Gilligan's Boat Tours finds that if it were to increase its price by 10 per cent, it would have a 6 per cent reduction in the NPV of its new 3-Hour Tour. Gilligan's analysis could be described as
A) a Monte Carlo simulation.
B) scenario analysis.
C) sensitivity analysis.
D) none of the above.

Question

Quizplus · Accepted Answer

Gilligan's analysis involves changing one specific variable (the price) to see how it affects the NPV. This is an example of sensitivity analysis, which examines how changes in one variable impact outcomes. Monte Carlo simulation involves creating multiple scenarios with different variables, and scenario analysis involves examining specific combinations of variables. Therefore, neither A nor B are the best choices for this situation.

Gilligan's Boat Tours Finds That If It Were to Increase