Introduction

Let's get down to business!

Your deliverables are:
1. A complete set of decisions for your company for Round 1. (We will show you exactly
what to do. Optionally you can play through Round 4.)
2. A quiz.
If you understand how to perform six basic tactics, you will be able to develop and execute
a strategy for your company. The tactics are:
Tactic 1: How do we reposition a product?
Tactic 2: How do we market a product?
Tactic 3: How do we schedule production and manage inventory?
Tactic 4: How do we modify plant and equipment?
Tactic 5: How do we raise money and pay debt?
Tactic 6: How do we invent a new product?
The quiz will ask you to match each basic tactic with a set of action steps. To complete the
Rehearsal, you must get 100% on the quiz, but you can take it as many times as you need.
After you complete the quiz, you can will put your decisions into competition with two
computer managed companies and advance the clock one year. You can then examine the
results to see how you did.
You will find it easier to do the Rehearsal if you use these three documents:
This Rehearsal script (PDF available here)
The Capstone Courier (click the Reports link on the Rehearsal menu in the right
panel)
The Industry Conditions report (click the Reports link on the Rehearsal menu)
Tip! The "expand/collapse" link in the frame separator will open and close this area, giving
you easier access to the Rehearsal Decision Workbook.
Good luck!
Please Note: During the Rehearsal, you are assigned to the "Andrews" company. Do not
worry if you have been assigned to a different company. When the real simulation begins
you will make decisions for your assigned company.
Tactic 1: Repositioning a Product
Instructions
1. In the Rehearsal Decision Spreadsheet (to the right of the Expand/Collapse bar),
select R&D from the Decisions menu.

2. Changing a product's Performance and Size repositions it on the Perceptual Map. If a

product is moved outside of the Rough Cut circles, it will have 0 sales; customers will
not want that product.
3. Slightly improve Able by repositioning it to a Performance of 5.8 and a Size 14.2.
Change Able's Mean Time Before Failure (or MTBF) to 18000. Click Recalculate. On
the Perceptual Map, the magenta name is where your product will be when the
project completes. The black name is where your product is today, January 1st.
4. Reposition Acre to MTBF 13000.
5. Reposition Adam to Performance 9.0, Size 11.0, MTBF 24000.
6. Reposition Aft to Performance 10.4, Size 15.0, MTBF 26000.
7. Reposition Agape to Performance 4.7, Size 9.8.
8. Click Recalculate. These projects will help your products keep up with changing
customer demand- as time goes on, customers want smaller, better performing
products.
9. In the menu, select File and click Update Official Decisions.
Observe
1. Repositioning a product takes time: The bigger the change, the longer the time; the
more projects underway, also the longer the time.

2. Moving a product on the Perceptual Map cuts its perceived age in half. See the Age
Profile Chart. A saw-tooth line shows you a product's age before and after the
revision date.
3. R&D projects are billed at a rate of $1 million per year. A three-month project costs
$250 thousand. A six-month project costs $500 thousand.
4. Material costs are driven by the position on the Perceptual Map and by the MTBF
specification; the higher the technology and the greater the reliability, the higher the
material costs.
What is this tactic about?
Positioning a product means choosing product attributes that customers want. You have five
customer types or segments - Traditional, Low End, High End, Performance, and Size. They
are interested in four product characteristics - size, performance (which together are plotted
on the Perceptual Map), Age and Reliability. Each customer segment has different
preferences. Your task is to give customers what they want, and that requires repositioning
because the customer expectations change over time.
For example, a year from now customers will expect different size and performance
specifications, and your product will be a year older. You need to plan a revision today that
will give customers what they want a year from now.
Where do we get the data to plan a revision?
We need two reports - The Capstone Courier and the Industry Conditions Report. The
Courier was published yesterday, December 31st. We are making decisions on January 1st
for the upcoming year.

