Your company's scientists have developed an exciting new product that is unlike anything presently available to consumers. The NPV of bringing the product to market is positive yet you are uncertain
About the sales projections. The best way for you to test the validity of the sales projections is to
Use:
A) Sensitivity and payback analysis.
B) Payback and break-even analysis.
C) Break-even and sensitivity analysis.
D) Operating leverage analysis.
E) IRR analysis.

Question

Quizplus · Accepted Answer

Break-even analysis will help determine the minimum number of units that need to be sold to cover costs, while sensitivity analysis will show the impact of changes in variables such as price or production costs on sales projections. By combining the two, a more realistic and accurate sales projection can be made. Payback analysis and operating leverage analysis are not as useful in testing sales projections, as they mainly focus on financial viability and risk. IRR analysis can be helpful, but it does not directly address the uncertainty surrounding sales projections.

Your Company's Scientists Have Developed an Exciting New Product That