Stochastic Discounted Cash Flow Model for Pricing Analytics

Authors: Sandeep Yadav

DOI: https://doi.org/10.5281/zenodo.14122967

Short DOI: https://doi.org/g8qttv

Country: USA

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Abstract: This paper presents a stochastic discounted cash flow model designed to optimize pricing strategies and profitability assessment for a Waste Management Business company’s municipal residential waste contract. In a competitive market, accurate profitability evaluation is essential for effective bidding and margin maintenance. To address this, we developed a reusable, Excel-based model that utilizes stochastic inputs to incorporate the variability of financial parameters over the contract lifecycle. The model captures revenue, cost factors, and EBITDA projections by applying a PERT distribution to stochastic variables, including fuel and labor costs, providing a realistic assessment range for each contract.
Sensitivity analysis within the model identified price per home (PPH) and seconds per pickup (SPP) as the most influential variables on profitability, guiding strategic adjustments for future contract bidding. Compared to the company’s existing model, this stochastic approach achieved a 1.8% improvement in EBITDA margin, offering more refined insights into contract profitability. Moreover, the model’s scalability enables its adaptation to additional contract types, such as commercial waste and recycling, thus broadening its applicability.
Ultimately, this stochastic discounted cash flow model equips Waste Management Business firms with a valuable tool for informed bidding. By balancing price, risk, volume, and profit through an adaptable, data-driven framework, the model enhances contract valuation strategies, improving long-term profitability and market competitiveness in dynamic Waste Management Business environments.

Keywords: Stochastic Discounted Cash Flow,Waste Management Business, Pricing Analytics, Contract Profitability, Municipal Residential Waste Contracts, EBITDA, PERT Distribution, Sensitivity Analysis, Strategic Bidding, Financial Modeling, Revenue Optimization

Paper Id: 231536

Published On: 2018-07-04

Published In: Volume 6, Issue 4, July-August 2018

Cite This: Stochastic Discounted Cash Flow Model for Pricing Analytics - Sandeep Yadav - IJIRMPS Volume 6, Issue 4, July-August 2018. DOI 10.5281/zenodo.14122967

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