When a company develops a new product, the profitability of the product is highly uncertain. Simulation is an excellent tool to estimate the average profitability and riskiness of new products. This example was taken from Chapter 28 of "Financial Models using Simulation and Optimization" by Wayne Winston, published by Palisade Corporation, where a detailed, step-by-step explanation can be found.
You will find two versions of this model:
1. Defining the NPV as an Output.
2. Using Advanced Sensitivity Analysis.