Monte Carlo Analysis

• This analysis covers multiple periods where the possible evolution of Gross Margins (proxies for Free Cash Flows) is calculated.

• MC Analysis aggregates risks from individual parameters regarding prices, sales volumes and costs. Then, it performs a sensitivity analysis to identify the most influential uncertainties. However, this does not tell which uncertainty should be investigated first; no indications for fail-fast or fail-cheap strategies are provided.

• Moreover, this approach does not perform an actual financial evaluation and therefore cannot drive acceptance decisions, optimal portfolio prioritization or annual budgeting.

• Importantly, this approach is explicit about uncertainties, but disregards entirely how innovators address uncertainty through adaptability (e.g., Lean Startup approach). This is regrettable, because adaptability is frequently valuable and decisive.