Monte Carlo on Net Present Value for Capital Investment in Malaysia

Capital investment becomes crucial investment decision in uncertain economic environment need to be made. Two major pitfall of classical net present value are uncertainty and managerial flexibilities. These drawbacks lead to imprecise cash flows estimation. This study proposes the employment of the Monte Carlo method in the NPV model in order to achieve reliable cash flows estimation. Monte Carlo provides the risk analysis which can be adopted by investors in making capital budgeting decisions. Result of this study found that Monte Carlo is an appropriate tool to embed in NPV model.