Asked by
Amanda Heckman
on Dec 20, 2024Verified
The sensitivity/scenario analysis:
A) provides a quantitative measure of project risk.
B) requires as input a probability distribution for each variable affecting project NPV.
C) indicates the variability of project NPV with fluctuations in the value of variables.
D) All of the above
E) None of the above
Sensitivity/Scenario Analysis
Techniques used in financial modeling to examine how different values of an input variable can impact a project or investment's outcome under various scenarios.
Project NPV
This refers to the net present value specifically calculated for a given project, representing the difference between the project's cash inflows and outflows discounted at a particular rate over time.
Probability Distribution
A mathematical function that provides the probabilities of occurrence of different possible outcomes in an experiment.
- Comprehend sensitivity, scenario, and simulation analyses as tools for assessing project risks.
Verified Answer
SD
Learning Objectives
- Comprehend sensitivity, scenario, and simulation analyses as tools for assessing project risks.