Stochastic simulation model of the apartment building investment project.

摘要

The traditional deterministic method for analysis of investment evaluation seems to provide incomplete information about the uncertainties of the real business climate. This paper studies the financial viability of a proposed apartment building project using the discounted cash flow (DCF) model to evaluate the single point estimates of financial performance measures, and then applies the Monte Carlo simulation model to incorporate the uncertainty of input variables into the DCF model. The results of the simulation model provide the probability distribution of the outcomes, suggesting that the central values of financial indicators are lower than those of the deterministic model. The performance measures of the projects are found to be most sensitive to the growth of the market rent, loan rate, and construction costs.