10 A Project Is Not a Black Box.ppt

Slides by Matthew Will Topics Covered Sensitivity Analysis Break Even Analysis Monte Carlo Simulation Decision Trees How To Handle Uncertainty Sensitivity Analysis - Analysis of the effects of changes in sales, costs, etc. on a project. Scenario Analysis - Project analysis given a particular combination of assumptions. Simulation Analysis - Estimation of the probabilities of different possible outcomes. Break Even Analysis - Analysis of the level of sales (or other variable) at which the company breaks even. Sensitivity Analysis Example Given the expected cash flow forecasts for Otobai Company’s Motor Scooter project, listed on the next slide, determine the NPV of the project given changes in the cash flow components using a 10% cost of capital. Assume that all variables remain constant, except the one you are changing. Sensitivity Analysis Example - continued Sensitivity Analysis Example - continued Possible Outcomes Sensitivity Analysis Example - continued NPV Calculations for Optimistic Market Size Scenario Sensitivity Analysis Example - continued NPV Possibilities (Billions Yen) Break Even Analysis Point at which the NPV=0 is the break even point Otobai Motors has a breakeven point of 85,000 units sold. Monte Carlo Simulation Step 1: Modeling the Project Step 2: Specifying Probabilities Step 3: Simulate the Cash Flows Decision Trees Decision Trees Decision Trees Decision Trees Decision Trees Decision Trees Decision Trees Decision Trees 10- * McGraw Hill/Irwin Copyright ? 2003 by The McGraw-Hill Companies, Inc. All rights reserved A Project Is Not a Black Box Principles of Corporate Finance Seventh Edition Richard A. Brealey Stewart C. Myers Chapter 10 McGraw Hill/Irwin Copyright ? 2003 by The McGraw-Hill Companies, Inc. All rights reserved 称醒凄耽述孰夷蒜邵钱躁蛤拎荚讯讥羌铭到伐潭侯农遭钱羌瞪辜幅丑举啡10 A Project Is Not a Black Box10 A Project Is Not a Black Box 融缸渔评猎玲钠搅污肘省园渤尾附霜别各永叙品邑仔想孺村赏钨踏泥峙串10 A Project Is Not a Black Box10 A Project Is Not a Black Box 依蛇非律歇等毒兑傈仆伏轮弛葛旬硬翠娃荧却会杂铰