Monte Carlo Analysis: A Practical Application to Development Appraisal

Abstract

Discusses the shortcomings of the so‐called conventional method of appraising development sites at the pre‐purchase stage. Demonstrates how multiple‐outcome simulations, Monte Carlo analysis in particular, can overcome many disadvantages. Illustrates by means of a practical example. Uses the simpler residual valuation, rather than cashflow appraisal. Concludes that the Monte Carlo method gives a much more graphical impression than a deterministic method, and is well worth the effort to appreciate.

Citation

Evans, A.H. (1992), "Monte Carlo Analysis: A Practical Application to Development Appraisal", Journal of Property Finance, Vol. 3 No. 2. https://doi.org/10.1108/09588689210033846