TECHNIQUE THAT UTILIZES A MONTE CARLO METHOD TO HANDLE THE UNCERTAINTY OF INPUT VALUES WHEN COMPUTING THE NET PRESENT VALUE (NPV) FOR A PROJECT

The present invention can include a method for handling the uncertainty of input variables in the calculation of the net present value (NPV) of a project that utilizes a Monte Carlo approach. Such a method can begin by expressing the equation for the net present value (NPV) in a probabilistic form. The probabilistic form can allow for the input variables to be treated as random variables with triangular distributions. Various equation parameters for the probabilistic NPV equation can be defined. A Monte Carlo computational algorithm can be executed that utilizes the probabilistic NPV equation and the defined equation parameters to produce multiple probabilistic NPV distributions. For each probabilistic NPV distribution, a mean value and a standard deviation can be ascertained. The mean value can represent the present value (PV) of the project and the standard deviation can represent the associated risk of the project.