Will Aviation Biofuels Fly?
@RISK Helps Assess Two Different Government
Policies in Purdue University Study
Developing biofuels for aircraft is a risky endeavor, as transforming plant material into liquid fuel is still very expensive compared to the price of fossil fuels. Dr. Wallace Tyner and his colleagues at Purdue University in Indiana used @RISK to conduct a cost-benefit analysis of building an aviation biofuel plant, and to determine the potential impacts of two different government policies to jump-start this technology: reverse auction and capital subsidy. They found that both policies reduced risk in investment of aviation biofuels, however a reverse-auction policy reduced the risk of this investment more.
Researchers Amanda Bittner, Dr. Wallace Tyner, and Xin Zhao at the Agricultural Economics Department at Purdue University used a discounted cash flow (DCF) model to find the net present value (NPV) of a theoretical aviation biofuel plant. They incorporated four variables that have a large impact on the non-risk adjusted breakeven fuel price: capital cost, feedstock cost, final fuel yield, and hydrogen cost (the price of hydrogen input used in producing biofuels). They created empirical distributions for each variable from literature and/or experts, and then used @RISK to incorporate uncertainty into the variables using a PERT distribution. The researchers created projections to forecast what the fuel prices would be in the future, and what the breakeven biofuel price would have to be in two different situations: one in which the fuel price has no overall trend, and one case in which the fuel price has an increasing trend.
The researchers next wanted to investigate what kind of government policy would be most effective in reducing the risks around investing in aviation biofuels, and at what point in the probability distribution would investment firms be willing to place a bid.
Then, they examined which lowers risk more: reverse auction or capital subsidy. They looked at each under three different contract lengths: 5-year, 10-year, and 15-year, to see how contracts of increasing duration would impact the probability of financial loss for investors. “At those different contract lengths, the numbers are pretty startling,” says Dr. Tyner.
Dr. Tyner uses @RISK for research, as well as for teaching his course in benefit cost analysis.
» Read the full case study
I use [@RISK] to teach all my students
to introduce uncertainty into project
evaluation. It’s been a tool in my
portfolio for a long, long time. You can
do something with much less expense
and much easier with @RISK today
compared to what I painstakingly did
Dr. Wallace Tayner
Professor of Agricultural Economics
There are three easy ways to get the DecisionTools Suite for your students:
Course Licenses available from Palisade. These are economical, annually renewing bulk licenses for both
network lab and laptop installation. Palisade offers a complimentary Live Web Training session to all instructors who order a Course License.
» Learn more
Student Versions from Palisade. These are 12-month versions available for purchase individually by students through either the Palisade web site or the school store.
» Learn more
Textbook Editions available bundled with textbooks.
These are time- and model-limited licenses.
» Learn more
Get DecisionTools Suite 7 for your course by contacting:
Palisade Academic Sales
800-432-7475 / 607-277-8000
The DecisionTools Suite is a great way to present quantitative techniques in a straightforward, easy-to-understand way for students.
Optimizing Channel Conflicts
Excerpted from Chapter 61 Financial Models Using Simulation and Optimization,
by Wayne Winston, published by Palisade Corporation
An important problem in marketing is how to set prices in different channels in order to maximize a company's profitability. Selling in different channels opens up a vast number of potential sales as it exposes the product to different consumers, however, a company must realize that charging a low price in one channel can and will cannibalize sales in another channel. Download the example model and step-by-step instructions to see how Solver and Evolver are used to determine the demand curves of each channel, and the optimal price for each channel so that profitability is maximized despite the conflict between channels.
» Learn more and download the associated example files
Number of Bins in a Histogram
Q: How does @RISK choose the number of bars when making a histogram? In other words, how many bins or intervals does @RISK divide the data range into? Can I change this?
By default, @RISK determines the number of bins from the number of iterations or data points n, as follows:
|Less than 25|| ||5|
|25 to 100|| ||Nearest integer to n/5|
|More than 100|| ||Largest integer below 10 x log(n)|
If you want to change this for a particular histogram, right-click the graph and select Graph Options. On the Distribution tab, the lower section lets you specify a number of bins (bars), as well as a minimum (left edge of the first bar). "Automatic" uses the calculation shown above, but you can specify a number from 2 to 200.
