Above all this is a writing assignment. All calculations , assumptions and conclusions must be accompanied by a supporting narrative with proper attributions to any outside sources used. The diagram below will outline in some detail the computational aspects of the project.
ALL SPREAD SHEETS AND COMPUTATIONS MUST BE INCLUDED WITH THE REPORT. THEY CAN BE INTEGRATED INTO THE TEXT OR IN AN APPEXNDIX OR A COMBINATION OF THE TWO.
Deterministic initial cost at least two depreciable assets one 5 year property class one ten year property class and anything else you choose. Could be nothing else or cash only buy in or …..
For six years an income (revenue) cash flow three discrete probability cases
Overperform case you choose probability and income level
Expected perform case you choose probability and income (revenue level)
underperform case you choose probability and income level
1000 monte carlo simulated cases
for six years an operation and maintenance cost cash flow three discrete probability cases
Bad year cost case you choose probability and cost level
Expected performance cost you choose probability and cost level
Low cost case you choose probability and cost level
1000 monte carlo simulated cases
In year 4 simulate the sale of an existing asset governed by a NORMAL DISTRIBUTION
You choose Mean and Standard Deviation. Add it to your cash flow in year 4. (Not one of the two assets you purchased in year 0)
This results in 1000 monte carlo simulated net BEFORE TAX cash flow simulated cases.
Using itr = .35 MACRS depreciation no bonus depreciation create a NET ATCF for each of the 1000 monte carlo simulated cases for all six years.
Now everything is After Taxes
Using MARR = 10% calculate 1000 monte carlo Present Worths PW
Assuming these values are normally distributed calculate AVERAGE PW
STD DEV PW
PROBABILITY PW> 0
PROBABILITY PW > your choice 1
PROBABILITY PW > your choice 2
USE NORM DIST in EXCEL for Probabilities
Narrative justification for each step justify all steps based on your specific project. This is a WRITING EXCERCISE