Probability analysis, Financial Accounting

Assignment Help:

Probability Analysis

This engrosses the assessment of the probabilities of future events linked to an investment project. If these events are universal circumstances the technique is called scenario analysis. For instance an assessment might be made of the outcome of an investment project under poor and moderate and good economic conditions and the probability of each economic state arising assessed.

Another approach is to assess the likelihood of particular values of project variables occurring therefore that a probability distribution for each variable can be determined. This cause the technique called simulation or the Monte Carlo method which results in a probability distribution for the project NPV.

With both approaches it is consequently possible to determine the expected net present value (ENPV) based on all possible outcomes, and the probability of a negative or zero NPV. The problem with possibility analysis is that in practice it is difficult to determine the probabilities to be attached to future events. An inescapable element of subjectivity is probable to exist in probability estimates.


Related Discussions:- Probability analysis

Acts of bankruptcy, ACTS OF BANKRUPTCY The following are the acts of ba...

ACTS OF BANKRUPTCY The following are the acts of bankruptcy on which a petition may be founded: (a) Assignment of property to trustee:   whereby one gives up all his proper

Determine estimated cost, XYZ Company is a large manufacturer of auto parts...

XYZ Company is a large manufacturer of auto parts for the auto manufacturers and parts distributors. XYZ has plants throughout the world, but most are located in North America. XYZ

Dissolution-liquidation of companies, Dissolution If the winding up con...

Dissolution If the winding up continues for more than a year, the liquidator must file progress reports with the registrar at such intervals as the court may prescribe s.333. W

Corporation''s gain or loss on the sale, The Gladys Corporation buys office...

The Gladys Corporation buys office equipment costing $426,000 on May 12, 2013. In 2015, new and improved models of the equipment make it obsolete, and Gladys sells the old equipmen

Compute both basic and diluted earnings per share, 1. Assume that the follo...

1. Assume that the following data relative to Eddy Company for 2014 is available: Net Income $1,400,000 Transactions in Common Shares Change Cumulative Jan. 1, 2014, Beginnin

Short-term solvency, Example of Short-term Solvency             ...

Example of Short-term Solvency                           Current Ratio = Current Assets / Current Liabilities                                                = 5.38

Calculate the annual percentage rate, Your mother-in-law is fretting about ...

Your mother-in-law is fretting about paying her mortgage. She refinanced her mortgage loan a while back, and now is thinking about refinancing again. You are going to help her eval

VAT SYSTEM, RECOMENDATION REGARDING THE CURRENT SOUTH AFRICAN VAT SYSTEM

RECOMENDATION REGARDING THE CURRENT SOUTH AFRICAN VAT SYSTEM

Describe about trade test, Q. Describe about Trade Test? With a view of...

Q. Describe about Trade Test? With a view of perform the work in a trade an artisan staff should have the skill required for the trade and for this Railway workers classificati

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd