Theoretically,the NPV is the most appropriate method to determine the acceptability of a project. A false sense of security can overcome the decision-maker when the procedure is applied properly but the positive NPV results are accepted blindly. Sensitivity and scenario analysis aid in the process by:
A) changing the underlying assumptions on which the decision is based.
B) highlights the areas where more and better data are needed.
C) providing a picture of how an event can affect the calculations.
D) All of these.
E) None of these.

Question

Quizplus · Accepted Answer

Sensitivity and scenario analysis can help decision-makers by allowing them to see how changes in assumptions or events can affect the NPV calculation. This can highlight areas where more data is needed or help decision-makers make a more informed decision rather than blindly accepting positive NPV results. Therefore, all of the given options are correct.

Theoretically,the NPV Is the Most Appropriate Method to Determine the Acceptability