Monte Carlo Risk Analysis and Due Diligence of New Business Ventures (With CD-ROM) [Hardcover]

James F. Wright (Author)

Book Description

ISBN-10: 0814407161 | ISBN-13: 978-0814407165 | Publication Date: June 15, 2002

A detailed look at how to use Monte Carlo risk analysis - a proven modeling process that potential investors can use to determine the risk involved in investing in a given technology project. The project could be a new business, a new manufacturing process, or a new product. The book outlines a step-by-step process that is divided into two areas: - Technical Systems Analysis - explains how to validate the technology as being able to actually perform as stated in its Business Plan. - Technical Risk Analysis - explains how to develop a potential business scenario and then "quantify the uncertainty" so investors will know how great the risks are.

Editorial Reviews

Book Description

"When it comes to new manufacturing processes and products, many investors fail to look past the novelty of the new, putting blind faith in potentially faulty business plans.

Now there’s a way to accurately measure the real risks of highly complicated projects. Wright outlines a step-by-step process that shows bankers, venture capital companies, and investors how to:

* Determine if technologies are valid to ensure, for example, that pilot-plant results can be duplicated at full-scale

* Use process design methods to analyze new and emerging technologies used in proposed investments

* Use the author’s scientific approximation to handle unsymmetrical distributions common in the evaluation of potential investments

* Use Monte Carlo Analysis to quantify the uncertainty of a plan -- and determine the potential for making a profit."

About the Author

James F. Wright, Ph.D. (Odessa, TX) is a physical chemist, project director, and an experienced chemical, process, nuclear, and environmental consultant.

Product Details

• Reading level: Ages 17 and up
  
• Hardcover: 352 pages
• Publisher: AMACOM (June 15, 2002)
• Language: English
• ISBN-10: 0814407161
• ISBN-13: 978-0814407165
• Product Dimensions: 10.1 x 6.9 x 1.4 inches
• Shipping Weight: 2 pounds
• Average Customer Review: 4.0 out of 5 stars  See all reviews (2 customer reviews)
• Amazon Best Sellers Rank: #1,523,886 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

6 of 6 people found the following review helpful:

4.0 out of 5 stars Wright clearly explains Monte Carlo analyses of businesses., December 30, 2002

By 

Peter Freund, Bank One Ventures (NYC) - See all my reviews

This review is from: Monte Carlo Risk Analysis and Due Diligence of New Business Ventures (With CD-ROM) (Hardcover)

As a VC (Venture Capitalist), I am always seeking better methods to analyze investment opportunities. Jim Wright's book takes that analysis to the next level. Monte Carlo simulation techniques have repeatedly proven their value in addressing some of the world's most complex problems. Unfortunately, the technique is inherently very compute intensive, until now placing its use beyond the reach of most business analysis. A combination of Moore's law, and Wright's very clever unsymmetrical Gaussangular DistributionsTM, now permit ordinary PC/spreadsheet users to employ this very powerful tool.

Wright has distilled his many years of field experience into an easily followed, step-by-step, approach to providing very insightful statistical evaluations of complex technical projects. Implementation is facilitated by ready-to-use software and support included on a CD with the book. Monte Carlo Risk Analysis is not only suitable for the most complex problems; it can very usefully be applied to most any business analysis. Within the context of VC investments in speculative, new technologies, Wright's book provides a very potent approach to identifying and quantifying the metrics for success. I highly recommend Wright's book to anybody analyzing business ventures.

5 of 5 people found the following review helpful:

4.0 out of 5 stars Uniquely quantifies the risk associated with investments., December 30, 2002

By 

Hassan K. Hosseini, Ph.D. Thunderbird Inst. (Glendale, AZ USA) - See all my reviews

This review is from: Monte Carlo Risk Analysis and Due Diligence of New Business Ventures (With CD-ROM) (Hardcover)

While, for many decades, simulation has been the most commonly used technique available for risk analysis of a variety of complex systems, its meaningful popularity, outside engineering and the sciences, has only started to build. James Wright's book provides a comprehensive guide to the application of the Monte Carlo simulation tool as a means of uniquely quantifying the risk associated with any technical investment project. Even though Wright's book specifically addresses the most complex case of evaluating "technical projects" the process is readily applicable to evaluate high-tech and other investment projects.

In Part I, Wright's innovative method of presenting technical due diligence, with its step-by-step approach to building a complex system, contains several practical examples. It is an excellent introduction to the use of Monte Carlo simulation to a broader audience with common interests in venture capital. In Part II, he covers different commonly used discrete and continuous random variables with relevant examples. In this part, Wright's extensive reviews of triangular and angular random distributions, and their applications in analyzing risk for technical projects, provide a helpful approach to simplify the application of the Monte Carlo simulation in other areas. Several user-friendly computer files in an accompanying CD offer opportunities to quickly simulate different systems.

Monte Carlo Risk Analysis and Due Diligence of New Business Ventures is an excellent reference for MBA programs with a concentration in finance, entrepreneurship, and technology management.