White Paper
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MONTE CARLO SIMULATION AND BUSINESS VALUATIONS: A BETTER WAY TO VALUE

October 19, 2016

In a recent publication by the Institute of Business Appraisers, Business Appraisal Practice: 2016 Second Quarter, there was discussion over the topic of Monte Carlo simulation and its application to the valuation world. The survey conducted by Toby Tatum, MBA, CBA, CVA, MAFF, editor of Business Appraisal Practice, showed that 34.55% of surveyors had never heard of Monte Carlo simulation or if they had, knew little about it. Along with this, of those that actually knew about it, 27.78% had never used it in a business valuation. Within this article, and the many others within the publication, there is plenty of discussion about the validity and usefulness of its application. The articles discuss both practical application to standard valuation engagements, as well as, the method’s interpretation within a court of law. While the peer-reviewed journal brought forth conversation on an extremely important topic, it is unfortunate that this essential technique is not considered standard within the valuation industry today.

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