Subjectivity in the valuation : Case study on the Finnish biotechnology industry

The thesis combines valuation and behavioral economics literature, which is not common among the Finnish management accounting research. Furthermore, the valuation is studied in biotechnology context and those type of studies are rather rare as well. The thesis studies the valuation in the Finnish biotechnology industry. The concepts of behavioral finance are employed in the empirical part of the study to explore decision-makers’ behavior in valuation processes. The main interest of this study is to explore how subjectivity of a decision-maker affects the valuation in the biotechnology industry. The valuation is studied from two perspectives. First, what is the best valuation model for biotechnology companies suggested by the valuation literature? Second, how the valuation in biotechnology industry is done in practice and how the decision-makers subjectivity affects the valuation? The literature review aims at seeking the best valuation model. The real options were found to be the most suitable valuation model for biotechnology companies, especially in the early stages of product development. The real option’s ability to take the value of the inherent options into account results in theoretically most correct valuations. The only disadvantage is the model’s complexity when compared to other models, such as discounted cash flow models. The empirical part of the study consists of a case study, which examines the valuation practices of the Finnish biotechnology companies. When it comes to the valuation models used in practice, it was found that the companies were using rather simple valuation models, which was due to two reasons. First, the interviewees did not believe in the valuation models and second, they were familiar neither with the most sophisticated models nor with all the theoretical aspects of the models they were using. The material for the study was collected with theme interviews. Four CEO’s of highly successful Finnish biotechnology companies. Strong signs of the decision-makers’ subjectivity in valuation were observed. Most obvious were the signs of framing. Furthermore, herding, excessive optimism, and overconfidence were present. All the behavioral concepts observed most likely have a severe effect on the valuation. As a result, the valuation can easily become overly optimistic, which leads to overvalued investments and to continuation of already unprofitable projects. Framing had the strongest evidence. If the product being valued is framed successfully, the risk of overvaluation is high, thus a strong belief can justify almost any value.

Experimental insights into deformation dynamics and intermittency in rapid granular shear flows

This work concerns the experimental study of rapid granular shear flows in annular Couette geometry. The flow is induced by continuous driving of the horizontal plate at the top of the granular bed in an annulus. The compressive pressure, driving torque, instantaneous bed height and rotational speed of the shearing plate are measured. Moreover, local stress fluctuations are measured in a medium made of steel spheres 2 and 3 mm in diameter. Both monodisperse packing and bidisperse packing are investigated to reveal the influence of size diversity in intermittent features of granular materials. Experiments are conducted in an annulus that can contain up to 15 kg of spherical steel balls. The shearing granular medium takes place via the rotation of the upper plate which compresses the material loaded inside the annulus. Fluctuations of compressive force are locally measured at the bottom of the annulus using a piezoelectric sensor. Rapid shear flow experiments are pursued at different compressive forces and shear rates and the sensitivity of fluctuations are then investigated by different means through monodisperse and bidisperse packings. Another important feature of rapid granular shear flows is the formation of ordered structures upon shearing. It requires a certain range for the amount of granular material (uniform size distribution) loaded in the system in order to obtain stable flows. This is studied more deeply in this thesis. The results of the current work bring some new insights into deformation dynamics and intermittency in rapid granular shear flows. The experimental apparatus is modified in comparison to earlier investigations. The measurements produce data for various quantities continuously sampled from the start of shearing to the end. Static failure and dynamic shearing ofa granular medium is investigated. The results of this work revealed some important features of failure dynamics and structure formation in the system. Furthermore, some computer simulations are performed in a 2D annulus to examine the nature of kinetic energy dissipation. It is found that turbulent flow models can statistically represent rapid granular flows with high accuracy. In addition to academic outcomes and scientific publications our results have a number of technological applications associated with grinding, mining and massive grain storages.

