Which of the following statements is CORRECT?
A) in comparing two projects using sensitivity analysis, the one with the steeper lines would be considered less risky, because a small error in estimating a variable such as unit sales would produce only a small error in the project's npv.
B) the primary advantage of simulation analysis over scenario analysis is that scenario analysis requires a relatively powerful computer, coupled with an efficient financial planning software package, whereas simulation analysis can be done efficiently using a pc with a spreadsheet program or even with just a calculator.
C) sensitivity analysis is a type of risk analysis that considers both the sensitivity of npv to changes in key input variables and the probability of occurrence of these variables' values.
D) as computer technology advances, simulation analysis becomes increasingly obsolete and thus less likely to be used as compared to sensitivity analysis.
E) sensitivity analysis as it is generally employed is incomplete in that it fails to consider the probability of occurrence of the key input variables.
Correct Answer:
Verified
Q61: The coefficient of variation, calculated as the
Q66: The standard deviation is a better measure
Q69: Laramie Labs uses a risk-adjustment when
Q71: Because of differences in the expected returns
Q71: Which of the following procedures best accounts
Q72: Spot-Free Car Wash is considering a
Q74: McLeod Inc.is considering an investment that has
Q75: Which of the following statements is CORRECT?
A)
Q77: Brandt Enterprises is considering a new project
Q78: Puckett Inc. risk-adjusts its WACC to account
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents