The possibility that errors in projected cash ﬂows can lead to incorrect estimates of net present value is called _____ risk.
A) Forecasting.
B) Projection.
C) Scenario.
D) Monte Carlo.
E) Accounting.

Question

Quizplus · Accepted Answer

Forecasting risk refers to the possibility of errors in projecting future cash flows, which can result in incorrect estimates of net present value. Option B (Projection) is similar in meaning but not as commonly used in finance terminology. Option C (Scenario) refers to the analysis of different possible outcomes or scenarios. Option D (Monte Carlo) refers to a simulation method used to estimate the probability of different outcomes in a complex system. Option E (Accounting) is not relevant to the question.

The Possibility That Errors in Projected Cash ﬂOws Can Lead