Use the information below to answer the following question(s).Wet Water Company drills residential and commercial wells.The company is in the process of analyzing the purchase of a new drill.Information on the proposal is provided below:
Note: Other than the initial investment, cash flows are end of period.The working capital is returned at the end of the investment period.
-A "what-if" technique that examines how a result will change if the original predicted data are not achieved, or if an underlying assumption changes, is called
A)sensitivity analysis.
B)net present value analysis.
C)internal rate of return analysis.
D)adjusted rate of return analysis.
E)payback method.

Question

Use the information below to answer the following question(s).Wet Water Company drills residential and commercial wells.The company is in the process of analyzing the purchase of a new drill.Information on the proposal is provided below:
  Note: Other than the initial investment, cash flows are end of period.The working capital is returned at the end of the investment period.
-A "what-if" technique that examines how a result will change if the original predicted data are not achieved, or if an underlying assumption changes, is called
A)sensitivity analysis. 
B)net present value analysis. 
C)internal rate of return analysis. 
D)adjusted rate of return analysis. 
E)payback method.

Quizplus · Accepted Answer

The "what-if" technique mentioned in the question is referring to sensitivity analysis.

Use the Information Below to Answer the Following Question(s)