Rouf-Mart has analysed a new type of all-in-one retail centre where the NPV of the project has an expected value with a distribution that yields a standard deviation of $25 million. Rouf-Mart came to this conclusion by analysing the individual input distributions for the project. This analysis is called.
A) a sensitivity analysis.
B) a scenario analysis.
C) a simulation analysis.
D) none of the above.

Question

Quizplus · Accepted Answer

This type of analysis, where individual input distributions are analysed to determine the overall distribution of project outcomes, is called a simulation analysis. Sensitivity analysis involves varying one variable at a time to see how it affects the overall outcome, while scenario analysis involves considering different possible future scenarios and their outcomes.

Rouf-Mart Has Analysed a New Type of All-In-One Retail Centre