Which approach estimates NPV by taking a distribution of values for each of the model's assumptions?

Question

Quizplus · Accepted Answer

Monte Carlo simulation is an approach that estimates NPV by taking a distribution of values for each of the model's assumptions. It uses random variables and probability distributions for each input variable in order to calculate a range of possible outcomes for net present value. This method provides a more comprehensive estimate of NPV and takes into account the probability of various scenarios occurring.

Which Approach Estimates NPV by Taking a Distribution of Values