Capital Budgeting in the Chemical Industry

 

Background Modules for ChE473K
Process Design and Operations

at the
University of Texas at Austin

Gerald G. McGlamery, Jr., Ph.D., P.E.

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A Useful Result of the Central Limit Theorem

In stochastic modeling, the central limit theorem will drive output variables toward normal distributions. Said another way, the sum of a large number of random variables will be normally distributed regardless of the distributions of the individual random variables.

This corollary is illustrated below:

Measurements of macro phenomena tend to be normally distributed because they are the sum of many micro distrubutions.

 

Updated: Sunday, March 7, 2010

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