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In the Courier we will find a Segment Analysis page associated with each segment. On the
page we will find a "Customer Buying Criteria" box. It tells us what customers wanted
yesterday. In the Industry Conditions Report, we will find how quickly those expectations
are changing. For example, suppose the Courier says that Traditional customers wanted a
performance of 5.0 yesterday. The Industry Conditions Report tells us that Traditional
customers expect Performance to improve by 0.7 each year. Therefore at the end of this
year, they will want a performance of 5.7.
We need to know four things. When our product comes out of R&D, what will customers
want for performance, size, age and reliability?
How do we make the decisions?
On the R&D spreadsheet, enter new performance, size, and MTBF specifications. Click
"Recalculate." Observe the following:
On the Perceptual Map, our product appears twice. The black letters show where our
product is today. We will make and sell the product at those specifications until the product
emerges from R&D. The magenta letters show where our product will be when it emerges
from R&D.
In the table we see a Revision Date and an Age at Revision. Whenever we move a product
on the map, no matter how far it moves, the day it emerges from R&D the customers
perceive it as being "new and improved," and they cut its age in half. We can see this
graphically in the Age Profile chart at the bottom of the spreadsheet. If a product is revised
in the middle of the year, its age profile will look like a saw-tooth.
In the Material Cost chart we can see the old product's material cost versus the revised
product. Two things drive material cost - the positioning on the map, and the MTBF
specification.
Are there tips to keep in mind?
Try to end your projects in December. Projects can only begin on January 1st. If an old
project is still underway on January 1st, we cannot begin a new one. Usually we should
keep projects under twelve months.
The more projects we add, the longer each project takes. This can cause earlier project
completion dates to slip. Always check the revision dates for all projects before saving

decisions.
Long projects can move a product from one segment to another - for example, from
Performance to Traditional. This can take two or even three years. Plan the project as a
series of one-year steps, with each step ending in December.
What do we need to do beyond the Rehearsal when the real competition begins?
1. Using the Courier and Industry Conditions reports, find out what customers will want
next year.
2. On the R&D spreadsheet, make decisions for Able, Acre, Adam, Aft and Agape.
3. Save your decisions. Click File and Update Official Decisions.

Tactic 2: Marketing a Product

Instructions
1. In the Rehearsal Decision Spreadsheet (to the right of the Expand/Collapse bar),
select Marketing from the Decisions menu.
2. Set Able's marketing mix to Price $29.00, Promo $1200, Sales $1400, Forecast
1850. Click Recalculate. (Promo, Sales and Forecast numbers are in thousands so
$1200 means $1.2 Million)
3. Set Acre's marketing mix to Price $20.50, Promo $1100, Sales $1300, Forecast
2500. Click Recalculate.
4. Set Adam's marketing mix to Price $39.00, Promo $1000, Sales $1100, Forecast
500. Click Recalculate.
5. Set Aft's marketing mix to Price $34.00, Promo $900, Sales $1000, Forecast 600.
Click Recalculate.
6. Set Agape's marketing mix to Price $34.50, Promo $950, Sales $1100, Forecast 550.
Click Recalculate.
7. In the menu, select File and click Update Official Decisions.
Observe
1. The Computer Prediction for demand is only useful for benchmarking. The computer
has no knowledge of what your competitors are doing. It assumes each competitor
will offer one unremarkable product in every segment. However, the Computer
Prediction is useful for benchmarking the impact of changes to your marketing mix
upon demand.
2. Until you supply a number to Your Sales Forecast, the spreadsheet uses the
Computer Prediction to forecast demand and calculate Gross Revenue, Variable
Costs, etc. Always override the Computer Prediction with a forecast of your own.
What is this tactic about?
Marketers talk about "the 4 P's of marketing - price, promotion, place and product." In this
tactic we consider all four aspects of the marketing mix to estimate our unit demand.
Price - each segment has an expected price range. Price serves two functions. Between
segments, price distinguishes one segment from another - for example, Low End customers
expect lower prices than High End customers. Within a segment, price drives a demand
curve - lower prices generate higher demand than higher prices.
Promotion - each product has a promotion budget that drives customer awareness. Think of
promotion as "what happens before the sale." If a potential customer knows about your
product before they begin shopping, they are more likely to consider your product.
Place - each product has a sales budget that drives customer accessibility. Think of place as
"what happens during and after the sale." If customers find it easy to examine your
product, talk to your employees, and take delivery, they are more likely to choose your
product.

