Checking the output

Figure 1. Simulation Summary table
Simulation Summary table

The Simulation Summary table shows that the stopping criteria on the confidence interval of the mean was satisfied once 35,214 cases were generated. This gives the analysts confidence that a sufficient number of cases were generated to create a target distribution with a reliable value of the sample mean.

Figure 2. Tornado chart of correlation between target and inputs
Tornado chart of correlation between target and inputs

The Correlation tornado chart, which is generated by default, shows the Pearson correlation between the target NPV and its simulated inputs opcost and revenue. The correlations have the expected signs since it is clear that net present value should increase with increasing revenue and decrease if operating costs increase.

Figure 3. Descriptive Statistics of Scale Inputs table
Descriptive Statistics of Scale Inputs table

The Descriptive Statistics of Scale Inputs table shows that the simulated values of the inputs cover almost the entire range specified for each input, and that the sample means agree well with the theoretical means for the associated triangular distributions. For example, opcost was specified to have a triangular distribution with a minimum value of $210,000 and a maximum value of $230,000. The minimum simulated value is $210,048 and the maximum simulated value is $229,837. The sample mean $219,944 of the simulated data for opcost agrees very well with the theoretical mean of $220,000 for the associated triangular distribution. For reference, the mean of a triangular distribution is given by: (min+max+mode)/3. Similar agreement can be verified for the other simulated input revenue.

  1. Switch to the dataset, you specified, that contains the simulated data.
  2. From the menus choose:

    Analyze > Descriptive Statistics > Frequencies...

    Figure 4. Frequencies dialog
    Frequencies dialog
  3. Move opcost and revenue to the Variable(s) list.
  4. Click Charts.
  5. Select Histograms in the Frequencies: Charts dialog.
  6. Click Continue.
  7. Deselect Display frequency tables in the Frequencies dialog.
  8. Click OK.
Figure 5. Histogram of simulated values of opcost
Histogram of simulated values of opcost

The histogram for opcost shows that sufficient data have been generated to nicely represent the specified triangular distribution with parameters min=$210,000, max=$230,000 and mode=$220,000. Inspection of the histogram for revenue will show that it also agrees well with the specified triangular distribution.

Figure 6. Probability Density chart
Probability Density chart

The Probability Density chart, which is included in the default output for a simulation, displays the distribution of values for the net present value. Reference lines are placed at the 5% and 95% points of the distribution. With the 5% line at a negative value of net present value, we know that there is at least a 5% probability that startup costs will not be recovered in three years. Of course, this is assuming that the growth rate has the conservative value of 8%.

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