR B BD ± i=0,...,T BDC± i=0,...,T BDM BP ± i=0, i = - l , . . . ,T CA ± i=-l,...,T Average d i r e c t service cost per f i e l d i n market l o c a t i o n k Asset increment Adjustment of Independent Development Accounts payable Accounts payable increment Accounts receivable Annual revenue per f i e l d , f i e l d type k Annual revenue per f i e l d , averaged, market l o c a t i o n k Annual revenue per f i e l d , per day, f i e l d type k Advertising and sales promotion Annual vessel r e n t a l Opening balance Book depreciation Book depreciation, cumulated Book depreciation method Bid and proposal cost Cash Current assets / P N ( l ) , L(2), E(3) N ( l ) , L(2), E(3) L P H N H H Routine D / / CARi i=0,. CCR± i=0,. C F k i k=l,, i=0, , CFB C I i i=0,, ,3 ,T COS k i k=l,...,3 i=0,...,T COSAi i=0,...,T COSST k i k. 1 y • • • y 3 i=0,. . . ,T COSSTS CP ± i=0, CRC ± i=0,. C V i i=0,. Di i=l>,, DC ± i=0,. D F k j i k=l,.. 3=1,•• i=0,.. DM DMOF DMSH^ k=l,. DMV ,T ,3 ,3 ,T Col l e c t i o n s of accounts receivable C o l l e c t i o n s of current receivables Crew cost per f i e l d , f i e l d type k Crew cost per f i e l d , base Cash increment Cost of sales f o r income statement k Cost of sales, aggregate Cost of sales sub-total, income statement k Cost of sales subtotal, summed Cash payments Cumulative cash required Capsule value, for depreciation c a l c u l a t i o n Discount per DUC f i e l d , post-MUC Depreciation per capsule Depreciation per f i e l d , f i e l d type k, S.H. depreciation category j Depreciation method Depreciation method, o f f i c e f u r n i t u r e Depreciation method, S.H. type k Depreciation method, vessel DOFj_ i=0,.. DRi 1=-1,. DSH. . i=0,.. ,7 DS0Hki k=l, 2 i=0,,..,T DS0HFki 1 j • « • y 3 1=0,...,T DS0HFBk rC X y * * • y 3 DS0HSTkj £ k=l,2 1=1,2 1=0, i = o, ,•, . DTCi 1=0,.. DUCDi i=0,.. DUCDB DVi i=0,.. DVS Ei i=-l,. E l i i=-l,. F i i=0,., »T ,T Debt required Depreciation on S.H. type k Direct service overhead, market location k Direct service overhead per f i e l d (other than vessel rental), f i e l d type k Direct service overhead per f i e l d (other than vessel rental), f i e l d type k, base Direct service overhead subtotal, market location k, f i r s t years (j=l) and other years(j=2) Deferred taxes Deferred taxes, cumulated DUC discount per year DUC discount per year, base Depreciation on vessel Depreciation on vessel, summed Equity Equity investment Fringe cost FAC-£ Fixed assets, cumulated i=-l,. .. ,T / ( - I ) , G(O-T) N ( l ) , L(2), E(3) 0 / ( - l ) , P(O-T) M D FAIi i=-l,...,l k 1 } • • • j 3 i=0,...,T FTA. i=C> FTABD ± i=0,...,T HRCki k 1 j • • • j 4 1=0,...,T HRCSk k=l,. I i i = - l , k=l,. 1=0,. ,4 ,3 IDAHRki k 1 j • • • j 3 i=0,...,T IDASH k i k=l,...,3 i=0,...,T IDASHD k ± k 3. ^ • • • j 3 i=0,...,T IDASHS 3 k k 1 y • • • j 3 IDHRk k=l,...,4 " i i=0,. .. ,T IOH ki k=l, i=0,, ,5 ,T IOHA 3 k k~ 1 y • • * y 3 Federal taxes, income statement k Federal tax, aggregate Federal tax, aggregate, with book depreciation H.R. subcontract cost, H.R. type I l k H.R. subcontract cost, H.R. type I l k , summed Inventory Investment i n capsule, market l o c a t i o n k I.D. a l l o c a t e d to H.R. type Ik I.D. a l l o c a t e d to S.H. type k I.D. a l l o c a t e d to S.H. type k, de-compounded I.D. a l l o c a t e d to S.H. type k, summed I.D. a l l o c a t e d to H.R. type I l k Inventory increment Indirect overhead a l l o c a t e d to function k Indirect overhead a l l o c a t e d to function 3 f o r S.H. type k IOHAHRk k=l,...,4 Indirect overhead al l o c a t e d to H.R. type I l k IOHDi i=0,...,T Indirect overhead a l l o c a t e d to function 3, de-compounded IOHF k. k=l,.. . ,3 i=0,. . . ,T Indirect overhead per f i e l d , f i e l d type k IOHFB k k. 1 j > • • ^  3 i=0,...,T Indirect overhead per f i e l d , f i e l d type k, base IOHS k k=3,4,5 Indirect overhead cost, summed, for function k ISSE k=l,' i=0, k i ,3 ,T Investment i n SSE, f i e l d type k L C k i k=l,. i=0, . ,6 Labour cost, function k k = l 3 k 3 Labour cost a l l o c a t e d to function 3 S.H. item k LCAHRk k=l,...,4 Direct labour cost a l l o c a t e d to H.R type I l k L C B k i k=1,. . ., 6 i=0,... ,T Labour cost base, function k LCDi i=0,...,T Labour cost, de-compounded LCS k k=3,5 Labour cost, summed, function k L(5) M k ± k=l,2,3,5 i=0,...,T Materials cost, function k MCSH k i rC 1 y • • • y 3 i=0,...,T Materials cost, S.H. type k MCSHDki iC l j • • • J 3 i=0,...,T Materials cost, S.H. type k, de-compounded MCSHS, k=l,...,3 Materials cost, S.H. type k, summed F(3), L(5) / / ( - l ) , P(O-T) / / / / h MPi i=0,...,T MS k k=3,5 N± i=-l,...,T NBAji j=l,...,n+l i=0,...,T NBAPi i=0,...,T-n-l NCFi i=0,...,T NCPi i-0,...