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Product - in the context here, we are concerned with forecasting demand so that we can
produce adequate inventory. After all, no inventory, no sales. In a broader sense, product
design - the invention and positioning of a product - are also marketing concerns.

Where do we get the data to market our product?

The Team Member Guide and the Capstone Courier. The Team Member Guide discusses all
four elements in section 4.2 Marketing.
The Courier presents market segment pages that tell us what customers want and contrast
the competing products. The market share page breaks down demand by product and
segment. The Perceptual Map plots all the product positions on a map.
How do we make the decisions?
Bring up the Marketing spreadsheet.
The marketing spreadsheet is designed to give you some benchmarking feedback about
demand as you change values for price, promo, and sales. However, because the computer
has no information about your competitor's decisions, the computer's prediction is only
useful for testing elasticities.
For example, drop Able's price by $1 and click recalculate. The computer's forecast will
predict an increase in sales. However, you cannot trust that forecast. Why? The computer
has no idea what your competitors will do. They might drop price $2, or raise prices. The
computer assumes your product will compete with mediocre products.
On the other hand, a benchmark can be useful. As you change prices and budgets, you can
get some sense for their impact upon demand and contribution margin.
Are there tips to keep in mind?
Try putting pessimistic forecasts into "Your Sales Forecast." You would like to know what
your cash position looks like in your worst case scenario. In the worst case, sales are poor,
but you built inventory for the best case. As a consequence, all of your cash is tied up in the
inventory sitting in the warehouse. You want to have at least one dollar in Cash in your
worst case scenario.
What do we need to do beyond the Rehearsal when the real competition begins?
1. For each product, use the Courier's segment page to determine what customers
expect for Price and to compare your product with competing products' awareness
and accessibility.
2. Decide upon a marketing mix for each product. For example, you might lower Able's
price a dollar, and increase its promotion and sales budgets by $100 thousand. For a
demand forecast, enter last year's demand or another number you believe is a worst
case for demand.
3. Save the decisions. Under File, select Update Official Decisions.
Tactic 3: Scheduling Production

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Instructions
1. In the Rehearsal Decision Spreadsheet (to the right of the Expand/Collapse bar),
select Production from the Decisions menu.
2. For Production Schedule:
o Set Able to 2100
o Set Acre to 2800
o Set Adam to 600
o Set Aft to 600
o Set Agape to 550 (Production Schedule units are in thousands; 550 means
550,000)
Click Recalculate
In the menu, select File and click Update Official Decisions.
Observe
1. Production After Adjustments is what we will actually produce.
2. Our inventory this year will be the Inventory On Hand with which we begin the year
plus our Production After Adjustments.
3. Our workforce complement (the number of workers required to meet our production

schedule) varies with number of units we produce. The more units produced, the
more workers we need.
4. There are two shifts - first and second. Second shift is paid a 50% premium over first
shift.
5. If the schedule requires a second shift, but there are not enough second shift
workers, first shift workers produce on overtime at a 50% premium over first shift.
6. Labor cost/unit is the average cost over all shifts and overtime to meet the
production schedule.
7. Material cost is not affected by the production schedule.
8. Contribution margin is defined as (Price - Unit Cost - Inventory Carry Cost) / Price. It
is the percentage of the price left over after paying variable costs.
What is this tactic about?
At the simplest level, we must have inventory to sell, and in this tactic we tell our plant how
many units to produce. We will offer our production, plus any inventory left over from last
year, for sale to our customers.
In a perfect world we would produce exactly enough inventory to meet demand.
Unfortunately, we cannot be certain what your competitors will do. Therefore, we must
manage two risks:
1. Stocking out. If we run out of inventory, we give our customers and our profits to
competitors.
2. Carrying too much inventory. We pay for inventory out of cash. If too much ends up
in the warehouse, we could run out of cash and take an emergency loan.

