A project requires an initial investment of $150. Your research generates the following estimates of revenues and costs (there are no taxes):

The cost of capital equals 10 percent. Assume that the cash flows occur in perpetuity. Conduct a sensitivity analysis of the project's NPV to variations in costs. (Answers appear in order: [Pessimistic, Most Likely, Optimistic].)
A)+50, −100, +400
B)−50, +300, +500
C)−100, +150, +350
D)+100, +150, +200

Question

A project requires an initial investment of $150. Your research generates the following estimates of revenues and costs (there are no taxes):

The cost of capital equals 10 percent. Assume that the cash flows occur in perpetuity. Conduct a sensitivity analysis of the project's NPV to variations in costs. (Answers appear in order: [Pessimistic, Most Likely, Optimistic].)
A)+50, −100, +400 
B)−50, +300, +500 
C)−100, +150, +350 
D)+100, +150, +200

Quizplus · Accepted Answer

The Answer is D

A Project Requires an Initial Investment of $150