1 applying simulation to decision problems. 2 monte carlo simulation: a simple example cash inflows...
Post on 21-Dec-2015
220 views
TRANSCRIPT
1
Applying Simulation
to
Decision Problems
2
Monte Carlo simulation: A simple example
Cash Cashinflows Probability outflows Probability ($) (%) ($) (%)50 000 30 50 000 4560 000 40 70 000 5570 000 30 100
100
3
Assigning random numbers to cash inflows
Cash inflow Probability Random
($) (%) numbers
50 000 30 00–29
60 000 40 30–69
70 000 30 70–99
4
Assigning random numbers to cash outflows
Cash outflowProbability Random ($) (%) numbers
50 000 45 00–44
70 000 55 45–99
5
Ten simulations of monthly cash flows
6
Estimating probabilities from the simulation results
7
The effect of the number of simulations on the reliability of the probability estimates
8
Factors affecting profit earned by the plate
9
Estimates of values for Elite pottery
10
Tornado diagram for Elite pottery
11
Probability distributions
12
Simulation results
13
Probability distribution of profit earned by commemorative plate
14
Probability distribution for profit on the figurine
15
A comparison of the two probability distributions
16
Cumulative probability distributions
17
First-degree stochastic dominance
18
Two more cumulative distributions
19
Second-degree stochastic dominance
20
The mean-standard deviation screening method
21
A normal distribution for profit
22
Examples of quadratic utility functions
23
Annual cash flows for two machines
24
Calculating the NPV for the Alpha machine
25
Calculating the NPV for the Beta machine
26
Probability distributions for Alpha machine
27
NPV probability distributions for the two machines