Timing of Capacity Change: Models for Capital Intensive Industry

The suitable timing of capacity investments is a remarkable issue especially in capital intensive industries. Despite its importance, fairly few studies have been published on the topic. In the present study models for the timing of capacity change in capital intensive industry are developed. The study considers mainly the optimal timing of single capacity changes. The review of earlier research describes connections between cost, capacity and timing literature, and empirical examples are used to describe the starting point of the study and to test the developed models. The study includes four models, which describe the timing question from different perspectives. The first model, which minimizes unit costs, has been built for capacity expansion and replacement situations. It is shown that the optimal timing of an investment can be presented with the capacity and cost advantage ratios. After the unit cost minimization model the view is extended to the direction of profit maximization. The second model states that early investments are preferable if the change of fixed costs is small compared to the change of the contribution margin. The third model is a numerical discounted cash flow model, which emphasizes the roles of start-up time, capacity utilization rate and value of waiting as drivers of the profitable timing of a project. The last model expands the view from project level to company level and connects the flexibility of assets and cost structures to the timing problem. The main results of the research are the solutions of the models and analysis or simulations done with the models. The relevance and applicability of the results are verified by evaluating the logic of the models and by numerical cases.

Analysis of Industrial Granular Flow Applications by Using Advanced Collision Models

Granular flow phenomena are frequently encountered in the design of process and industrial plants in the traditional fields of the chemical, nuclear and oil industries as well as in other activities such as food and materials handling. Multi-phase flow is one important branch of the granular flow. Granular materials have unusual kinds of behavior compared to normal materials, either solids or fluids. Although some of the characteristics are still not well-known yet, one thing is confirmed: the particle-particle interaction plays a key role in the dynamics of granular materials, especially for dense granular materials. At the beginning of this thesis, detailed illustration of developing two models for describing the interaction based on the results of finite-element simulation, dimension analysis and numerical simulation is presented. The first model is used to describing the normal collision of viscoelastic particles. Based on some existent models, more parameters are added to this model, which make the model predict the experimental results more accurately. The second model is used for oblique collision, which include the effects from tangential velocity, angular velocity and surface friction based on Coulomb's law. The theoretical predictions of this model are in agreement with those by finite-element simulation. I n the latter chapters of this thesis, the models are used to predict industrial granular flow and the agreement between the simulations and experiments also shows the validation of the new model. The first case presents the simulation of granular flow passing over a circular obstacle. The simulations successfully predict the existence of a parabolic steady layer and show how the characteristics of the particles, such as coefficients of restitution and surface friction affect the separation results. The second case is a spinning container filled with granular material. Employing the previous models, the simulation could also reproduce experimentally observed phenomena, such as a depression in the center of a high frequency rotation. The third application is about gas-solid mixed flow in a vertically vibrated device. Gas phase motion is added to coherence with the particle motion. The governing equations of the gas phase are solved by using the Large eddy simulation (LES) and particle motion is predicted by using the Lagrangian method. The simulation predicted some pattern formation reported by experiment.

Empirical Tests of Asset Pricing Models in Finnish Stock Market

Tämän tutkielman tavoitteena on selvittää mitkä riskitekijät vaikuttavat osakkeiden tuottoihin. Arvopapereina käytetään kuutta portfoliota, jotka ovat jaoteltu markkina-arvon mukaan. Aikaperiodi on vuoden 1987 alusta vuoden 2004 loppuun. Malleina käytetään pääomamarkkinoiden hinnoittelumallia, arbitraasihinnoitteluteoriaa sekä kulutuspohjaista pääomamarkkinoiden hinnoittelumallia. Riskifaktoreina kahteen ensimmäiseen malliin käytetään markkinariskiä sekä makrotaloudellisia riskitekijöitä. Kulutuspohjaiseen pääomamarkkinoiden hinnoinoittelumallissa keskitytään estimoimaan kuluttajien riskitottumuksia sekä diskonttaustekijää, jolla kuluttaja arvostavat tulevaisuuden kulutusta. Tämä työ esittelee momenttiteorian, jolla pystymme estimoimaan lineaarisia sekä epälineaarisia yhtälöitä. Käytämme tätä menetelmää testaamissamme malleissa. Yhteenvetona tuloksista voidaan sanoa, että markkinabeeta onedelleen tärkein riskitekijä, mutta löydämme myös tukea makrotaloudellisille riskitekijöille. Kulutuspohjainen mallimme toimii melko hyvin antaen teoreettisesti hyväksyttäviä arvoja.

