RE4807

Tutorial II

Preparation before the tutorial session:

Work with your classmates (max 5 in total) on the following exercises and present your
results during the session (those who want to present can send me the results before the start
of the session):
1. Simulate lognormal distribution: Y = log(X), where Y follows normal distribution
𝑁(10, 0.5! ). X = exp(Y) follows a log-normal distribution with mean exp(10+0.5/2)
a) Calculate the mean for simulation size 50, 100, 200, 500, 800, 1000, 5000.
b) Compare results using simple Monte Carlo and Latin Hypercube Sampling (plot
a graph like that in Slide 26)

2. Replicate the MC in this video: https://www.youtube.com/watch?v=UeGncSFijUM

3. MC for DCF analysis, following the setting and simulation in

https://www.youtube.com/watch?v=BQv2Uyea8i4

a) With simulation size 1000, plot the simulated CDF for the NPV (DCF Value)
b) Change uniform distribution to normal distribution in data generating for the
growth rates and exit cap and repeat a).
Hint: You replace RANDBETWEEN with NORMINV(rand(),mean, s.d.) (you can
choose your own range, mean, s.d.)

Note that, for these exercises, it’s more important to try and learn about how Excel works for
MC than getting the correct answers. It’s fine if you have difficulties in getting the results. We
can discuss what challenges you face (what prevents you from generating the outcomes) and
possible solutions.