This is done by randomly selecting observations from

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The idea behind simulation is to imitate the performance of the project being evaluated.  This is done by  randomly selecting observations from each of the distributions that affect the outcome of the project,  combining each of those observations and determining the final outcome of the project, continuing with  this process until a representative record of the project’s probable outcome is assembled.  In effect, the  output from a simulation is a probability distribution of net present values or internal rates of return for  the project.  The decision maker then bases his decision on the full range of possible outcomes. n. Sensitivity analysis involves determining how the distribution of possible net present values or internal  rates of return for a particular project is affected by a change in one particular input variable.  This is  done by changing the value of one input variable while holding all other input variables constant. 5
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  • Spring '11
  • Abner
  • Operating cash flow, Flow network, free cash, CASH   FLOW

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