Numerical and ExperimentalModelling of Gas Flow and Heat Transfer in the Air Gap of An Electric Machine

This work deals with the cooling of high-speed electric machines, such as motors and generators, through an air gap. It consists of numerical and experimental modelling of gas flow and heat transfer in an annular channel. Velocity and temperature profiles are modelled in the air gap of a high-speed testmachine. Local and mean heat transfer coefficients and total friction coefficients are attained for a smooth rotor-stator combination at a large velocity range. The aim is to solve the heat transfer numerically and experimentally. The FINFLO software, developed at Helsinki University of Technology, has been used in the flow solution, and the commercial IGG and Field view programs for the grid generation and post processing. The annular channel is discretized as a sector mesh. Calculation is performed with constant mass flow rate on six rotational speeds. The effect of turbulence is calculated using three turbulence models. The friction coefficient and velocity factor are attained via total friction power. The first part of experimental section consists of finding the proper sensors and calibrating them in a straight pipe. After preliminary tests, a RdF-sensor is glued on the walls of stator and rotor surfaces. Telemetry is needed to be able to measure the heat transfer coefficients at the rotor. The mean heat transfer coefficients are measured in a test machine on four cooling air mass flow rates at a wide Couette Reynolds number range. The calculated values concerning the friction and heat transfer coefficients are compared with measured and semi-empirical data. Heat is transferred from the hotter stator and rotor surfaces to the coolerair flow in the air gap, not from the rotor to the stator via the air gap, althought the stator temperature is lower than the rotor temperature. The calculatedfriction coefficients fits well with the semi-empirical equations and precedingmeasurements. On constant mass flow rate the rotor heat transfer coefficient attains a saturation point at a higher rotational speed, while the heat transfer coefficient of the stator grows uniformly. The magnitudes of the heat transfer coefficients are almost constant with different turbulence models. The calibrationof sensors in a straight pipe is only an advisory step in the selection process. Telemetry is tested in the pipe conditions and compared to the same measurements with a plain sensor. The magnitudes of the measured data and the data from the semi-empirical equation are higher for the heat transfer coefficients than thenumerical data considered on the velocity range. Friction and heat transfer coefficients are presented in a large velocity range in the report. The goals are reached acceptably using numerical and experimental research. The next challenge is to achieve results for grooved stator-rotor combinations. The work contains also results for an air gap with a grooved stator with 36 slots. The velocity field by the numerical method does not match in every respect the estimated flow mode. The absence of secondary Taylor vortices is evident when using time averagednumerical simulation.

Numerical Investigation of Flow Past a Circular Cylinder and in a Staggered Tube Bundle Using Various Turbulence Models

Transitional flow past a three-dimensional circular cylinder is a widely studied phenomenon since this problem is of interest with respect to many technical applications. In the present work, the numerical simulation of flow past a circular cylinder, performed by using a commercial CFD code (ANSYS Fluent 12.1) with large eddy simulation (LES) and RANS (κ - ε and Shear-Stress Transport (SST) κ - ω! model) approaches. The turbulent flow for ReD = 1000 & 3900 is simulated to investigate the force coefficient, Strouhal number, flow separation angle, pressure distribution on cylinder and the complex three dimensional vortex shedding of the cylinder wake region. The numerical results extracted from these simulations have good agreement with the experimental data (Zdravkovich, 1997). Moreover, grid refinement and time-step influence have been examined. Numerical calculations of turbulent cross-flow in a staggered tube bundle continues to attract interest due to its importance in the engineering application as well as the fact that this complex flow represents a challenging problem for CFD. In the present work a time dependent simulation using κ – ε, κ - ω! and SST models are performed in two dimensional for a subcritical flow through a staggered tube bundle. The predicted turbulence statistics (mean and r.m.s velocities) have good agreement with the experimental data (S. Balabani, 1996). Turbulent quantities such as turbulent kinetic energy and dissipation rate are predicted using RANS models and compared with each other. The sensitivity of grid and time-step size have been analyzed. Model constants sensitivity study have been carried out by adopting κ – ε model. It has been observed that model constants are very sensitive to turbulence statistics and turbulent quantities.

