1 / 7

An Example of Monte Carlo Sensitivity Analysis

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

jacie
Download Presentation

An Example of Monte Carlo Sensitivity Analysis

An Image/Link below is provided (as is) to download presentation 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. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. An Example of Monte Carlo Sensitivity Analysis Mock Seep Tent Example

  2. 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.

  3. Net present value • Net present value over a T year planning horizon: • Benefits: Use formula 6 from discounting handout. • Costs: Use formula 6 + C.

  4. An Excel spreadsheet

  5. 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.

  6. NPV0=24,622

More Related