Analyzing the results

The Cumulative Distribution chart displays the distribution of the target for each of the specified values of the fixed input growth. The table below the chart includes a legend that specifies the value of growth associated with each distribution function. For example, the blue curve is for a growth rate of 8%. The table also displays the probabilities in the three regions bounded by the reference lines, initially placed at the 5% and 95% points of the distribution associated with the first specified value of the fixed input. You can interactively change the positions of the reference lines, allowing you to determine probabilities associated with any region of the distribution.

The question of interest is the probability that net present value is greater than zero. From the chart, you can see that the probability increases as the growth rate increases as would be expected.

1. To determine the actual probabilities, double-click the Cumulative Distribution chart.
2. Click Chart Options in the Graphboard Editor.

   

3. Enter 0 in the Lower field, in the Slider positions group.

   This will set the position of the left-hand sliding reference line to 0.

4. Select Infinity in the Slider positions group.

   This effectively removes the right-hand sliding reference line, which is not needed for this example.

5. Click Continue.

The values in the third column of the table below the chart (in the column labeled >$0) provide the probabilities that net present value is greater than 0. At a growth rate of 8% there is roughly an 84% chance that net present value will be greater than zero. At a growth rate of 10% the probability increases to about 89%, and at the aggressive growth rate of 12% the probability is about 93%.

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