Methods and Models for Accelerating Dynamic Simulation of Fluid Power Circuits

The objective of this dissertation is to improve the dynamic simulation of fluid power circuits. A fluid power circuit is a typical way to implement power transmission in mobile working machines, e.g. cranes, excavators etc. Dynamic simulation is an essential tool in developing controllability and energy-efficient solutions for mobile machines. Efficient dynamic simulation is the basic requirement for the real-time simulation. In the real-time simulation of fluid power circuits there exist numerical problems due to the software and methods used for modelling and integration. A simulation model of a fluid power circuit is typically created using differential and algebraic equations. Efficient numerical methods are required since differential equations must be solved in real time. Unfortunately, simulation software packages offer only a limited selection of numerical solvers. Numerical problems cause noise to the results, which in many cases leads the simulation run to fail. Mathematically the fluid power circuit models are stiff systems of ordinary differential equations. Numerical solution of the stiff systems can be improved by two alternative approaches. The first is to develop numerical solvers suitable for solving stiff systems. The second is to decrease the model stiffness itself by introducing models and algorithms that either decrease the highest eigenvalues or neglect them by introducing steady-state solutions of the stiff parts of the models. The thesis proposes novel methods using the latter approach. The study aims to develop practical methods usable in dynamic simulation of fluid power circuits using explicit fixed-step integration algorithms. In this thesis, twomechanisms whichmake the systemstiff are studied. These are the pressure drop approaching zero in the turbulent orifice model and the volume approaching zero in the equation of pressure build-up. These are the critical areas to which alternative methods for modelling and numerical simulation are proposed. Generally, in hydraulic power transmission systems the orifice flow is clearly in the turbulent area. The flow becomes laminar as the pressure drop over the orifice approaches zero only in rare situations. These are e.g. when a valve is closed, or an actuator is driven against an end stopper, or external force makes actuator to switch its direction during operation. This means that in terms of accuracy, the description of laminar flow is not necessary. But, unfortunately, when a purely turbulent description of the orifice is used, numerical problems occur when the pressure drop comes close to zero since the first derivative of flow with respect to the pressure drop approaches infinity when the pressure drop approaches zero. Furthermore, the second derivative becomes discontinuous, which causes numerical noise and an infinitely small integration step when a variable step integrator is used. A numerically efficient model for the orifice flow is proposed using a cubic spline function to describe the flow in the laminar and transition areas. Parameters for the cubic spline function are selected such that its first derivative is equal to the first derivative of the pure turbulent orifice flow model in the boundary condition. In the dynamic simulation of fluid power circuits, a tradeoff exists between accuracy and calculation speed. This investigation is made for the two-regime flow orifice model. Especially inside of many types of valves, as well as between them, there exist very small volumes. The integration of pressures in small fluid volumes causes numerical problems in fluid power circuit simulation. Particularly in realtime simulation, these numerical problems are a great weakness. The system stiffness approaches infinity as the fluid volume approaches zero. If fixed step explicit algorithms for solving ordinary differential equations (ODE) are used, the system stability would easily be lost when integrating pressures in small volumes. To solve the problem caused by small fluid volumes, a pseudo-dynamic solver is proposed. Instead of integration of the pressure in a small volume, the pressure is solved as a steady-state pressure created in a separate cascade loop by numerical integration. The hydraulic capacitance V/Be of the parts of the circuit whose pressures are solved by the pseudo-dynamic method should be orders of magnitude smaller than that of those partswhose pressures are integrated. The key advantage of this novel method is that the numerical problems caused by the small volumes are completely avoided. Also, the method is freely applicable regardless of the integration routine applied. The superiority of both above-mentioned methods is that they are suited for use together with the semi-empirical modelling method which necessarily does not require any geometrical data of the valves and actuators to be modelled. In this modelling method, most of the needed component information can be taken from the manufacturer’s nominal graphs. This thesis introduces the methods and shows several numerical examples to demonstrate how the proposed methods improve the dynamic simulation of various hydraulic circuits.

