Question

An analysis of what happens to the estimate of a project’s net present value when you examine a vast number of different likely economic situations is called _____ analysis. Select one: a. forecasting b. scenario c. sensitivity d. simulation e. break-even

Answer #1

Option "B" is correct.

Forecasting is the process of making predictions of the future based on past and present data and most commonly by analysis of trends.

Sensitivity Analysis is a tool used in financial modeling to analyze how the different values of a set of independent variables affect a specific dependent variable under certain specific conditions.

Simulation analysis is implemented for preparing a probability profile regarding a criterion of merit by stochastically aggregating the variable values that are associated with the opted criterion.

A break-even analysis is a useful tool for determining at what point your company, or a new product or service, will be profitable.

An analysis of what happens to the estimate of a project’s net
present value when you examine a vast number of different likely
economic situations is called _____ analysis.
Select one:
a. forecasting
b. scenario
c. sensitivity
d. simulation
e. break-even

16. The _______________ break-even point is the one that results
in a ___________________ of zero. a. Financial; net present value
b. Accounting; net present value c. Cash; net income d. Accounting;
operating cash flow e. Cash; net present value
17. If my forecasted numbers may be off by + or - 10%, what
method of analysis would work best? a. Simulation b. Sensitivity c.
Scenario d. Break-even e. Degree of operating leverage

When projects involve certain, or constant, cash flows, the
capital budgeting analysis that can be conducted is very simple and
straightforward. Unfortunately, this type of project rarely
exists.
When a project’s cash flows, or the conditions that affect their
magnitude or timing, vary from their expected values, then the
analysis becomes more complicated. Projects that have the potential
to exhibit greater or lesser levels of risk than the firm’s
average, or normal, level means that adjustments should be made to...

The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Delta is 11.3%, but he can’t recall how...

The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Delta is 11.3%, but he can’t recall how...

The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Delta is 11.3%, but he can’t recall how...

The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Green Caterpillar Garden Supplies Inc.:
Last Tuesday, Green Caterpillar Garden Supplies Inc. lost a
portion of its planning and financial data when both its main and
its backup servers crashed. The company’s CFO remembers that the
internal rate of return (IRR) of Project Zeta is 14.6%, but he
can’t...

Question) The situation a firm faces when it has positive net
present value projects but cannot obtain financing for those
projects is referred to as:
a. sensitivity planning.
b. a contingency situation.
c. capital rationing.
d. a discounted cash flow.
e. a sunk cost situation.

The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Cold Goose Metal Works Inc.:
Last Tuesday, Cold Goose Metal Works Inc. lost a portion of its
planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Omicron is 13.8%, but he can’t...

Net present value _____________.
Select one:
a. Requires the firm set an arbitrary cutoff point for
determining whether an investment is acceptable
b. Is equal to zero when the discount rate used is less than the
IRR
c. Is simplified by the fact that future cash flows are easy to
estimate
d. Is equal to the initial investment in a project
e. Compares project cost to the present value of the project
benefits

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