Question

The NPV profile can be used to: (Select all correct answers.) a) Perform sensitivity analysis. b)...

The NPV profile can be used to: (Select all correct answers.)

a) Perform sensitivity analysis.

b) Identify negative NPV projects.

c) Identify the IRR.

d) Identify positive NPV projects.

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Answer #1


All of the following are correct:

a) Perform sensitivity analysis.

b) Identify negative NPV projects.

c) Identify the IRR.

d) Identify positive NPV projects.

Reason:

a) Perform sensitivity analysis. – Different rates of discounting can be used to see different NPV values

b) Identify negative NPV projects. – NPV profiling shows negative NPV projects

c) Identify the IRR. – At NPV = 0 we have IRR = Cost of Capital or Required rate

d) Identify positive NPV projects. - NPV profiling shows positive NPV projects

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