Monte Carlo Analysis
The name Monte Carlo refers to the famous gambling resort in Monaco. The Monte Carlo analysis technique uses randomly generated combinations of the input variables (estimated factors) and runs them through the cost function to calculate the result under those conditions—much like “rolling the dice” at the casinos in Monte Carlo. This is repeated a large number of times, and then the statistical distribution of the outcomes is analyzed. To do this successfully, the statistical distribution (mean and variance, see Appendix E) of the estimates being input need to be known. Consider the Zymurgenics project from the previous chapter. The estimates are copied in Table 24.6.
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