> T NCRi i=-l,...,T NDIHR NDLAR NDLAP NDLSP N E k i k=l,. .. , 6 i=-l,...,T NENF± i=-l,...,T NENFIi i= 0 , . . . , ] • ' N F k i k=l , 2 1 = 0 , . . . ,T NFAi I--~~1 y • • • jT NFC k i k=l , 2 i=0,...,T Materials, summed, function k Number of year New business a l l o c a t i o n (of I.R. and I.D.) New business annual p r o f i t of projects s t a r t i n g i n year i Net cash flow Net cash payments Net cash required No. days inventory, of H.R. No. days lag on accounts receivable c o l l e c t i o n s No. days lag on accounts payable No. days lag on s a l a r i e s payable No. employees, function k No. employees, no n - f i e l d No. employees, non-field,increment No. f i e l d s , market l o c a t i o n k Net f i x e d assets No.fields, cumulated, market l o c a t i o n k NFDD No. of f i e l d s to receive DUC discount NFY k i k=l,2 i=0,...,T NHR k ji k 1 > • • j 3 3=1,2 " i=0,...,T NOIi i=0,...,T NPki k=l,...,3 i=0,...,T NPAi i=0,...,T NPF N S H k i i k=l,2,4,5 j = l,2 i=0,...,T NSSUS NTNBP NWHCkl k=l,2 1-0,. . . ,T NWHCSk k=l,2 NYBDD NYCR NYLRP NYNPID NYNPP NYSC OB k k 1 j • • • ) 7 No. of f i e l d years, market l o c a t i o n k No. units of hardware f o r resale type Ik, market l o c a t i o n j Net other income Net p r o f i t , income statement k Net p r o f i t , aggregate No. p a r t i a l f i e l d s No. units of S.H. type k, market l o c a t i o n j No. sets of spares f o r a l l U.S. f i e l d s Sales revenue: No. times N.B. p r o f i t No. wellhead c e l l a r s , WHC type k No. wellhead c e l l a r s , WHC type k, summed No.years to begin DUC discount No. years before capsule r e f u r b i s h -ments No. years lag to PAIT repaymei No. years new projects' I.D. No. years new projects' p r o f i t No. years to service contract at l e v e l p r i c e Opening balance (for depreciation), S.H. type k H H H H I C / / / / N N N ( l ) , L(2), E(3) OBC OBR OBS OBSSE OBV OFI. i=0^...,T OFNFEi i=0,...,T OFNFEB OFOB ,3 OIki k=l,.. i=0,.. 0 1 0 % i=0,.. ONE P i i=l,...,T PAITR ± i=0,...,T PAPi i=0,...,T PBT k i llC X y m a • y 3 i=0,...,T PBTA ± i=0,...,T PC ± i=i,...,T PCPi i=0,...,T Opening balance f o r one r e f u r b i s h -ment capsule Opening balance f o r spares Opening balance f o r SSE Opening balance f o r ves s e l O f f i c e f u r n i t u r e increment O f f i c e f u r n i t u r e per non-field employee O f f i c e f u r n i t u r e per non - f i e l d employee, base O f f i c e f u r n i t u r e opening balance Other income, source k Other i n d i r e c t overhead The value 1 Net cash flow a f t e r tax PAIT repayment Payments of accounts payable P r o f i t before taxes, income statement k P r o f i t before taxes, aggregate Net cash flow, cumulated Payments for current purchases Prepaid expenses M N N N M M M M I I N ( l ) , L(2), E(3) PEIi i=0,...,T PVCF k i rC l y « • • y 3 i=0,...,T PVCFS k k~X 9* • • y3 PVNBi i=0,...,T-n-l PVOS PVPi 1=1,...,T PVPS PVTDF k i f V X y • • • y 3 i=0,...,T PVTDFS k k = l , . . . , 3 PVTIF k i k = l , . . . , 3 i=0,.. . ,T PVTIFS k rC X ^  • • • j 3 PWR PVVTSi i=0,...,T PVVTSS Rki k=l, . i=0,. RAi i=0,. RATR RBD ,3 Present value of t o t a l costs per f i e l d , f i e l d type k Present value of t o t a l costs per f i e l d , f i e l d type k Present value of new business f o r proj ect beginning i n year i Present value of one (1), summed Present value of net cash flow Present value of net cash flow, summed Present value of t o t a l depreciation per f i e l d , f i e l d type k Present value of t o t a l depreciation p.er f i e l d , f i e l d type k, summed Present value of t o t a l investment i n a f i e l d , f i e l d type k Present value of t o t a l costs, f i e l d type k, summed Present value of vessel r e n t a l Present value of v e s s e l tax saving Present value of v e s s e l tax saving, summed Revenue, income statement k Revenue, aggregate Ratio of advertising to revenue Rate of book depreciation Routines C, CBASE RC Rate of compounding Routines D, DR / / / / . N / / / / / / / / RCTS RD RDOF RDPF RDSHk k=l,...,7 RDV RFMk. k=l,2 i=l,...,T RFMDki k=l,2 i=l,...,T RFTTLC RFYS RFYSR RFYSRF RH± i=0,...,T RHB Rl RIDAHR, . k=l,...