1. An Example of Monte Carlo Sensitivity Analysis Mock Seep Tent Example

2. Benefits and Costs Suppose benefits of seep tents are: reduced asthma attacks (  per year at p  per event)….every year for T years. Suppose costs of seep tents are One-time costs of C (up front) and ongoing maintenance costs of p m. Initial parameter values:  =100, p  =$600, C=$100,000, p m =$50,000, T=20, r=0.05.

3. Net present value Net present value over a T year planning horizon: Benefits: Use formula 6 from discounting handout. Costs: Use formula 6 + C.

4. An Excel spreadsheet

5. Cookbook 1.Define distribution for uncertain parameters (I used ~N(guess,  )) 2.Run many simulations, obtain NPV each time 3.Plot histogram of results. In this case, about a 57% chance NPV>0.

6. NPV 0 =24,622