If a company is interested in the distribution of the NPV for a project that it is considering, then the company should be most interested in
A) a sensitivity analysis.
B) a scenario analysis.
C) a simulation analysis.
D) none of the above.

Question

Quizplus · Accepted Answer

A simulation analysis would provide the full distribution of NPV for the project, taking into account all possible uncertainties and their potential impact on the project's profitability. Sensitivity and scenario analyses would only consider specific variations on key assumptions or inputs, and would not provide a comprehensive view of the possible range of outcomes.

If a Company Is Interested in the Distribution of the NPV