*3 i=0,. . . ,T RIDASH^i lC— 1 y • • • y 3 i=0,...,T RLCA RMTLIR RNBSCR Rate of depreciation Rate of depreciation on office furniture Rate of depreciation on non-U.S. partial fields Rate of depreciation on S.H. type k Rate of depreciation on vessel Revenue per f i e l d , MUC, market location k Revenue per f i e l d , MUC, market location k, per day Ratio of fringe to total labour costs Ratio of f i r s t year direct service costs Ratio of f i r s t year direct service revenue Ratio of f i r s t year direct service revenue, f i r s t field(s) Revenue per head Revenue per head, base Rate of inflation Ratio I.D. allocation to H.R. type Ik Ratio I.D. allocation to.S.H. type k Ratio of labour cost allocated Ratio of materials to labour for I.R. Ratio of new business selling costs to revenue Routine DR L / / /, Routine PV / / Routine DR H H / ( - l ) , P(O-T) ROR RPki k=l,. i=0,. RPF RPFITF RR RRP RRS RS RSB RSC k i k=6,7 i=0,.. RSF k i k=l,.. i=0,.. RST ± i=0,. RT RU k k=l, RV ± i=0,, ,4 ,T ,3 ,T ,3 s k i k=1,..., 6 i=-l,...,T SA ± i=-l,...,T SAI ± i=0,...,T SB k k=1,.. ., 6 Ratio of other i n d i r e c t overhead to home labour Rate of replenishment . Revenue, as a function of p r i c e , from H. R. type I l k Ratio of p a r t i a l f i e l d s to non-U.S. f i e l d s Ratio of p a r t i a l f i e l d s ' i n d i r e c t overhead to that of f u l l f i e l d s Rate of return Ratio of repayment of PAIT Rate of replenishment of spares Replenishment of spares per f i e l d Replenishment of spares, per f i e l d , base Replenishment of S.H. type k Replenishment of spares, per f i e l d , f i e l d type k Revenue subtotal Rate of taxation Rate of usage, f i e l d type k Refurbishment value, for depreciation c a l c u l a t i o n Salary (base, compunded), function k Salaries accrued Salaries accrued increment Salary base, function k SCHR k i k=2,3 i=0,...,T SCHRBk k=2,3 SCSH k i rv — X y • • * y 3 i=0,...,T SCSHBk rC"- X y • • • y 3 SCWHCki k=l,2 i=0,. . . ,T SCWHCBk k=l,2 SDi i=0,...,T S H I k i rC"~" 1 y • • • y 1 i=0,...,T SL ± i=-l,...,T SRFY k l k=l,2 i=l,...,T SROY k i k=l,2 i=l,...,T SSi i=0,....,T SSB SSEVi i=0,...,T ST ± i=0,...,T i=0,...,T T Subcontract cost, H.R. type Ik, base Subcontract cost, S.H. type k Subcontract cost, S.H. type k, base Subcontract cost, WHC type k Subcontract cost, WHC type k, base Service depreciation Service hardware increment, type k Surplus or loss Service revenue, f i r s t years of a f i e l d , market l o c a t i o n k Service revenue, other years of a f i e l d , , market l o c a t i o n k Shore support Shore support, base SSE value, f o r depreciation c a l c u l a -t i o n Subtotal of deductions from cash pay-ments Spares value, f o r depreciation c a l c u l a t i o n Time horizon i n years M / ( - l ) , G(O-T) L N M i=-l,...,T T C k i k=l,2 i=0,...,T T C F k i rC X y • • • y 3 i=0,...,T TCHRk k=l,...,4 TCL± i=-l,...,T TCSH k k=l,...,3 TDi i=-l,...,T TDCi i=-l,...,T TDF k l k=l,...,3 1=0,...,T TDL ± i=0,...,T TDSOHi i=0,...,T TIDAHRi i=0,.,.,T TIDANB^ i=0,...,T TIDASH^ i=0,...,T TIDHRS TIDSHS T ^ k i k X y» • • y 3 1 0 y • • • )T TIOHi i=0,...,T Total costs of function k Tota l costs per f i e l d , f i e l d type k Tota l costs of H.R. all o c a t e d to H.R. type I l k Total current l i a b i l i t i e s T o t a l cost of S.H. type k Total depreciation T o t a l depreciation, cumulated Total depreciation per f i e l d , f i e l d type k Total d i r e c t labour cost Total depreciation, service overhead Tot a l I.D. all o c a t e d to H.R. Total I.D. allocated to N.B. Total I.D. all o c a t e d to S.H. Tota l I.D. al l o c a t e d to H.R., summed Total I.D. all o c a t e d to S.H., summed Total investment i n a f i e l d , f i e l d type k Tota l i n d i r e c t overhead i=0,...,T TNEi 1=0,...,T TNHR k i rC~ 1 j • • • j 3 i=0,...,T TNHRSk k=2,3 TNMISi i=0,...,T TNMISS A(2,3,4,5),/(3,6,7,8) TNSH k i k=l,...,8 i=0,...,T F TNSHSk fV X y • • • y 3 0 TGIi i=0,...,T 0 TPA ± i=0,...,T E TPNBi i=0,...,T N TR ± i = l . ,T K L L G(l-3),/(4-7) TRCi 1=0,...,T TWi i=0,...,T TWAHR k=l,...,4 TWS k-1 4 ucc UCSH k i X j * • • y l 1=0,...,T To t a l no. employees Total numbers of H.R. type Ik Total numbers of H.R. type Ik, summed Total no. MUCs including spare MUCs Tota l no. MUCs including spare MUCs, summed Total numbers of S.H. type k Total numbers of S.H. type k, summed Total other income Taxable p r o f i t , aggregate To t a l p r o f i t on N.B. Total service revenue Total revenue c o l l e c t i o n s T o t a l warranty To t a l warranty allocated to H.R. type I l k Tota l warranty, summed Total cost of H.R. type I l k Unit cost of capsule Unit cost of S.H. item k, base Routines D, DR L / I M I I K Routines / / Routines UCSHBk k=l,...,7 UDA± UPk k=l,...,4 UPBTk k=l,...,4 U f k i i=0,...,T USPBk k=l,...,4 ,4 UT k k=l, V VI ± i=0, VR± i=0,. . . ,T' VSV VTSi i=0,...,T W k i k=l,. ..,3 i=0,.. . ,T WBk k=l,...,3 W C k i k=l^...,3 i=0,...,t X-r x i i=-l. YZ Z, Z± Unit cost of service hardware type k, base Undepreciated asset Unit profit on H.R. item Ilk Unit profit before tax on H.R. item Ilk Unit selling price on H.R. item Ilk Unit selling price on H.R. item Ilk, base Unit tax Vessel cost Vessel increase Vessel rental Vessel salvage value Vessel tax saving Warranty cost, for H.R. type Ik Warranty cost, base, for H.R. type Ik Warranty cost, H.R. type Ik Dummy variable Year Year zero (base year) Dummy variables used to define values Subscript D e