1. 課程四 : 風險分析 Application: The replacement decision Public utilities and annual cost Risk Analysis Sensitivity analysis Scenario analysis Mote Carlo simulation A case

2. The replacement decision Two approaches: –To compute the absolute cash flow of each alternative. –To compute the savings resulting from using the new asset instead of the old asset. An example

3. Solution Approach 1 Not replacing: PV of cost=200000B(10,0.1)=1,229,000 Replacing: PV of cost=190000B(10,0.1)+70000=1,237,000 Approach 2 Benefit of replacing 10000B(10,0.1)-70000=-8,554 The replacing is not desirable.

4. Example 2 The savings are $1000 a year. The initial cost of the new equipment is $70000 Salvage now of the old $20000 Salvage in ten years of the old1000 Salvage in ten years of the new5000

6. Public utilities and annual cost An example asset cost1000000 a life of two years earn 10% of the investment Straight-line depreciation

7. Public utilities and annual cost To equalize the annual cost to the consumers AEC=1000000/B(2,0.1)=1000000/1.73554 =576,190

9. Assuming there is 0.6 inflation

10. Risk Analysis Sensitivity analysis Scenario analysis Monte Carlo simulation

11. An example

13. Excel: Table

14. Scenario analysis

15. Monte Carlo simulation

16. payback

17. Discounted payback