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Where do we get the data to plan a production schedule?
The Team Member Guide, The Capstone Courier, and our marketing forecast.
The Team Member Guide discusses production in section 4.3. The Courier offers starting
inventory and capacity constraints on the Production page.
In Tactic 3 Marketing, we tried pessimistic sales forecasts. We said something like, "In our
worst case, we believe we can sell 900 thousand units of Able." But if 900 thousand units is
our worst case, what is our best case? We would like to have enough inventory to satisfy
our best case. Otherwise we stock out.
Suppose we decide our best case is 1200 units of Able, and that we have 100 already sitting
in the warehouse left over from last year. We would produce 1100.
If our worst case comes true, we end the year with 300 thousand units of inventory. If our
best case comes true, we end the year with 0 inventory but every customer is served.
In the worst case, we would have to buy 300 thousand units of inventory. At $20 per unit,
that would tie up $6 million of our cash. We can see how much cash we would have left by
bringing up the Proforma Balance Sheet. As long as we have $1 left in cash in our worst
case, we can say, "We planned for the worst, but we hope for the best."
How do we make the decisions?
Bring up the Production spreadsheet.
Your Unit Sales Forecast (ideally our worst case) was brought over from the Marketing
spreadsheet, and our Inventory On Hand (left over from last year) is shown below it. We
have our best case forecast.
Schedule enough production to meet our best case forecast.
Are there tips to keep in mind?
Consider the question, "How many months of inventory are we willing to carry?" For
example, three months of inventory means three months of sales sitting in the warehouse.
That is a policy decision. If your policy is 3 months, then your worst case sales are 9
months of sales, and your best case is 12/9ths or 4/3rds of your worst case. To get our best
case, we need only multiply our worst case by 4/3rds or 133%.
What do we need to do beyond the Rehearsal when the real competition begins?
1. Schedule enough production to meet your best case demand for each product.

2. Save the decisions. Under File, select Update Official Decisions.

Tactic 4: Modifying Plant and Equipment
Instructions

1. In the Rehearsal Decision Spreadsheet (to the right of the Expand/Collapse bar),
select Production from the Decisions menu.
2. For Buy/Sell capacity:
o a. Sell 300 thousand units of capacity for Able by entering -300.
o b. Buy 400 thousand units of capacity for Acre by entering 400.
For New Automation Rating:
1. Increase Able's Automation to 5.0.
2. Increase Acre's Automation to 6.0.
Click Recalculate
In the menu, select File and click Update Official Decisions.
Observe
1. Selling capacity recovers 65% of its original value. Capacity is sold on January 1st.
2. Buying capacity takes one year to get delivery. You order capacity on January 1st. It
arrives on December 31st.
3. Similarly, automation changes take a year.
4. Your investment is totaled in the right-most column. The total investment cannot
exceed Max Investment.
5. Our inventory this year will be the Inventory On Hand with which we begin the year
plus our Production After Adjustments.
What is this tactic about?
Our plant produces our inventory. Capacity determines how many units we can produce in a
year. Automation determines the labor content in each unit.
Occasionally we need to buy or sell capacity. Investing in automation reduces our labor
costs. If we expand capacity or automation, we must also raise the money to pay for it.
Capacity is rated as, "The number of units that can be produced in a year on first shift." A
capacity of 800 means that we could produce up to 800 thousand units on first shift. We
could produce another 800 on second shift, but our labor costs would increase 50%.
Capacity and automation are ordered on January 1st and arrive on December 31st,
effectively one year later.
Suppose that we have capacity for 800. We expect demand to be 1200 next year. We could
produce 800 on first shift and 400 on second. Or we could increase capacity to 1200 and
produce everything on first shift. Or we could increase automation - we would still produce
400 on a second shift, but at some point our labor costs fall enough that we are indifferent.
How do we make the decisions?
Bring up the Production spreadsheet.

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Under "Physical Plant" we see "Buy/Sell Capacity." To buy an additional 100 thousand units
of first shift capacity, enter "100." To sell 100 thousand units, enter "-100."
Automation is rated on a scale of 1 to 10. To increase automation enter a new value.
The cost of the investment appears as a positive number when buying equipment, and as a
negative number when selling.
Are there tips to keep in mind?
As a rule of thumb, always fully fund plant and equipment purchases. Sources of funding
include stock issues, bond issues, and depreciation. (Later in the tutorial we will discuss
"why.") For example, if we are spending $20 million on new plant, we should be able to add
together stock issues, bond issues and depreciation equaling $20 million. Like any rule of
thumb there are exceptions, but you should be able to explain why the exception is
appropriate before making the exception.
What do we need to do beyond the Rehearsal when the real competition begins?

