When Examining the Change in NPV Using Scenario Analysis,increasing Sales

question 7

Multiple Choice

When examining the change in NPV using scenario analysis,increasing sales by 10%,reducing operating costs by 10%,reducing lost sales by 10%,reducing selling and admin costs by 10%,and reducing working capital by 10% would probably represent which type of scenario?

• A)'Best' case
• B)'Worst' case
• C)'Normal' case
• D)'Base' case

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Definitions:

Subjective Probabilities

The individual's personal judgment or estimate of the likelihood of an event occurring, based on their own knowledge and experience.

Event

An occurrence or happening, especially one of significance.

Law of Small Numbers

A cognitive bias that leads people to make unjustified conclusions based on limited data.

Risks

The potential for losing something of value, or the uncertainty regarding the outcome of an action or decision.