Monte Carlo simulation

To determine how much the investor can invest in a lift, to get at least the same return at the same risk level as without a lift, we have to search for input variables which generate the same return-risk profile for both cases. This can be done, in a trial and error manner, with the following assumptions (Table 10.1):

• Investment for a multiple family unit without lift:

- Pessimistic/optimistic estimates: ±10% from best guess.

• Rest value: 80% of initial investment.

• Exploitation results from regression equation (10.1).

The Monte Carlo simulations with the software package MIS give the same return-risk profile for both cases for a value x = € 15 500 (Figs. 10.1,10.2). This means that € 15500 per multiple family unit can be spent on installing a lift. A simple lift for four floors costs about € 44 500. The investment in a lift is, therefore, justified if three or more multiple family units can make use of it.

Table 10.1 Input values for Monte Carlo simulation

Object without lift

Object with lift

Investment (C):

best guess

70 500

x

optimistic (-10%)

64 000

x

pessimistic (+10%)

77 000

x

Inflation:

best guess

2.0%

2.0%

optimistic

0.5%

0.5%

pessimistic

4.0%

4.0%

Exploitation result (C):

best guess

2 500

3 000

optimistic

3 600

4 500

pessimistic

140

1 600

Rest value (C) (80% of investment))

best guess

56 000

0.8 x x

optimistic (+10%)

62 000

0.8 x x

pessimistic (-10%)

51 000

0.8 x x

Exploitation_15 years (start 2001) 15 years (start 2001)

Exploitation_15 years (start 2001) 15 years (start 2001)

Figure 10.1 Return-risk profile without lift
Figure 10.2 Return-risk profile with lift
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