Angelo knows that the selling price of a new product is going to be subject to considerable market pressures. He would like to know in advance how much leeway he has to lower the selling price without causing the project's rate of return to fall below the required rate. Angelo can determine this price range by using _____ analysis.
A) Sensitivity.
B) Scenario.
C) Simulation.
D) Financial break-even.
E) Cash break-even.

Question

Quizplus · Accepted Answer

Sensitivity analysis helps in understanding how different values of an independent variable affect a particular dependent variable under a given set of assumptions. In this context, it would allow Angelo to see how changes in the selling price affect the project's rate of return, thus identifying the price range that maintains the rate of return above the required level.

Angelo Knows That the Selling Price of a New Product