In general, there are two methoes which investment proposals can be evaluated, one is deterministic approaches using single value or best estimates for the magnitude of returns and the other is pobabilistic approaches which involve probabilistically b...
In general, there are two methoes which investment proposals can be evaluated, one is deterministic approaches using single value or best estimates for the magnitude of returns and the other is pobabilistic approaches which involve probabilistically based analytical procedures and Monte Carlo simulation. The advantage of the method reflects much of reality more comprehensive than the former.
This syudy estimates cumulative probabilistic distribution of internal rate of return and net present value using Monte Carlo simulation by combining variables; project cost, sales volume, unit sales price, operating cost and etc. The descriptive methods for discrete cash flows is proposed for use in economic risk analysis and numerically illustrated by microcomputer aided solution procedure.
Further, to grasp the effect on the investment by variables, sensitivity analysis is carried out.