Consider the feasibility study shown in the table.You have been advised that sales revenues may be 10 percent lower and/or development costs may be 10 percent higher.Performing a sensitivity analysis,you conclude:
A)A 10 percent decrease in sales revenues would have a bigger impact on returns than a 10 percent increase in development costs
B)A 10 percent increase in development costs would have a bigger impact on returns than a 10 percent decrease in sales revenues
C)A 10 percent increase in development costs and a 10 percent decrease in sales revenues would have opposite impacts on returns,canceling each other out and having no impact on returns
D)Both factors would have such a small impact,that there is no reason to be concerned about either a 10 percent increase in development costs or a 10 percent decrease in sales revenues

Question

Consider the feasibility study shown in the table.You have been advised that sales revenues may be 10 percent lower and/or development costs may be 10 percent higher.Performing a sensitivity analysis,you conclude: 
A)A 10 percent decrease in sales revenues would have a bigger impact on returns than a 10 percent increase in development costs 
B)A 10 percent increase in development costs would have a bigger impact on returns than a 10 percent decrease in sales revenues 
C)A 10 percent increase in development costs and a 10 percent decrease in sales revenues would have opposite impacts on returns,canceling each other out and having no impact on returns 
D)Both factors would have such a small impact,that there is no reason to be concerned about either a 10 percent increase in development costs or a 10 percent decrease in sales revenues

Quizplus · Accepted Answer

The Answer is A

Consider the Feasibility Study Shown in the Table