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Monte Carlo Simulation And Risk Assessment In Capital Bugeting, Caitlin Gallagher

Honors Scholar Theses

A capital budgeting case study involving determination of relevant cash flows over a projects life then the calculation of a number of decision criteria to determine if project should be accepted. Then risk will be incorporated using two methods of risk adjustment: scenario and sensitivity analysis. The findings will guide the state of the art Monte Carlo simulation using continuous and discrete probability distributions to model the risk of cash flow inputs. Using @Risk software as an Excel add in simulations will be run to determine a large number of decision variables. A comparison of cost of capital from each …