1. Make any adjustments to capacity

2. Increase Acre's capacity by 200 thousand units.
3. Increase Aft's automation to 6.0.
4. Observe the net cost of these decisions
5. On the Finance worksheet, issue a bond to fund the plant improvements.
(Alternatively, use a mix of issue stock and a bond).
Tactic 5: Raising Money and Paying Debt
Instructions
1. In the Rehearsal Decision Spreadsheet (to the right of the Expand/Collapse bar),
select Finance from the Decisions menu.
2. For Issue Stock, issue $9 million of new stock by entering 9000 in the Issue Stock
cell..
3. For Issue Long Term Debt, issue $9 million of new bonds by entering 9000 in the
Issue Long Term Debt cell.
4. For Borrow, raise $7 million of current debt by entering 7000 in the Borrow cell.
5. Leave the Accounts Receivable and Accounts Payable policies at 30 days.
6. Click Recalculate
7. In the menu, select File and click Update Official Decisions.
8. In the menu, select Balance Sheet from the Proformas and review the balance sheet.
9. In the menu, select Income Statement from the Proformas and review the income
statement.
10. In the menu, select Cash Flow Statement from the Proformas and review the cash
flow statement.
Observe
1. Your totals for plant improvement are brought forward to the finance page from
Production.
2. You cannot issue more new stock than the Max Stock Issue limit.

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3. You cannot retire more outstanding stock than the Max Stock Retire limit.
4. You are not required to pay a dividend. If you pay a dividend, it is expressed in
dollars per share.
5. Your cash position as of yesterday, and your cash position that is forecast for the end
of this year, are presented at the bottom of the left column.
6. You cannot issue more bonds that the Maximum issue this year limit.
7. Your Accounts Receivable and Accounts Payable lags are expressed in days.
Increasing your Receivables lag effectively gives a loan to customers. Increasing
your Payables lag effectively extracts a loan from vendors.
8. Your proforma financial statements estimate what your financial statements will look
like at the end of the year, assuming that your sales forecast is exactly correct.
What is this tactic about?
Ultimately this tactic is about funding our assets. Assets are paid for with debt and equity.
Consequences affect our performance ratios, our profitability, our growth, even our
company's viability.
How do we make the decisions?
Bring up the Finance worksheet.
We can raise debt two ways - with short term debt from our banker, and with long term
debt from our bondholders. Values are entered in thousands. For example, 4000 means $4
million dollars.
We can raise equity with stock issues, and by retaining the profits we make instead of
paying a dividend. Stock issues are entered in thousands.
We can reduce debt by paying down our current debt or by paying bonds early.
We can reduce equity by repurchasing stock or by paying a dividend. Dividends are entered
in dollars per share. For example, $1.49 means we will pay $1.49 to every share

outstanding.
There are two credit policies which can also affect our balance sheet - Accounts Receivable
and Accounts Payable credit policies. Both are expressed in days. For example, 30 days A/R
policy means that we give customers 30 days to pay our invoices.
Are there tips to keep in mind?
Keep the ratio of assets to equity (or leverage) between 33% and 66%. What does this
mean? Any asset is paid for with a mix of debt and equity. Let's use a personal asset for
discussion purposes. When a person buys a house, they make a down payment - say 20%.
The down payment is equity. That mix is 20% equity and 80% debt, or a leverage of 5.0.
(For every dollar of asset, $0.20 would be in equity, so assets/equity is 5.0.) In business a
leverage is 5.0 is very risky. It would be very difficult to make a profit after interest
payments, and the risk of default is high. At 33% equity, our leverage is 3.0. Risk becomes

