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 is a technique that helps in identifying how changes in one variable can affect the outcome of a project. In this case, Angelo can use sensitivity analysis to understand the impact of changes in the selling price on the project's rate of return. By varying the selling price and analyzing the changes in the rate of return, Angelo can determine the price range within which he can lower the selling price without affecting the project's rate of return. Scenario analysis, simulation, financial break-even, and cash break-even are also useful techniques in project management. However, sensitivity analysis is the most appropriate choice in this scenario.

Angelo Knows That the Selling Price of a New Product