f i n i t i o n F i e l d Type Function 1 2 3 1 2 3 4 5 6 Meaning U.S. (F u l l ) Non-U.S. (F u l l ) Non-U.S. ( P a r t i a l ) I.R. I.D. S.H. S.O. H.R. Indirect Overhead Variables Typed ARF k, ARFDk, C F k l , DF k : j i, DSOHF k i, DSOHFBk, I C k l , IOHF k i, IOHFBk, I S S E k i , PVCF k i, PVCFS k, PVTDF k i, PVTFS k, PVTIF k ±, PVTIFS k, RSF k i, RU k, TCF k i, TDF k i, T I F k i -IOHfci, IOHSk, L C k i , LCB k i, LCS k, M k l, MSk, NE k i, S k i, SB k, T C k i Hardware for Resale Type I 1 WHC 2 PC 3 MM Hardware f o r Resale Type II 1 WHC Pre-MUC 2 WHC Post-MUC 3 PC 4 MM 1 Service 2 Hardware 3 New Business Income Statement IDAHR k i, NHR kj ±, RIDAHRk, SCHR ki, SCHRBk, TNHRki, TNHRSk, Wki, WC k i HRC k i, HRCSk, IDHRk, IOHAHRk, LCAHRk, R P k i , TCHRk, TWAHRk, UC k, UP k, UPBTk, USP ki, USPB k, UT k COSfci, COSST k i, FT k±, NPki, PBT k i, R k i Market Location Other Income Source 1 U.S. 2 Non-U.S. 1 PAIT 2 IRDIA 3 IRAP ADSF k l, ARFA k, DSOH ki, DSOHST k j i, ICfci, NF k i, NFC k i, NFY k i, NHR k j : L(j), NSHkji(j), RFM k i, RFMDki, SRFYki, SROYki OIki S.H. Depreciation Category 1 2 Service Hardware Type Capsule SSE Spares 1 DUC 2 MUC 3 SSE 4 Refurbishment DUC 5 Refurbishment MUC 6 DUC Spares 7 MUC Spares 8 Spare MUCs D F k j i ( j ) DMSHk, DSHki, IDASH k i, IDASHDki, IDASHS 3 k, IOHA 3 k, LCA 3 , MCSH k i, MCSHDki, MCSH5k, NSHkji, 0Bk, RDSHk, RIDASHki, RSC ki, SCSH k i, SCSHBk, SHI k i, TCSH k, TNSH k ±, TNSHSk, USSH k i, UCSHBk The subscript i s k unless j i s i n parentheses. Subscript i re f e r s to year. 2 Post-MUC SCWHBk Y e a r C a t e g o r y 1 F i r s t y e a r D S O H S T k j i ( j ) 2 O t h e r y e a r s Variable Name Rl RR RT RRS RBD RDSHi RDSH2 RDSH3 RDSH4 RDSH5 RDSHg RDSH7 RUi RU 2 RU 3 RDOF RDV RLCA RATR ROIOH RFTTLC RFYS REYSRF RFYSR RRP RNBSCR RPF RPFITF RMTLIR RCTS RDPF T YZ NSSUS NYSC NYCR NYNPID NYNPP NYLRP NYBDD NDLAR NDLAP NDLSP NDIHR NTNBP NFDD Document 5 - Input Required Input Table 1 - Decimal Fractions and Integer Numbers Variable Description Decimal Fractions: Rate of i n f l a t i o n Rate of return Rate of taxation Rate of replenishment of spares Rate of book depreciation Rate of depreciation on S.H.: Rate of usage: DUC MUC SSE Refurbishment DUC Refurbishment MUC Spares DUC Spares MUC U.S. Non-U.S. f u l l f i e l d f u l l f i e l d p a r t i a l f i e l d - Non-U.S. Rate of depreciation: o f f i c e f u r n i t u r e Rate of depreciation: v e s s e l Ratio of labour cost a l l o c a t e d Ratio of advertising to revenue Ratio of other i n d i r e c t overhead to home labour Ratio of f r i n g e to t o t a l labour cost Ratio of f i r s t year d i r e c t service costs Ratio of f i r s t year d i r e c t service revenue f i r s t f i e l d ( s ) Ratio of f i r s t year d i r e c t service revenue Ratio of repayment of PAIT Ratio of new business s e l l i n g costs to revenue Ratio of p a r t i a l f i e l d s to non-U.S. f i e l d s Ratio of p a r t i a l f i e l d s ' i n d i r e c t overhead to f u l l Ratio of materials to labour f o r I.R. Ratio of cash to sales Rate of depreciation on non-U.S. p a r t i a l f i e l d s Integer Numbers: Time horizon i n years Year zero (base year) No. sets of spares f o r a l l U.S. f i e l d s No. years to service contract at l e v e l p r i c e No. years before capsule refurbishment No. years new project's I.D. No. years new project's p r o f i t No. years lag to PAIT repayment No. years to begin DUC discount No. days lag on accounts receivable c o l l e c t i o n s No. days lag on accounts payable No. days lag on s a l a r i e s payable No. days inventory, of hardware f o r resale Sales revenue: number of times new business p r o f i t No. of f i e l d s to receive DUC discount NENF_i In year previous to base year: no. employees non-field N E i s _ i . I.R. NE2'-1 I.D. NE39'_i S.H. NE4'_i S.O. NE5]_i H.R. NEg _ i Indirect Overhead Depreciationmethods: l=straight l i n e , 2=declining balance DMSH^ DUC DMSH2 MUC DMSH3 SSE DMSH4 Refurbishment DUC DMSH5 Refurbishment MUC DMSHg DUC spares DMSH7 MUC spares DMOF O f f i c e f u r n i t u r e DMV Vessel Variable Name Variable Description PE_i Costs i n year previous to base year: Prepaid expenses E I _ l Equity investment C_i Cash AR_i Accounts receivable I _ l Inventory FAI_2 Fixed assets TD_i Depreciation AP_1 Accounts payable SA_i Salaries accrued NCR_i Cash required SL_i Surplus or loss A l l other costs are costs i n base year: SCSHBi Subcontract cost, S.H., base: DUC SCSHB2 MUC SCSHB3 SSE SCWHCBi Subcontract cost, WHC, base: Pre-MUC SCWHCB2 Post-MUC SCHRB2 Subcontract cost, H.R., base: PC SCHRB3 MM UCSHB4 Unit cost of S.H., base: DUC refurbishment UCSHB5 MUC refurbishment UCSHB6 DUC spares UCSHB7 MUC spares DSOHFBi Direct service overhead per f i e l d other than vessel