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more tolerable. At 50%, our leverage is 2.0 and comfort levels high. At 66% lenders are
eager to lend us money at favorable rates.
What do we need to do for the Rehearsal?
We have already issued stocks and bonds to cover plant purchases.
However, we have not considered current debt or a dividend.
1. Examine your Proforma Balance sheet.
2. Add together Inventory and Accounts Receivable. These are current assets, and they
should be funded by current liabilities and working capital. Current liabilities are the
sum of Accounts Payable and Current Borrowing.
3. There is a rule of thumb that you can use to calculate how much money to borrow
from your banker as current debt. Add together Inventory + Accts Receivable.
Roughly half should be funded with current liabilities. Therefore, your current debt =
(Inventory + Accounts Receivable)/2 - Accounts Payable.
4. Borrow the result on the Finance worksheet as new current debt in the "Borrow
($000)" cell.
5. On the Finance worksheet, examine the "Earnings Per Share" cell under common
stock. Assuming it is positive, how much of this do you wish to give to stockholders
as a dividend? Suppose your answer is half. Enter half the EPS in the Dividend Per
Share cell.
Tactic 6: Inventing a New Product
Instructions
1. In the Rehearsal Decision Spreadsheet (to the right of the Expand/Collapse bar),
select R&D from the Decisions menu.
2. In the first free row enter a Name Ace, set performance to 10.0, set size to 10.0, and
set MTBF to 25000. Click Recalculate.
3. Select Production from the Decisions menu.
4. For Buy/Sell capacity, buy 400,000 units of capcity by entering 400. For New Autom.
Rating enter 4.0. Click Recalculate.
5. Select Finance from the Decisions menu.
6. Increase Issue Stock to $13 million by entering 13000.
7. Increase Issue Long Term debt to $13 million by entering 13000.
8. In the menu, select File and click Update Official Decisions.
Observe
1. R&D for new products takes longer - typically between 1.4 and 3.0 years.
2. Since it takes a year to take delivery on new capacity, order capacity and automation
one year before the product emerges from R&D.
3. Finance the new plant with a mix of stock issues and bonds.
What is this tactic about?

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Sometimes we want to invent new products. Perhaps we are replacing an old product, or

perhaps we are increasing our product breadth. We want to give customers what they want.
The process is almost the same as repositioning a product. However, we need to broaden
our perspective to include plant and equipment for our new product, and raising the money
to buy the plant.
Inventing a product takes longer than repositioning - typically between 1.4 and 3.0 years,
although most products are ready 1.6 to 2.0 years.
Where do we get the data to plan a new product?
We need two reports - The Capstone Courier, and the Industry Conditions Report. The
Courier was published yesterday, December 31st. We are making decisions on January 1st.
We need to think ahead two to three years.
As with repositioning, we use the Segment Analysis page of the Courier find out what
customers wanted yesterday, then use the Industry Conditions report to project into the
future. We need to know four things. When our product comes out of R&D, what will
customers want for performance, size, age and reliability?
We also need to get a sense for our capacity requirements. You will find the segment size
and growth rate for next year on the Segment Analysis page. However, capacity must be
evaluated in the face of competition. We can get a sense for competitors by looking at the
Segment Analysis, the Perceptual Map, and the Production Analysis page.
Our plan includes the product specifications, our plant and equipment requirements, and our
funding requirements.
How do we make the decisions?
Suppose we decide to create a new High End product called "Ace." Looking two years into
the future, we will give Ace a Performance of 10.0, Size of 10.0, and MTBF of 25000. We
hope to capture 1/6th of the market, so we will plan for 400 units of capacity at an
automation level of 4.0. This will require an investment of $8.8 million. We will raise $4.4
million with stock and $4.4 million with bonds.
On the R&D spreadsheet, we enter the product specifications. Name - Ace, Performance
10.0, Size 10.0, MTBF 25000. Click Calculate.
On the Production spreadsheet, we enter our capacity and automation requirements.
Capacity 400. Automation 4.0. We read the cost of the investment.
On the Finance spreadsheet, we raise the capital to fund our new plant. Issue Stock of $4
million (entered as 4000 because everything is in thousands). Issue Long Term Debt of $4.4
million (entered as 4400).
Under File, click Update Official Decisions.
Are there tips to keep in mind?

