Conduct a baseline, fixed analysis using the mean values

Reference no: EM133396006

Question: Setup and conduct a Monte Carlo analysis for the following assumptions.

Costs in year 0 = mean of $1000, follows a uniform distribution (ranging from $550 to $1450)
Benefits in years 1-5 = mean $300, follows a normal distribution with SD=$50
Discount rate = 4%

a. Conduct a baseline, fixed analysis (non-random/non-Monte Carlo) using the mean values. What is the NPV? Should we do the project?
b. Now conduct a Monte Carlo analysis using software* with 1000 draws (simulations). Report all information:
i. Average NPV from 1000 draws
ii. Minimum
iii. Maximum
iv. SD of your 1000 draws
v. "Low likely" range (your average minus 1.96*the SD)
vi. "High likely" range (your average plus 1.96*the SD)
vii. # of times out of 1000 that your NPV is negative
viii. Probability of a positive NPV
c. Include a histogram** of your results. What does the height of the bars represent? (Bonus if you can label the "bins" meaningfully along the X-axis.)

Reference no: EM133396006

Questions Cloud

What unique value proposition can your small cafe offer : What unique value proposition can your small cafe offer to differentiate yourselves from other cafes in the college town and attract your target customer base

Explain what you understand from the risk appetite : Extracts from annual reports about risk appetite Explain what you understand from the risk appetite in the annual report. Explain how the company manages risk

Complex pricing strategy of disney with the movie mulan : Explain whether Apple satisfies the conditions for using a complex pricing strategy, and which type of complex pricing strategy Apple is using

What are the key terms from the reading : What are the key terms from the reading? Define each term. What are the main way(s) that the author suggests that firms may achieve a competitive advantage?

Conduct a baseline, fixed analysis using the mean values : Conduct a baseline, fixed analysis (non-random/non-Monte Carlo) using the mean values. What is the NPV? Should we do the project

Summarize the purpose of this project : Web server software offered, and the reason why it is made available at no cost. If you were working in an e-commerce role for Intuit Turbotax

Evaluation strategy based on a causal loop diagram : Propose a monitoring and evaluation (M&E) strategy based on a Causal Loop Diagram (CLD) and stock and flow model of the Kerala, India Coir fiber industry.

Promote from within is good strategy : Most people think Promote from Within is a good strategy. However, how could a Promote from Within policy actually affect

How do the three questions above effect equity : Provide three discussion questions to about cruising for parking with answers that include economic principles. How do the three questions above effect equity

User Account

All Pages