» View other Techniques and Tips here
The Academic Global Leader in
Risk and Decision Analysis
Palisade Corporation is the world's leading provider of risk and decision analysis software and solutions. Founded in 1984, its products @RISK and the DecisionTools Suite are used by over 95% of the Fortune 100, in nearly every industry around the world. Palisade is headquartered in New York State, and has offices in London, Sydney, Rio de Janeiro, and Tokyo.
What is The DecisionTools Suite?
The DecisionTools Suite is the world’s only integrated set of risk and decision analysis programs. The Suite includes @RISK for Monte Carlo simulation, BigPicture for mind mapping and data exploration, PrecisionTree for decision trees, and TopRank for “what if” sensitivity analysis. In addition, DecisionTools Suite comes with StatTools for statistical analysis and forecasting, NeuralTools for predictive neural networks, and Evolver and RISKOptimizer for optimization. All programs work together seamlessly, and all integrate completely with Microsoft Excel for ease of use and maximum flexibility.
The Suite is offered in three affordable and flexible licensing options for those in academia: Student Versions, Course Licenses and Full Academic Versions.
» Schools using Palisade software
» Textbooks using Palisade software
» Will Aviation Biofuels Fly?
@RISK Helps Assess Two
Policies in Purdue U Study
» Licensing Options
» Teaching Tips &
Optimizing Channel Conflicts
» Tech Tip
Number of Bins in a
» About Palisade and the
Click to chat live with
a sales representative
An intensive day of networking, software training presented by Palisade trainers and consultants, and real-world case studies presented by industry experts. Join us at an event near you.
EMEA & India
» San Francisco:
» New Orleans:
Sydney: 1-3 September
London: 15-17 September
Amsterdam: 6-8 October
London: 27-29 October
Dubai: 3-5 November
London: 17-19 November
München: 26-28 November
8 al 10 de septiembre
23 al 25 de septiembre
27 al 29 de octubre
Dallas, TX: 22-24 September
Charlotte, NC: 6-8 October
Los Angeles, CA: 17-19 November
Miami, FL: 1-3 December
Seattle, WA: 8-10 December
» Trade Shows
Society of Petroleum Engineers / ATCE 2015
» Live Web Training
Decision-Making & Quantitative Risk Analysis using the DecisionTools Suite
1-2 Oct, 11am-3pm EDT
24-25 August, 1pm-5pm AEST
29-30 Oct, 11am-3pm EDT
Decision-Making and Quantitative Risk Analysis using @RISK
8-9 Sept, 11am-3pm EDT
23-24 Sept, 11am-3pm EDT
Project Cost Estimation, Schedule Risk and Decision Modelling using @RISK and PrecisionTree
26-27 Aug, 1pm-5pm AEST
Palisade software is available in fully functional trial versions. Try @RISK or any of our software today!
The complete risk and
decision analysis toolkit
The world's most widely
used risk analysis tool
» @RISK for Excel
» For Project Management
» For Six Sigma
Mind Mapping and Data Exploration for Excel
Visual decision analysis
Sophisticated neural networks for spreadsheets
Advanced statistical analysis for spreadsheets
The Innovative Optimizer
Intel and the Intel logo are trademarks or registered trademarks of Intel Corporation or its subsidiaries in the United States and other countries.
|©2015 Palisade Corporation, visit www.palisade.com
798 Cascadilla Street, Ithaca, NY 14850 USA, +1 607 277 8000 firstname.lastname@example.org
Av. Presidente Vargas 435, Sala 501, Centro, Rio de Janeiro CEP 20071-001, +55 (21) 2586-6334 email@example.com
Palisade Europe UK Ltd
31 The Green, West Drayton, Middlesex, UB7 7PN, UK, +44 1895 425050 firstname.lastname@example.org
Palisade Asia-Pacific Pty Limited
Suite 404, L4, 20 Loftus Street, Sydney NSW 2000 Australia, +61 2 9252 5922 email@example.com
Palisade Asia-Pacific, Tokyo Office
〒 150-8512 東京都渋谷区桜丘町 26-1 セルリアンタワー15F 電話 03-5456-5287