r e n t a l : U.S. DSOHFB2 Non-U.S. ( f u l l ) DSOHFB3 P a r t i a l SSB Shore support, base V Vessel CFB Crew (per f i e l d ) , base SBi Salary base: I.R. SB2 I.D. S B 3 S.H. SB4 S.O. SB5 H.R. SB5 Indirect overhead RHB Revenue per head, base (for estimation of advertising cost) OFNFEB O f f i c e f u r n i t u r e per non- f i e l d employee, base DUCDB DUC discount per year, base WBi Warranty cost, base: WHC WB2 PC WB3 MM OB^ Opening balance (for depreciation): DUC 0 B 2 MUC 0 B 3 SSE OB4 DUC refurbishment OB5 MUC refurbishment OBg DUC spares 0B- , MUC spares OFOB O f f i c e f u r n i t u r e opening balance Input Table 3 - Data Arrays Over Time In the v a r i a b l e name, i=0,...,T and refer s to year. Variable ' Name Variable Description N F i i No. f i e l d s : U.S. N F 2 i Non-U.S. NWHCii No. WHC: Pre-MUC NWHC2i Post-MUC N H R i 5 l i No. WHC: U.S. NHRi \2i Non-U.S. NHR2'li No. connectors: U.S. NHR2 )2i Non-U.S NHR3',li No. J4Ms: U.S. NHR'3,2i Non-U.S. N S H i j i No. DUCs: U.S. N S H l j 2 i Non-U.S. NSH 2,li No. MUCs: U.S. NSH2,2i Non-U.S. NSH^u No. Refurbishment DUCs: U.S. N S f y ^ i Non- U.S. NSH5 5'ii No. Refurbishment MUCs: U.S. NSHs^i Non- U.S. NSH31 No. SSEs NSH 6i No. Spares DUC NSH7 ± No. Spares MUC NSH 8 i No. Spare MUCs NEU No. employees: I.R. N E 2 i I.D. N E 3 i S.H. NE4i S.O. N E 5 1 H.R. N E 6 i Indirect overhead NENFi Non-field RIDASH 1 ± Ratio I.D. a l l o c a t i o n to S.H. : DUC RIDASH21 MUC RIDASH 3 i SSE RIDAHRii Ratio I.D. a l l o c a t i o n to H.R. : WHC RIDAHR21 PC RIDAHR 3i MM M 2 i Cost of materials, I.D. BP ± Cost of bid and proposal O I n Other income: PAIT 0 I 2 i IRDIA 0 l 3 i IRAP PEi Prepaid expenses E l i Equity investment Document 6 - Output Produced L i s t of Output Schedules Section Schedule T i t l e A l Market B 2 Labour C 3 Depreciation on O f f i c e Furniture C 4 Indirect Overhead D 5 Independent Research and Independent Development E 6 New Business P r o f i t and Income Statement F 7 A l l o c a t i o n of C a p i t a l Expense to Service Hardware G 8 Fixed Assets H 9 Service Hardware Depreciation per F i e l d I 10 Vessel Rental J 11 Direct Service Overhead K 12 Warranty L 13 Hardware for Resale L 14 Hardware f o r Resale Income Statement M 15 Cash Outflow Service (MUC) N 16 Service Revenue and Pay-Out Analysis N 17 Service Income Statement 0 18 Other Income 0 19 Aggregate Income Statement P 20 Notes on Cash Flow P 21 /Balance Sheet P 22 Aggregate Cash Flow Statement Q 23 Income Statement with Book Depreciation Q 24 Balance Sheet with Book Depreciation F i e l d s U.S. Non-U.S. Cumulative - U.S. Cumulative'— Non-U.S. ..Field-years -.U.S. Field-years - Non-U.S. Hardware - U.S. Wellhead c e l l a r s P i p e l i n e connectors Manifold modules DUCs MUCs Refurbishment DUCs Refurbishment MUCs Hardware - Non-U.S. Wellhead c e l l a r s P i p e l i n e connectors Manifold modules DUCs MUCs Refurbishment DUCs Refurbishment MUCs Hardware - Tot a l Wellhead c e l l a r s -P i p e l i n e connectors Manifold modules DUCs MUCs Refurbishment DUCs Refurbishment MUCs Spares DUC Spares MUC Spare MUCs SSEs A l l i=0, Y-N F U N F 2 i NFCii NFC 2i NFYli NFY 2i NHRi i i NHR 2; 1 ± N H R 3 j l i NSHl,li N S H 2 > l i NSH4 sii NSH 5;ii NHRi } 2i NHR 2 > 2 i NHR3 t21 N S H l j 2 i NSH 2 , 2 i NSH4,2i N S H 5 > 2 i TNHRii TNHR 2i TNHR31 TNSHu TNSH 2 i TNSH41 T N S H 5 1 TNSH6i TNSH71 TNSHgi TNSH 3 i A l l 1=0, Number of employees Independent Research NEn Independent Development NE21 Service Hardware N E 3 i Service Operations NE4i Hardware for Resale NE51 Indirect NE6i Total TNE ± Labour cost base (100%) I.R. LCBn I.D. LCB2i S.H. LCB31 S.O. LCB4-L H. R. LCB 5 i Indirect LCBfc Labour Cost I. R. L C i i I.D. LC2i S.H. L C 3 1 S.O. LC,. H.R. LC5i To t a l D i r e c t TDL-^  Indirect LC6i To t a l Labour Cost T L i A l l i=0,...,T Year Y • 1 Number of non - f i e l d employees NENFj[ Increase per year NENFI^ O f f i c e f u r n i t u r e increase OFI--Depreciation on o f f i c e f u r n i t u r e DOF-; Indirect labour cost Fringe Bid and proposal Depreciation on o f f i c e f u r n i t u r e Advertising and sales promotion Other i n d i r e c t overhead Total i n d i r e c t overhead A l l o c a t i o n to corporate functions I.R. I.D. S.H. S.O. H.R. A l l i=0, Y i L C 6 i F i BP ± DOF± ASPi 0 1 0 % TIOHi I 0 H U I 0 H 2 i I 0 H 3 1 I0H4 ± I 0 H 5 i Year I.R. Materials Labour Indirect overhead al l o c a t e d Total I.R. Materials Labour Indirect overhead a l l o c a t e d Total I.D. Applied to: DUC MUC SSE To t a l applied to S.H. WHC p c \ , . ; MM Tota l applied to H.R. Remainder applied to N.B. A l l i=0,...,T M i l L C i i I 0 H U TCn M 2 i L C 2 i IOH 2 i T C 2 i IDASHu IDASH2i IDASH3i TIDASHi IDAHR 1 ± IDAHR 2i IDAHR31 TIDAHRi TIDANBi Year of I.R. Present