An Example of Monte Carlo Sensitivity Analysis

1 / 7

# An Example of Monte Carlo Sensitivity Analysis - PowerPoint PPT Presentation

An Example of Monte Carlo Sensitivity Analysis. Mock Seep Tent Example. Benefits and Costs. Suppose benefits of seep tents are: reduced asthma attacks ( a per year at p a per event)….every year for T years. Suppose costs of seep tents are

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

## PowerPoint Slideshow about 'An Example of Monte Carlo Sensitivity Analysis' - jacie

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

### An Example of Monte Carlo Sensitivity Analysis

Mock Seep Tent Example

Benefits and Costs
• Suppose benefits of seep tents are:
• reduced asthma attacks (a per year at pa per event)….every year for T years.
• Suppose costs of seep tents are
• One-time costs of C (up front) and ongoing maintenance costs of pm.
• Initial parameter values: a=100, pa=\$600, C=\$100,000, pm=\$50,000, T=20, r=0.05.
Net present value
• Net present value over a T year planning horizon:
• Benefits: Use formula 6 from discounting handout.
• Costs: Use formula 6 + C.
Cookbook
• Define distribution for uncertain parameters (I used ~N(guess, s))
• Run many simulations, obtain NPV each time
• Plot histogram of results.
• In this case, about a 57% chance NPV>0.