Financial methodology: Simulation versus NPV

The evaluation of financial managers based upon the quality and performance of the investments they choose to implement creates a need for managers to utilize the most accurate forecasting method available to them in order to protect the interests of the firm and the stockholders, as well as their own careers. Currently, there are many different investment analysis techniques available to estimate the value of a proposed project, but the Net Present Value (NPV) method is the most prominent. It is because the popularity of the NPV technique and its similarities to a much less utilized analysis method - Monte Carlo simulation analysis - that this thesis will compare these two methods in order to highlight the strengths and weaknesses associated with each type of analysis.