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Dr. Richard Hofstetter was wondering what was to become of his acoustic disruption technology (ADT), a technology that used sounds to change behavior patterns of several species of wood boring beetles. Initial lab tests indicated that customized sounds would change the behavior of pine bark beetles in a way that would make the insects less likely to attack a tree and generally less likely to survive and reproduce. While the technology was not designed to protect large areas of forest, it represented an environmentally-friendly way to protect individual trees on private property or high-value trees within national forests, parks, or other public areas. Unfortunately, the technology languished in a university research lab, attracting some interest from potential customers but little financial support for the needed field-testing and development. Dr. Hofstetter was eager to begin field-testing and to gain support for the commercialization of an ADT device. However, future decisions hinged on some key questions: Was this target market large enough to attract funding from external parties? If so, was a focus on public, agricultural or private-land-owners the best bet for obtaining the cash needed to jump-start the project? What sort of proposal would be most attractive to potential investors?

Billy Cordasco, as President of Babbitt Ranches, was looking for alternatives to his current business model, where calves were born on the ranch, kept on the range for over a year, and then sold on the hoof at the market price. Interest in alternatives to the grain-fed beef offerings of supermarkets was growing. Health and sustainability issues had increased the popularity of grass-fed beef. Beef production and sales were generally low margin businesses, but if consumers were willing to pay a premium price for sustainable grass-fed beef, it might be possible for Babbitt Ranches to respond to the consumer need and increase the firm's bottom line at the same time. Because of Babbitt Ranches' financial resources, size, and reputation, numerous business model options existed. Billy needed to brainstorm which business models made sense for Babbitt Ranches. Presented with information necessary to understand the complex beef value chain, financial data on different value chain functions, and several options that were previously considered by Babbitt Ranches, Billy was able to both quantitatively and qualitatively the evaluate taking over one or more of the following functions: slaughter, hanging, processing, distribution, wholesale and/or retail sales. Under consideration was Babbitt Ranches' ability to acquire or develop the necessary resources for a new business model. Recognizing the opportunity presented by the increasing demand for grass-fed beef and the challenge of a complex beef value chain, Billy's goal was to limit the number of business model options to those that were feasible so he could put additional resources toward due diligence on a reasonable set of models.

. Matthew Haertzen, a timber portfolio manager for Cogent Partners, the fund manager for Cambium Global Timberland (a UK listed timber investment fund), was tasked with the analysis of a managed teak plantation in Honduras for potential cumulative investment in the amount of $21-25 million. Matt was evaluating an opportunity from Beyond Forestry, a Honduran Company that employed a unique accelerated teak growth model. This accelerated growth model allowed for harvesting of teak wood in as few as 7-12 years, as compared to 20-30 years for traditional commercial plantations. The demand for teak was growing and the supply was dwindling due to significant restrictions regarding the harvest of native teak forests, which traditionally have a very long growth cycle of 70-80 years. The current supply/demand conditions led to a shortage of teak and created an opportunity for investment in companies who could grow teak in an ongoing, sustainable basis with manageable harvest rotations. Mr. Haertzen needed to perform a capital budgeting analysis, including deriving an appropriate risk-adjusted cost of capital, to use in his investment analysis. He obtained data from Beyond Forestry in Honduras including growth rates of managed teak plantations, teak pricing, and operational expenses necessary to estimate cash flows associated with the managed teak plantations. Of equal importance was an assessment of the many risks associated with the teak plantation investment, given the political and economic environment in a developing market such as Honduras.

The board of Babbitt Ranches had officially adopted a constitution to guide the future of the family business. Babbitt Ranches was a fourth-generation, 122 year old family firm with extensive landholdings in Arizona. The firm's board recognized responsibility and obligation to organizational, ecological, economical, and community values through multiple bottom-line criteria in the new constitution. In addition, the constitution reinforced the family's heritage by outlining a philosophy designed to direct processes, interactions, and critical decisions. Several business opportunities were being considered by the board that could be evaluated using the framework provided by the constitution. The challenge for Billy Cordasco, the firm's president, was to operationalize the constitution to evaluate the current set of opportunities and to ensure the constitution was used as a "touchstone" for firm decisions on an ongoing basis.

Spreadsheet supplement for NA0068.