Question

Which of the following is NOT true regarding simulation? a. It can be used to generate a probability distribution of NPVs. b. It generates a probability distribution of NPVs by randomly drawing values for the input variable(s). c. It can be used to develop probability distributions of all variables with uncertain future values. d. It can only be used for one variable at a time

Answer 1

The false statement is "it can be used for one variables at a time"

Explanation:

Given:

Simulation for NPV.

To Find :

Which statements is not correct .

Solution;

In simulation NPVs, Net present values.

In Excel the simulation called as monte carlo simulation

So it consists of variables like mean ,standard deviation, variance etc.

In simulation it develops the graphs .

It consists of formula for probability calculation

So it has probability distribution function.

Ultimately, It will develop the output values for input variables.

Hence The false statement will be that" it can only be used for one variable at a time"