When evaluating an investment opportunity, an economic analysis will be required. Invariably the input assumptions that go into the cash flow calculations cannot be pinpointed at exact numbers but will have some range of uncertainty. For decision makers it is important to have a sense of the uncertainty in the valuation. To assess the impact on the decision metrics, in particular the NPV, usually a tornado diagram will be prepared.
This webinar will discuss three methods to derive an NPV probability distribution from such a tornado by using:
- An uncertainty tree
- A simple Monte Carlo simulation application
- The novel DeltaLogN method