Modelling of combustion and sorbent reactions in three-dimensional flow environment of a circulating fluidized bed furnace

This thesis presents a three-dimensional, semi-empirical, steady state model for simulating the combustion, gasification, and formation of emissions in circulating fluidized bed (CFB) processes. In a large-scale CFB furnace, the local feeding of fuel, air, and other input materials, as well as the limited mixing rate of different reactants produce inhomogeneous process conditions. To simulate the real conditions, the furnace should be modelled three-dimensionally or the three-dimensional effects should be taken into account. The only available methods for simulating the large CFB furnaces three-dimensionally are semi-empirical models, which apply a relatively coarse calculation mesh and a combination of fundamental conservation equations, theoretical models and empirical correlations. The number of such models is extremely small. The main objective of this work was to achieve a model which can be applied to calculating industrial scale CFB boilers and which can simulate all the essential sub-phenomena: fluid dynamics, reactions, the attrition of particles, and heat transfer. The core of the work was to develop the model frame and the required sub-models for determining the combustion and sorbent reactions. The objective was reached, and the developed model was successfully used for studying various industrial scale CFB boilers combusting different types of fuel. The model for sorbent reactions, which includes the main reactions for calcitic limestones, was applied for studying the new possible phenomena occurring in the oxygen-fired combustion. The presented combustion and sorbent models and principles can be utilized in other model approaches as well, including other empirical and semi-empirical model approaches, and CFD based simulations. The main achievement is the overall model frame which can be utilized for the further development and testing of new sub-models and theories, and for concentrating the knowledge gathered from the experimental work carried out at bench scale, pilot scale and industrial scale apparatus, and from the computational work performed by other modelling methods.

CFD Modelling of Direct Contact Condensation in Suppression Pools by Applying Condensation Models of Separated Flow

The condensation rate has to be high in the safety pressure suppression pool systems of Boiling Water Reactors (BWR) in order to fulfill their safety function. The phenomena due to such a high direct contact condensation (DCC) rate turn out to be very challenging to be analysed either with experiments or numerical simulations. In this thesis, the suppression pool experiments carried out in the POOLEX facility of Lappeenranta University of Technology were simulated. Two different condensation modes were modelled by using the 2-phase CFD codes NEPTUNE CFD and TransAT. The DCC models applied were the typical ones to be used for separated flows in channels, and their applicability to the rapidly condensing flow in the condensation pool context had not been tested earlier. A low Reynolds number case was the first to be simulated. The POOLEX experiment STB-31 was operated near the conditions between the ’quasi-steady oscillatory interface condensation’ mode and the ’condensation within the blowdown pipe’ mode. The condensation models of Lakehal et al. and Coste & Lavi´eville predicted the condensation rate quite accurately, while the other tested ones overestimated it. It was possible to get the direct phase change solution to settle near to the measured values, but a very high resolution of calculation grid was needed. Secondly, a high Reynolds number case corresponding to the ’chugging’ mode was simulated. The POOLEX experiment STB-28 was chosen, because various standard and highspeed video samples of bubbles were recorded during it. In order to extract numerical information from the video material, a pattern recognition procedure was programmed. The bubble size distributions and the frequencies of chugging were calculated with this procedure. With the statistical data of the bubble sizes and temporal data of the bubble/jet appearance, it was possible to compare the condensation rates between the experiment and the CFD simulations. In the chugging simulations, a spherically curvilinear calculation grid at the blowdown pipe exit improved the convergence and decreased the required cell count. The compressible flow solver with complete steam-tables was beneficial for the numerical success of the simulations. The Hughes-Duffey model and, to some extent, the Coste & Lavi´eville model produced realistic chugging behavior. The initial level of the steam/water interface was an important factor to determine the initiation of the chugging. If the interface was initialized with a water level high enough inside the blowdown pipe, the vigorous penetration of a water plug into the pool created a turbulent wake which invoked the chugging that was self-sustaining. A 3D simulation with a suitable DCC model produced qualitatively very realistic shapes of the chugging bubbles and jets. The comparative FFT analysis of the bubble size data and the pool bottom pressure data gave useful information to distinguish the eigenmodes of chugging, bubbling, and pool structure oscillations.