value of I.R. and I.D. Annual p r o f i t equivalent Year P r o f i t generated from investment Sales revenue Less: Cost of sales subtotal Cost of I.R. Cost of I.D. To t a l cost of sales P r o f i t before tax Federal tax Net p r o f i t Both i=0,...,T-n-l Y i PVNBi NBAP--A l l i=0,...,T TPNBi R.3i COSST31 T C n TIDANBi C0S3i PBT 3 i F T 3 i NP31 A l l i = 0 , . . . ,T Y e a r No. DUCs ( i n c l u d i n g p r o t o t y p e ) No. MUCs p l u s s p a r e MUCs No. SSEs S u b c o n t r a c t c o s t s DUC MUC ( l e s s s u b s i d y ) SSE T o t a l m a t e r i a l c o s t T N S H i i TNMISi TNSH31 M C S H i i MCSH2i MCSH3i M 3 i A l l o c a t i o n o f c a p i t a l c o s t s on b a s i s o f s u b c o n t r a c t c o s t s : Number DUC TNSHSi MUC TNMISS SSE TNSHS3 T o t a l S u b c o n t r a c t C o s t D i r e c t Labour I n d i r e c t Overhead Independent Development T o t a l C o s t U n i t C o s t MCSHSl MCSHS 2 MCSHS3 MS 3 L C A 3 j i L C A 3 j 2 L C A 3 ) 3 LCS3 I 0 H A 3 s l IOHA3]2 IOHA3'3 IOHS3 IDASHS3 }1 IDASHS3 52 IDASHS3^3 TCSHl TCSH 2 TCSH3 UCSHBl UCSHB 2 UCSHB3 A l l i=0, Year Y. 1 Unit cost DUC UCSHii MUC UCSH2i SSE UCSH31 Refurbishment DUC UCSH41 Refurbishment MUC UCSH5i Spares DUC UCSHfci Spares MUC UCSH71 Numbers DUC TNSHii MUC TNMIS SSE TNSH31 Refurbishment DUC TNSH4-L Refurbishment MUC TNSH51 Spares DUC TNSHgi Spares MUC TNSH71 S.H. Increase DUC SHIi i MUC S H I 2 i SSE SHI3-L Refurbishment DUC SHI41 Refurbishment MUC SHI51 Spares DUC SHl6i Spares MUC SHl7i Fixed assets increase F A I - L Depreciation on S.H. DUC DSHli MUC DSH2i SSE DSH3i Refurbishment DUC DSH41 Refurbishment MUC DSH51 Spares DUC with repenishment DSHg-^  Spares MUC with replenishment DS^.-Service Depreciation SD-^  O f f i c e Furniture Depreciation DOF^ Tota l Depreciation TD.-Unit costs Capsule Refurbishment (compounded) SSE Spares Year Costs per U.S. f u l l f i e l d Depreciation on capsule Depreciation on SSE Depreciation on spares To t a l depreciation Costs per non-U.S. f u l l f i e l d Depreciation on capsule Depreciation on SSE Depreciation on spares To t a l depreciation Costs per non-U.S. p a r t i a l f i e l d Depreciation on capsule Depreciation on SSE Depreciation on spares To t a l depreciation UCC UCSH 5 )n+l UCSHs^o U C S H 7 ' 0 A l l i=0,...,T Y i D F l , l i D F l , 2 i DFl,3i TDFH D F 2 , l i DF2,2i DF 2,3i TDF 2i DF3,li DF3,2i D F 3 ) 3 i TDF 3 i A l l 1=0, Year Y± D e p r e c i a t i o n DV-^  Tax saving VTS i Present value of tax saving PVVTS^ Vessel cost V Less: present value of tax saving PVVTSS Less: salvage value (book) VSV Equals: present value of r e n t a l s PVVR Annual r e n t a l AVR A l l i=0, Y4 D i r e c t s e r v i c e overhead per f i e l d U.S. Non-U.S. D i r e c t s e r v i c e overhead c o s t s : ADSFn ADSF 2i U.S. F i s t years of f i e l d s Other years T o t a l U.S. Non-U.S. F i r s t years of f i e l d s Other years T o t a l Non-U.S. DSOHSTi^ii DSOHSTi] 2i DSOH 1 ± DSOHST 2 >li DSOHST 2 j 2 i DSOH„. 2i P l u s : T o t a l U.S. DSOH1:i T o t a l d i r e c t s e r v i c e overhead TDSOHi A l l 1=0 Number of items WHC TNHRii PC TNHR2i MM TNHR 3 i Unit cost of warranty WHC Wii PC W 2i MM W 3i Costs of warranty WHC WCn PC w c 2 i MM WC 3i Total cost A l l i=0,...,T Year Yj_ Subcontract cos t WHC Pre-MUC HRCii WHC Post-MUC HRC 2i PC HRC3i MM HRC 4 i Total subcontract cost M^^ Direc t labour ^5± Indirect overhead 10^51 Independent development TIDAHR-^ Warranty TWi Tot a l cost C0S2i A l l o c a t i o n of H.R. costs to H.R. items: Sub. Di r e c t Cost Labour WHC Pre-MUC HRCS.i LCAHR1 WHC Post-MUC HRCS2 LCAHR2 PC HRCS3 LCAHR3 MM HRCS4 LCAHR4 Tota l (100%) MS2 LCS5 Ind. I. War- Total O.H. D. ranty Cost IOHAHRi IDHRi TWAHRi TCHRi IOHAHR2 IDHR2 TWAHR2 TCHR2 IOHAHR3 IDHR3 TWAHR3 TCHR3 IOHAHR4 IDHR4 TWAHR4 TCHR4 IOHS5 TIDHRS5 TWS C0SS 2 Number U. U. U. S e l l . C. Tax P. Pr i c e NWHCSl UCi UTi UPl USPBl NWHCS2 UC 2 UT 2 UP 2 USPB2 TNHRS3 UC3 UT3 UP3 USPB3 TNHRS4 UC4 UT4 UP 4 USPB4 A l l i=0,...,T Year Y± Revenue Sales WHC Pre-MUC RP 1 ; L Sales WHC Post-MUC R P 2 i Sales PC R P 3 i Sales MM R P 4 ± T o t a l revenue R2-£ Less: Cost of sa l e s COS 2i P r o f i t before tax P B T 2 i F e d e r a l tax F T 2 i Net p r o f i t N P 2 i A l l i=0,. .. ,T Year U.S. f i e l d ( f u l l ) Capsule SSE Spares Total Investment P.V. t o t a l investment Shore support Crew Indirect overhead Vessel r e n t a l D i r e c t service overhead T o t a l costs P.V. t o t a l costs T o t a l depreciation P.V. t o t a l depreciation Non-U.S. f i e l d ( f u l l ) Capsule SSE Spares Total investment P.V. t o t a l investment Shore support Crew Indirect overhead ' "Vessel r e n t a l D i r e c t service overhead Total costs P.V.total costs T o t a l depreciation P.V. t o t a l depreciation Non-U.S- f