Discount Rate

For a Weekly Assignment, you will create a Monte Carlo Simulation for the NPV model and run it for 1,000 iterations

  • Capital Investment = ~Norm($100,000, $20,000)
  • Annual Revenue = ~Norm($60,000, $10,000)
  • Annual Expenses = ~Norm($23,000 , $5,000)
  • Useful life (n) = ~uniform(5,9)
  • Discount rate = 15%

This model is a bit more sophisticated that the one worked in class, which had a single Future Value at year 10.This model says that each of the ten years has a future value revenue AND expense.

Answer the following questions

  • What it the 50% percentile NPV
  • What is the probability of the NPV being < zero
  • What is the probability of the NPV being between zero and +$5,000

**** Also, take an internet tour and find instances of where a Monte Carlo Simulation is used by some agency as a tool for making more informed decisions.This will probably be a government agency, whether state or federal).Submit the document / website along with a summary of the use.

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