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Do the repositioning decisions first. When you add the new product decisions, the revision
dates will slip. Adjust the repositioning projects so they end before January 1st if possible.
New products often emerge in mid-year. But plant and equipment are purchased on January
1st and arrive on December 31st. Therefore, our plant will sit idle for some period of time
until the product emerges from R&D. For example, suppose our product emerges in July of
next year. The plant would sit idle for 7 months. Sometimes it makes sense to either wait
until next year to buy the plant, or modify our project to end late in the year. For example,
if we modified our design to end in December, we could postpone purchasing plant until
next year.
What do we need to do for the Rehearsal?
Pick a segment for our new product. (Example, the High End segment.)
Using the Courier and the Industry Conditions Report, select specifications. (Example, Name
"Ace," Performance 10.0, Size 10.0, MTBF 25,000.)
Decide how much plant and equipment to purchase for our new product. (Example, 400
thousand units at an automation of 4.0 for an $8.8 million investment.)
Enter the product specifications on the R&D spreadsheet.
Enter the plant and equipment decisions on the Production spreadsheet.

Fund the plant and equipment using a roughly 50/50 mix of new stock and new bonds.
(Example, stock issue $4.4 million, bond issue $4.4 million.)
Save the decisions. Under File, select Update Official Decisions.
The Rehearsal Quiz and Processing
In the right-hand pane, click the Quiz link.
The quiz is straightforward. The six basic tactics are listed on the left. In the right column
we list six groups of action steps as groups A to F. Associate each tactic with a group of
action steps.
You must get all answers correct to complete the quiz. If you get them all right on the first
try, you earn a score of 100. If you get them all right on the second try, you earn a 90. On
the third try, 80, and so on.
Processing the Rehearsal
After you complete the quiz, a new menu item will appear - Process.
Processing will finalize your decisions, advance the clock one year, and allow you to
examine a new Capstone Courier.
Your instructor will be able to view the Sales and Profits which result from your decisions so
your tactics for the Rehearsal should maximize those for your company.
After you process, look at the results in The Capstone Courier.
You can play up to four rounds of the rehearsal. Simply make new decisions for the next
round process the round.
Alternatively, after Round 1, the Process menu offers a Replay option. Replay allows you to
edit last round's decisions and try again. For example, you could replay Round 1 as many
times as you wish. When you are satisfied with Round 1, you can advance to Round 2. You
can replay Round 2 as many times as you wish. (However, you cannot restart the Rehearsal
from the beginning, and you cannot back up beyond the current round.)
Good luck!

Reposition a product

Research current customer buying criteria in the Courier

Display the R&D worksheet
Adjust Performance, Size, MTBF
Observe impacts upon Age, material cost, and completion dates
Save the decisions

Marketing a product

Research the competitive environment in the Courier

Display the Marketing worksheet
Enter decisions for Price, Promotion and Sales Budgets
Observe the decision impact upon the computer's forecast
Develop a worst case estimate for demand
Enter your worst case estimate for in the sales forecast
Save the decisions

Scheduling production

Estimate a best case for demand for each product this year
Display the Production worksheet
Observe existing inventory
Schedule production to meet best case demand less existing inventory
Save the decisions

Modifying plant and equipment

Estimate peak demand for each product for this year and next year
Examine unit costs and margins
Display the Production worksheet
Increase or decrease capacity as required
Increase automation as required
Observe the net cost of the investment

Display the Finance worksheet

Fund the investment with a mix of stock issues, bond issues, and depreciation
Save the decisions

Raising money and paying debt

Examine the proforma Income Statement

Examine the proforma Balance Sheet
Display the Finance worksheet
Issue or repurchase stock as required
Issue or repay bonds as required
Issue short term debt as required
Issue a dividend as required
Save the decisions

Inventing a new product

Research the opportunity in the segment in the Courier

Select appropriate product attributes - Performance, Size, MTBF
Display the R&D worksheet.
Enter the product attributes
Note the R&D completion date
Display the Production worksheet
Order capacity and automation (optionally, wait a year)
Display the Finance worksheet
Fund the plant with stock and bond issues
Save the decisions