Naslov
Importance of Monte Carlo Simulation in Capital Budgeting Process

Autori
Pušar Banović, Dolores

Vrsta, podvrsta i kategorija rada
Sažeci sa skupova, kratko priopćenje, znanstveni

Izvornik
Znanje in poslovni izzivi globalizacije v letu 2013: zbornik povzetkov referatov 5. mednarodne znanstvene konference, Celje, 14.–15. november 2013 / Merkač Skok, Marjana - Celje : Rok Birsa Poslovna agencija Ekonomika d.o.o., Slovenija, 2013, 66-66

ISBN
978-961-6825-82-5

Skup
5. mednarodna znanstvena konferenca "Znanje in poslovni izzivi globalizacije v letu 2013"

Mjesto i datum
Celje, Slovenija, 14.11.2013. - 15.11.2013

Vrsta sudjelovanja
Plenarno

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
Monte Carlo simulation, Capital Budgeting process, discounted cash flow analysis, sensitive method, scenario method

Sažetak
Monte Carlo Simulation in Capital Budgeting Process provides better understanding of risk and uncertainty in discounted cash flow analysis (DCF). The traditional methods of the risk analysis in Capital Budgeting Process such as sensitivity analysis and scenario analysis do not provideinformation of probability of the failure or success of a capital investment projects. The use of the Monte Carlo Simulation in decision making process provides probability distributions of all predetermined variables (NPV, IRR), respectively estimation of probability of success of a project. Among other results Monte Carlo Simulation quantifies how each assumption affects the NPV or IRR of the project. Although Monte Carlo Simulation can help managing risk and uncertainty in the decision making process, this method is not without limitations. Simulations can lead to misleading results if inappropriate inputs are entered into the model. The conclusion is that only the combination of the traditional methods of risk analysis and the Monte Carlo Simulation in Capital Budgeting Process ensure the optimal selection of capital projects. However, it is important to emphasize that the quality of the results is directly related and proportional to the quality of inputs used, in all the methods.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA