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

Depreciation, The non current asset section of Aadil & Co. at December 31, ...

The non current asset section of Aadil & Co. at December 31, 2005 is as under:- Land Rs. 1,000,000 Office equipment Rs. 5,000,000 Less: accumulated depreciation 250,000 4,75

The brownstone corporation''s bonds , a) What will be the value of every of...

a) What will be the value of every of these bonds when the going rate of interest is 12%? Suppose that there is only one more interest payment to be made on Bond S. Round your answ

What is the cash flow from assets for 2010, The following question are base...

The following question are based on above table:- Question 1 What is the change in net working capital from 2009 to 2010? Question 2 What is net capital spending for 20

Short-term creditors, Short-term Creditors:   Bankers and another short-ter...

Short-term Creditors:   Bankers and another short-term creditor have an interest same to those of the debenture holders and equity shareholders who are interested in the profitabil

Illustration of balance sheet, Normal 0 false false false ...

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4

Which depreciation method would produce the higher npv, Wendy is evaluating...

Wendy is evaluating a capital budgeting project that should last for 4 years. The project requires $ 800,000 of equipment. She is unsure what depreciation method to use in her anal

expected quarterly return, Common stocks A, B, C, and D had the following ...

Common stocks A, B, C, and D had the following quarterly returns. A B C D 0.07 0.05 0.07 0.12

Various types of accounting changes can affect the financial, Various types...

Various types of accounting changes can affect the financial statements of a business enterprise differently. Assume that the following list describes changes that have a material

Trade sources of information, Trade Sources of Information Within for i...

Trade Sources of Information Within for instance the credit card industry it isn't uncommon for information on an individual's credit rating to be shared. In a alike vein withi

Successive interest computations, Show that if an investment of P dollars d...

Show that if an investment of P dollars declines by 4% during a year , the balance at the end of the year is P(1-.04) that is P(.96) ?

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