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Modeling of Risk Using Monte Carlo Simulation
Modeling of Risk Using Monte Carlo Simulation
Project Overview
Township
project at Mullanpur,
Chandigarh
Project tenure = 6 years
Financials based on projections:
Total Cost = Rs. 1126.14 Cr (base case)
Total Revenue = Rs. 1348.87 Cr (base case)
Means
of Finance
Equity = Rs. 60 Cr
Debt = Rs. 60 Cr
Sales & Advances from Customer = Rs.
1006.14 Cr
Objective
Modelling
Cement prices
Iron & Steel prices
Labor wages
Inflation rate (WPI)
Interest rate (Risk-Free rate)
Cost Distribution
Labour
7%
Miscellaneous
28%
26%
39%
Estimation
Equation:
Y = 0.0029X +
2.1103
Estimation
Equation:
Y = 29.869e0.001X
Historical WPI
Source : Business
Beacon, CMIE
Estimation
Equation:
Y = 116.26e0.043X
Estimation
Equation:
Y=
173.89X+1167.9
Historical Yield on
10-year GOI Security
Source : Business
Beacon, CMIE
Estimation
Equation:
Y = 0.7437ln(X)
+4.8192
Sensitivity Analysis
By
Sales
Price
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Cost
Price
-5%
-2%
20.06%
20.89%
21.70%
22.48%
23.24%
23.98%
24.70%
25.40%
26.09%
26.75%
27.40%
18.89%
19.76%
20.61%
21.42%
22.21%
22.98%
23.73%
24.46%
25.16%
25.85%
26.53%
2%
5%
18.08%
18.98%
19.85%
20.69%
21.51%
22.30%
23.06%
23.81%
24.53%
25.24%
25.92%
17.25%
18.18%
19.07%
19.94%
20.78%
21.59%
22.38%
23.14%
23.88%
24.61%
25.31%
15.95%
16.92%
17.86%
18.77%
19.65%
20.49%
21.31%
22.11%
22.88%
23.63%
24.36%
Mean=420
22.63
Mean=585
53.54
Std. Dev. =
Std. Dev. =
Mean=390
29.34
Std. Dev. =
Mean=105
9.83
Std. Dev. =
Forecast
values
0.179067765
0.211152379
0.215399676
0.218350002
0.220854004
0.22313157
0.225402246
0.227732845
0.230428835
0.234044378
0.256146292
Trials
Base Case
Mean
Median
Standard
Deviation
Forecast
Values
Interpretation
22.30%
22.28%
22.31%
0.90%
Forecast
Values
Skewness
-0.2218
Kurtosis
3.08
Coeff. Of
Variability
0.0402
Minimum
17.91%
Maximum
25.61%
Range Width
7.71%
Interpretation
Limitations
Thank You