256 Energy Project Financing: Resources and Strategies for Success
Table A-11 Sensitivity analysis data tableFactor/
Percent Change - 10% Base + 10%1st Cost 1353.20 1203.21 1053.20Annual Revenue 932.88 1203.21 1473.52MARR 1272.97 1203.21 1136.36analysis is the application of probabilistic and statistical concepts to eco-
nomic analysis. These techniques require information regarding the pos-
sible values that uncertain quantities may take on, as well as estimates of
the probability that the various values will occur. A detailed treatment of
this topic is beyond the scope of this appendix. A good discussion of this
subject can be found in Park and Sharp-Bette [1990].
A second approach to risk analysis in economic analysis is through
the use of simulation techniques and simulation software. Simulation in-
volves using a computer simulation program to sample possible values
for the uncertain quantities in an economic analysis and then calculating
the measure of worth. This process is repeated many times using differ-
ent samples each time. After many samples have been taken, probability
statements regarding the measure of worth may be made. A good discus-
sion of this subject can be found in Park and Sharp-Bette [1990].A.10 SUMMARY AND ADDITIONAL
EXAMPLE APPLICATIONSIn this appendix a coherent, consistent approach to economic analysis
of capital investments (energy related or other) has been presented. To
conclude the appendix, this section provides several additional examples
to illustrate the use of time value of money concepts for energy related
problems. Additional example applications, as well as a more in depth
presentation of conceptual details, can be found in the references listed
at the end of the appendix. These references are by no means exclusive;
many other excellent presentations of the subject matter are also avail-