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.
PIAC was apparently negatively affected by the safety and health concerns of the EU. With 27 countries raising public concern, PIAC's corporate image is likely to have been spoilt
Method to Identify the Component of Seasonal Variation in a Time Series This technique is called as Ratio to Moving Average Method. In this technique, we construct an index wh
Collar A collar can be established by holding a share, along with purchasing a protective put and writing a covered call, where both options at out-of-money.. For Example
Example: - MM Foam Company at present has 5000 outstanding shares selling at Rs. 100 each. The firm suppose to have a net earning of Rs. 50000 as well as contemplating a dividend
three years ago, SSSG Ltd. issued 10 years $1000 bonds with a 7% coupon rate paid semi-annually, at par value. the market currently requires a 9% yield. what was the price of bond
Assume that we have the following data: C=100+0.50Y Ip=100-20r Mt=0.10Y Ms=100-10r M=80 a. Build the IS-LM function. b. If we assume an increase in Investments by 100 units, p
Q. Describe the Walters dividend model? Walter's Model: - Walter's model maintains the doctrine that the dividend policy is relevant for the value of the firm. As-per to the Wa
FORMS OF DIVIDEND Cash Dividend Many Companies pay dividend in cash. Often cash dividend may be supplemented by a bonus issue (stock dividend). When the company chooses
Why investment decision depend on financing decision All these decisions interact, investment decision cannot be taken without taking the financing decision, working capital de
How do opportunity costs affect the capital budgeting decision-making process? Opportunity costs imitate the foregone benefits of the alternative not chosen while a capital budge
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