Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Monte Carlo Simulation Model
Monte Carlo simulation is used to analyse to what extent the valuation of the chosen company is dependent on the assumptions. Monte Carlo simulation is based on artificially creating a chance process, running it many times and observing the result (Barreto & Howland, 2005). A deterministic model is created on the excel sheet for the calculation of valuation of the share of the company. A set of inputs are identified that are assumed to arrive at the valuation of the company. These inputs are varied and result of the model is evaluated. This way the model is run many times. Results are analysed using statistical methods like histograms, probability distribution, and summary statistics. Monte Carlo simulation takes into account already defined variables with their all possible values and iterate these values thousands of time to analyse all the possible results expected with the change in inputs.
Figure: Monte Carlo Simulation model
So in Monte Carlo simulation instead of fixed inputs a probability distribution is applied to some or all of the inputs which generates a probability distribution of the Output.
Analysis of the result of the Monte Carlo simulation is done to analyse how the valuation of the companies changes with the change in inputs. But this simulation requires that inputs like beta, growth rates are defined by a distribution. Distribution could be normal, triangular, binomial, lognormal, studentt, exponential etc. Triangular distribution is typically used where data is predicted subjectively and it is not possible to collect sufficient data for the population sample. This is based on a minimum, maximum and a subjective guess what is the most likely value the data can take.
(a) The calculation of the Weighted Average Cost of Capital (WACC) is theoretically easy but practically complex. Discuss. (b) Two-fifths of the total market value of Jefferson
Q. Benefits of the proposed policy change? Short-term sources of debt finance comprise overdrafts and short-term loans. An overdraft offers elasticity but since it is technical
Q. What do you know about sinking funds? sinking funds : quite often, one may be interested to accumulate a target amount over a given period inclusive of interest for the peri
A Ltd sells goods at Rs.10.P.U. Its variable cost Rs.7.P.U and fixed cost amount to Rs.1,70,000 it finances all its assets by equity funds. It pays 40% tax on its income. Z Ltd is
Traditional Capital Budgeting Techniques These techniques are usually very simple and easily catchable. But the fundamental drawback of these methods is that they don't cons
traditional theory in assignment
Question 1 Describe the functions of merchant banking and functions of financial intermediaries Question 2 What do you understand by book building and Green shoe option
Need for Simulation If the mathematical model set up could always be optimized by the analytical approach, then, there would be no need for simulation. Only when interrelation
The issuers of ALBS are the financial subsidiaries of automobile manufacturers, commercial banks and other independent finance companies and small financial insti
Federal Agency Securities are those securities issued by federally related institutions and those issued by Government-Sponsored Enterprises (GSE). Securities iss
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd