CH10_147 - 3332 UNCERTAINTY IN FUTURE EVENTS Frequency...

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Unformatted text preview: 3332 UNCERTAINTY IN FUTURE EVENTS Frequency FIGURE 10-9 Graph of IR values. Stand-alone simulation programs and commercial spreadsheet add-in pack as @Risk and Crystal Ball provide probability distribution functions to use for 9, variable. In Example 10-16 the functions RiskUniform and RiskNormal are packages also collect values for the output variables, such as the IRR for Ex . In other problems the PW or EUAC could be collected. These values form a . distribution for the PW, IRR, or EUAC. From this distribution the simulation p calculate the expected return, P(loss), and the standard deviation of the return. : Example 10-16 uses @Risk to simulate 1000 iterations of PW for the d w. ample 10—15. A simulation package makes it easy to do more iterations. More still, since it is much easier to use different probability distributions and pararne ' accurate models can be built. Because the models are easier to build, they are less contain errors. 3 EXAMPLE 1049 Consider the scale described in Example 10- 15. Generate 1000 iterations and construct a frequ a ‘V distribution for the scale’s rate of return. The first IRR (cell A8) of 14.01% that is computed in Figure 10—10 is based on the avera and the average first cost. The second IRR (cell All) of 14.01% is computed by @ , the average of each distribution. The cell cantentjis-the RATE formulawith its RiskUnif ...
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