Monte Carlo 101: Start Modeling in Excel

BVResearch Pro
Training Event Transcripts
April 11, 2017
John Elmore, JD, CPA/ABV/CFF/CITP, MAFF
valuation method

Summary

Valuation analysis often relies on imprecise inputs. To compensate for this uncertainty, valuation analysts sometimes employ a range of inputs to represent likely “what-if” scenarios, such as sets of “low,” “high,” and “expected” input values. While this rough approximation may be acceptable for the purposes of many analyses, the results tend to reflect bias and estimation error on the part of the valuation analyst as the input selection essentially distills a large number of possible inputs down to a handful. Monte Carlo simulation method was introduced to valuation analysis to mitigate this kind of error. The Monte Carlo method uses a computer to generate a large number of scenarios based on probabilities for inputs and gives the valuation analyst insight into the most likely result and the likelihood of other outcomes. Join valuation expert John Elmore for an introduction to the Monte Carlo method for valuing business interests and intangible assets.
Monte Carlo 101: Start Modeling in Excel
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