The fallacies of Scenario analysis
Scenario analysis is often used in company valuation – with high, low and most likely scenarios to estimate the value range and expected value – but do they give correct answers?
Scenario analysis is often used in company valuation – with high, low and most likely scenarios to estimate the value range and expected value – but do they give correct answers?
In public works and large scale construction or engineering projects – where uncertainty mostly concerns cost, a simplified scenario analysis is often used …
Don’t worry about the average, worry about how large the variations are, how frequent they occur and why they exists.
Let’s say that you are considering new investment opportunities for your company and that the sales department has guesstimated that the market for one of your products will most likely grow by ….