An exploration of the effect of changing multiple project parameters on net present value (NPV) is called ________.
A) scenario analysis
B) internal rate of return (IRR) analysis
C) accounting break-even analysis
D) sensitivity analysis

Question

Quizplus · Accepted Answer

Scenario analysis is the only option that specifically deals with changing multiple project parameters and analyzing their effect on the net present value (NPV). Internal rate of return (IRR) analysis is a tool for evaluating the profitability of an investment, but it does not involve changing multiple project parameters. Accounting break-even analysis is focused on determining the minimum amount of revenue needed to cover all costs, and sensitivity analysis is used to determine how changes in one variable will impact an entire system, not specifically related to changing project parameters for NPV analysis.

An Exploration of the Effect of Changing Multiple Project Parameters