i e l d ( p a r t i a l ) Capsule SSE Spares T o t a l investment P.V. t o t a l investment Crew Indirect overhead D i r e c t service overhead Total costs P.V. t o t a l costs Total depreciation P.V. t o t a l depreciation I C 1 ± ISSE,-Summation RSF l i TIFn PVTIFH SSi CFn IOHFii VRi DSOHF.ii TCF 1 ; L PVCFli T D F U PVTDFH I C 2 l ISSEi RSF 2 1 T I F 2 i PVTIF 2 i SSi C F 2 i IOHF 2 i VRi DSOHF 2i T C F 2 i PVCF 2i TDF 2 i PVTDF 2i I C 3 i ISSEi RSF 3 i T I F 3 i PVTIF 3 i C F 3 ± IOHF 3 i DSOHF 3i T C F 3 i PVCF 3i TDF 3. PVTDF 3i PVTIFS! PVCFSi PVTDFSi PVTIFS 2 PV.CFS2 PVTDF S2 PVTIFS-PVCFSi PVTDFS-Annual Revenue Per F i e l d U.S. ( f u l l ) Non-U.S. ( f u l l ) " Non-U.S. ( p a r t i a l ) Annual Revenue, Averaged U.S. .Non-rU.S. Revenue Schedule (MUC): Year Per year U.S. Non-U.S. (average) Per day U.S. Non-U.S. (average) Service revenue U.S. F i r s t years Other years Non-U.S. F i r s t years Other years To t a l revenue Discount on DUCs Net revenue Pay-Out Analysis Net cash flow a f t e r tax Cumulative net cash flow P.V. of net cash flow Per Year Per Day(365 Days) ARFi ARFD]_ ARF2 ARFD2 ARF3 ARFDo ARFA^ ARFA2 A l l i=l,...,T Y i Summation RFMn RFM2i RFMDii RFMD21 SRFYu SROYn SRFY 2 i SR0Y2ii TR ± Di R l i P i PC. PVPi PVPS A l l i=0,... Year Y± Revenue: Less cost of sales: Labour L G 4 i Indirect overhead IOHz^ Direct overhead TDSOH^ Cost of sales subtotal COSST^ Plus: service depreciation SD-^  Plus: I.D. TIDASH. Less: adjustment of I.D. AID-^ Cost of sales COSii P r o f i t before tax PBTli Federal tax F T j ^ Net p r o f i t NP^i A l l i Year Y ± Income from PAIT 0 1 ^ Income from IRDIA 0T_2i Income from IRAP U 1 3 i Total other income T O ^ Less: repayment of PAIT PAITR Net other income NOIi Sales revenue S.H. H.R. N.B. Revenue subtotal Other income Tot a l revenue Less: cost of sales S.H. H.R. N.B. T o t a l cost of sales P r o f i t before tax - aggregate Surplus/loss (carry forward) Taxable p r o f i t s - aggregate Federal tax - aggregate Net p r o f i t - aggregate A l l i=0, . .. ,-T Y i R l i R 2 i R 3 i RST ± NOIi RAi c o s l i GOS 2i c o s 3 i COSAi PBTAi SL ± TPAi FTA ± NPA± A l l i=0,. Year Y ± Revenue c o l l e c t i o n s C o l l e c t i o n s of current receivables CCR--Col l e c t i o n s of accounts receivable CAR--Total revenue c o l l e c t i o n s TRCi Accounts receivable ARi Materials - purchases I.R. M 1 ± I.D. M 2 i S.H. M 3 i H.R. M 5 1 T o t a l materials purchases MPi Payments for current purchases PCPi Payments f o r outstanding accounts receivable . PAP^ Accounts payable APi Inventory I i Salaries accrued SAn-A l l i=-l,...,T Year Y± Assets Cash Ci Accounts receivable ARi Inventory I i Prepaid expenses PEi Total current assets CA^ Fixed assets FAC^ Less: depreciation TDC^ Net fixed assets NFAi Total assets TA i L i a b i l i t i e s Accounts payable APi Salaries accrued SA^ Total current l i a b i l i t i e s TCLi Debt required DRi Equity Investment EI^ Surplus/Loss SL^ Net equity E^ Total l i a b i l i t i e s and equity TAi A l l i=0,...,T Year Y ± Cash c o l l e c t i o n s Revenue c o l l e c t i o n s TRC^ Cash payments Cost of sales COSA-L Taxes FTA± Fixed assets increment FAI.. Inventory increment II± Prepaid expenses increment PEIi Total cash payments , CPj. Less: Depreciation TD. Accounts payable increase API^ Salaries accrued increase SAI--Subtotal STi Net cash payments NCP. Net cash flow NCFi Cahs increment Cl± Net cash required NCR^ Cumulative cash required CRC"! A l l i=0,...,T Year Y ± P r o f i t before tax - aggregate PBTAi Surplus/loss (carry forward) SL-^  Taxable p r o f i t s - aggregate TPA^ Federal tax - aggregate FTABDi Net p r o f i t - aggregate NPA^ Year Assets Cash Accounts receivable Inventory Prepaid expenses Tot a l current assets Fixed assets Less: book depreciation Net f i x e d assets T o t a l assets L i a b i l i t i e s Accounts payable Salaries accrued T o t a l current l i a b i l i t i e s Debt required Deferred taxes Equity Investment Surplus/loss Net equity Total l i a b i l i t i e s and equity A l l i=0,... ,T Y i AR i I i PE ± CA. l FACi BDC± NFAi TA ± AP ± SAi TCLi. DRi DTCi E l i SLi E i TAi D. Algorithm Limitat ions The potent ia l user of the algorithm should be aware of the l imi ta t ions l i s t e d below. 1. The algorithm does not allow subs t i tut ion of externa l l y set values for var iables derived in algorithm formulae. If this is desired for comparison of actual values with model-generated values , i t would probably be for only one year ' s values. Because the algorithm is designed to handle a number of years , i t would be better to design a separate comparison model. As a computer program, i t would take as input the set of actual values of var i ab le s , and the set of values derived from the long range f i n a n c i a l planning model, and merely compare the two sets rather than mix the comparison feature with the value-generation feature. 