Capital Budgeting in the Chemical Industry

 

Background Modules for ChE473K
Process Design and Operations

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University of Texas at Austin

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

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The Log-Normal Distribution

The log-normal distribution (ND) is the continuous random variable resulting from transforming the normal distribution with the exponential function, i.e. if f(x) is the normal probability density function, then

where h(x) is the log-normal PDF.

The log-normal distribution is a two-parameter distribution described by its mean, µ, and its standard deviation, s.

The log-normal PDF and CDF are shown below, respectively:

 

In stochastic modeling, the log-normal distribution is best used to model asymmetric variables with a bound near the range of interest.

 

Updated: Sunday, March 7, 2010

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