Variance reduction properties of dynamic hedging models - empirical evidence from BRICS countries

This Master’s Thesis analyses the effectiveness of different hedging models on BRICS (Brazil, Russia, India, China, and South Africa) countries. Hedging performance is examined by comparing two different dynamic hedging models to conventional OLS regression based model. The dynamic hedging models being employed are Constant Conditional Correlation (CCC) GARCH(1,1) and Dynamic Conditional Correlation (DCC) GARCH(1,1) with Student’s t-distribution. In order to capture the period of both Great Moderation and the latest financial crisis, the sample period extends from 2003 to 2014. To determine whether dynamic models outperform the conventional one, the reduction of portfolio variance for in-sample data with contemporaneous hedge ratios is first determined and then the holding period of the portfolios is extended to one and two days. In addition, the accuracy of hedge ratio forecasts is examined on the basis of out-of-sample variance reduction. The results are mixed and suggest that dynamic hedging models may not provide enough benefits to justify harder estimation and daily portfolio adjustment. In this sense, the results are consistent with the existing literature.

Managing and utilizing information flow for new products’ periodic account sales process

The goal was to understand, document and module how information is currently flown internally in the largest dairy organization in Finland. The organization has undergone radical changes in the past years due to economic sanctions between European Union and Russia. Therefore, organization’s ultimate goal would be to continue its growth through managing its sales process more efficiently. The thesis consists of a literature review and an empirical part. The literature review consists of knowledge management and process modeling theories. First, the knowledge management discusses how data, information and knowledge are exchanged in the process. Knowledge management models and processes are describing how knowledge is created, exchanged and can be managed in an organization. Secondly, the process modeling is responsible for visualizing information flow through discussion of modeling approaches and presenting different methods and techniques. Finally, process’ documentation procedure was presented. In the end, a constructive research approach was used in order to identify process’ related problems and bottlenecks. Therefore, possible solutions were presented based on this approach. The empirical part of the study is based on 37 interviews, organization’s internal data sources and theoretical framework. The acquired data and information were used to document and to module the sales process in question with a flowchart diagram. Results are conducted through construction of the flowchart diagram and analysis of the documentation. In fact, answers to research questions are derived from empirical and theoretical parts. In the end, 14 problems and two bottlenecks were identified in the process. The most important problems are related to approach and/or standardization for information sharing, insufficient information technology tool utilization and lack of systematization of documentation. The bottlenecks are caused by the alarming amount of changes to files after their deadlines.

Fluid flow and dispersion predictions in porous media by utilizing advanced numerical methods

Diplomityön tavoitteena oli tarkastella numeerisen virtauslaskennan avulla virtaukseen liittyviä ilmiöitä ja kaasun dispersiota. Diplomityön sisältö on jaettu viiteen osaan; johdantoon, teoriaan, katsaukseen virtauksen mallinnukseen huokoisessa materiaalissa liittyviin tutkimusselvityksiin, numeeriseen mallinnukseen sekä tulosten esittämiseen ja johtopäätöksiin. Diplomityön alussa kiinnitettiin huomiota erilaisiin kokeellisiin, numeerisiin ja teoreettisiin mallinnusmenetelmiin, joilla voidaan mallintaa virtausta huokoisessa materiaalissa. Kirjallisuusosassa tehtiin katsaus aikaisemmin julkaistuihin puoliempiirisiin ja empiirisiin tutkimusselvityksiin, jotka liittyvät huokoisen materiaalin aiheuttamaan painehäviöön. Numeerisessa virtauslaskenta osassa rakennettiin ja esitettiin huokoista materiaalia kuvaavat numeeriset mallit käyttäen kaupallista FLUENT -ohjelmistoa. Työn lopussa arvioitiin teorian, numeerisen virtauslaskennan ja kokeellisten tutkimusselvitysten tuloksia. Kolmiulotteisen huokoisen materiaalinnumeerisessa mallinnuksesta saadut tulokset vaikuttivat lupaavilta. Näiden tulosten perusteella tehtiin suosituksia ajatellen tulevaa virtauksen mallinnusta huokoisessa materiaalissa. Osa tässä diplomityössä esitetyistä tuloksista tullaan esittämään 55. Kanadan Kemiantekniikan konferenssissa Torontossa 1619 Lokakuussa 2005. ASME :n kansainvälisessä tekniikan alan julkaisussa. Työ on hyväksytty esitettäväksi esitettäväksi laskennallisen virtausmekaniikan (CFD) aihealueessa 'Peruskäsitteet'. Lisäksi työn yksityiskohtaiset tulokset tullaan lähettämään myös CES:n julkaisuun.