TITLE

Using Monte Carlo Simulation for a Capital Budgeting Project

AUTHOR(S)
Clark, Virginia; Reed, Margaret; Stephan, Jens
PUB. DATE
November 2010
SOURCE
Management Accounting Quarterly;Autumn2010, Vol. 12 Issue 1, p20
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The article focuses on the effectiveness of using Monte Carlo simulation for the capital budgeting project of a company. While many tools that are useful in determining the scope and possible success of a project, it notes that Monte Carlo provides understanding and risk analysis to managers by mapping all possible outcomes of a project. It notes that the method also allows managers to determine risks and uncertainties of discounted cash flow (DCF). It mentions that the method overcomes the limitations of sensitivity and scenario analyses through examination of effects of all combinations of variables and their realizations.
ACCESSION #
59208208

 

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