2. The algorithm handles only the number of subscript categories which were used in the model. New subscripts can b added, with careful a t tent ion to the i r v a l i d i t y with respect to a l l the var iables for which the new subscripts w i l l be used 3. The algorithm does not have b u i l t - i n ed i t ing of the input data for i n v a l i d or inconsis tent f igures . Therefore, c a l cu la t ion resul t s w i l l be only as good as the input data. 4. The algorithm is based on time units of one year and would have to be revised to handle d iv i s ions into parts of a year. These l imi ta t ions could be overcome i f i t were decided that the increased f l e x i b i l i t y warranted making the changes. CHAPTER VI CONCLUSIONS Several questions were asked in the process of solving the problem of computerization of a p a r t i c u l a r company's long range f i n a n c i a l planning model. The conclusions of th i s study can be summarized in terms of the answers to these questions (posed in Chapter I.) 1. The company, Lockheed Petroleum Services L imited , needs to meet present report ing requirements and i s planning for further requirements accompanying expected large-scale growth. 2. The company's long range f i n a n c i a l planning model i s the most complex and comprehensive report ; therefore, i t was the one considered for computerization. 3.. Although LPS has no management information systems department, the company's use of the computer in several a p p l i -cations provides an environment for acceptance of further computerization. 4. The company's long range f i n a n c i a l planning model s a t i s f i e s general reporting requirements and aids in making f i n a n c i a l dec i s ions . 5. The model projects aggregate f i n a n c i a l statements based on market factors , costs a l located among corporate func-t iona l areas, and a required p r o f i t margin. 6. >. There are several areas of po tent i a l model s o p h i s t i -ca t ion , evident from the nature pf the model and i t s l i m i t a t i o n s . 7. Model computerization i s j u s t i f i e d by projected cost reductions and improved information system, despite uncertainty inherent in making system change. 8. D i f f i c u l t i e s were encountered in defining the problem of the study; a generalized algorithm usable by other companies was not designed; po tent i a l model sophis t icat ions were not incorporated into the algorithm. 9. An algorithm was designed with features (not present in the model) making future computer programming and a l t e ra t ion possible with a minimum of education time for the programmer. Computer output i s s imp l i f i ed with respect to the schedules of the ex i s t ing manually-processed model. Yet both sets of sched-ules w i l l be eas i ly comparable for program v e r i f i c a t i o n purpo s e s. In summary, information systems analysis was performed, re su l t ing in design of the means for computerization of the company's long range f i n a n c i a l planning model. L o c k h e e d M i s s i l e s & Space Company. Sunnyvale, C a l i f . B r o c h u r e s : C a p a b i l i t y i n D e p t h : a B r i e f Look a t L o c k h e e d ' s Advanced  S k i l l s i n Ocean Systems T e c h n o l o g y . 1969. O f f s h o r e P e t r o l e u m Systems. 1967. Subsea P e t r o l e u m : An Advanced O f f s h o r e P r o d u c t i o n  System f o r Deeper W a t e r s . 1968. T e c h n i c a l R e p o r t : A Subsea System f o r Deep Water  C o m p l e t i o n and P r o d u c t i o n . LMSC-682597, 1 F e b r u a r y 1969. L o c k h e e d P e t r o l e u m S e r v i c e s L t d . New W e s t m i n s t e r , B.C. B r o c h u r e : Subsea P e t r o l e u m . 1971. L o c k h e e d P e t r o l e u m S e r v i c e s L t d . New W e s t m i n s t e r , B.C. U n p u b l i s h e d documents: "A P h y s i c a l , T e c h n i c a l , and F i n a n c i a l R e p o r t Which D e s c r i b e s the L o c k h e e d System." Toby M. Symes. 1970. "Long Range. F i n a n c i a l P l a n n i n g M o d e l . " A u g u s t 1970. " P r e m i s e s f o r : 1971 Management Budget; 1970 Y e a r - E n d P e r f o r m a n c e R e p o r t ; December 1970 Management F o r e c a s t . " "1971 Management B u d g e t . " "Management F o r e c a s t - ^ Dec. 1970." " Y e a r - E n d P e r f o r m a n c e R e p o r t - Dec. 1970." 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            data-media="{[{embed.selectedMedia}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
https://iiif.library.ubc.ca/presentation/dsp.831.1-0101739/manifest

Comment

Related Items