The Monte Carlo simulation:
A) can be useful for estimating a project's market risk.
B) uses probability distributions for variables as input data to estimate the project's net present value (NPV).
C) produces both an expected NPV (or IRR) and a measure of the riskiness of the NPV or IRR for different scenarios.
D) gives the exact outcome that can be expected from a project.
E) calculates NPV for a change in one key variable.

Question

Quizplus · Accepted Answer

The Answer of The Monte Carlo simulation:
A) can be useful for estimating a project's market risk.
B) uses probability distributions for variables as input data to estimate the project's net present value (NPV).
C) produces both an expected NPV (or IRR) and a measure of the riskiness of the NPV or IRR for different scenarios.
D) gives the exact outcome that can be expected from a project.
E) calculates NPV for a change in one key variable.

The Monte Carlo Simulation