1 applying simulation to decision problems. 2 monte carlo simulation: a simple example cash inflows...
Post on 21-Dec-2015
225 views
TRANSCRIPT
![Page 1: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/1.jpg)
1
Applying Simulation
to
Decision Problems
![Page 2: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/2.jpg)
2
Monte Carlo simulation: A simple example
Cash Cashinflows Probability outflows Probability ($) (%) ($) (%)50 000 30 50 000 4560 000 40 70 000 5570 000 30 100
100
![Page 3: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/3.jpg)
3
Assigning random numbers to cash inflows
Cash inflow Probability Random
($) (%) numbers
50 000 30 00–29
60 000 40 30–69
70 000 30 70–99
![Page 4: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/4.jpg)
4
Assigning random numbers to cash outflows
Cash outflowProbability Random ($) (%) numbers
50 000 45 00–44
70 000 55 45–99
![Page 5: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/5.jpg)
5
Ten simulations of monthly cash flows
![Page 6: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/6.jpg)
6
Estimating probabilities from the simulation results
![Page 7: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/7.jpg)
7
The effect of the number of simulations on the reliability of the probability estimates
![Page 8: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/8.jpg)
8
Factors affecting profit earned by the plate
![Page 9: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/9.jpg)
9
Estimates of values for Elite pottery
![Page 10: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/10.jpg)
10
Tornado diagram for Elite pottery
![Page 11: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/11.jpg)
11
Probability distributions
![Page 12: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/12.jpg)
12
Simulation results
![Page 13: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/13.jpg)
13
Probability distribution of profit earned by commemorative plate
![Page 14: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/14.jpg)
14
Probability distribution for profit on the figurine
![Page 15: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/15.jpg)
15
A comparison of the two probability distributions
![Page 16: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/16.jpg)
16
Cumulative probability distributions
![Page 17: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/17.jpg)
17
First-degree stochastic dominance
![Page 18: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/18.jpg)
18
Two more cumulative distributions
![Page 19: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/19.jpg)
19
Second-degree stochastic dominance
![Page 20: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/20.jpg)
20
The mean-standard deviation screening method
![Page 21: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/21.jpg)
21
A normal distribution for profit
![Page 22: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/22.jpg)
22
Examples of quadratic utility functions
![Page 23: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/23.jpg)
23
Annual cash flows for two machines
![Page 24: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/24.jpg)
24
Calculating the NPV for the Alpha machine
![Page 25: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/25.jpg)
25
Calculating the NPV for the Beta machine
![Page 26: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/26.jpg)
26
Probability distributions for Alpha machine
![Page 27: 1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50](https://reader036.vdocuments.mx/reader036/viewer/2022081514/56649d605503460f94a40b88/html5/thumbnails/27.jpg)
27
NPV probability distributions for the two machines