Which Three of the Following Statements Accurately Relate to Scenario

question 16

Multiple Choice

Which three of the following statements accurately relate to scenario analysis?

• A) It is essentially a 'what- if' analysis in which a number of variables may be changed at the same time.
• B) It uses a series of calculations to build up a picture of the nature of the risks facing the project and their impact on project profitability.
• C) It is used by managers to analyse how projects have been affected by decisions made by their predecessors.
• D) It can identify the extent to which variables may change allowing management to consider possible actions to be taken before a negative NPV is produced.

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Definitions:

Profit-Maximizing

The strategy or approach adopted by a company to increase its earnings to the highest possible level.

Perfectly Competitive

A market structure where there are many buyers and sellers, all of whom have full and symmetric information, and there are no barriers to entry or exit.

Level of Output

The total quantity of goods or services produced by a firm, industry, or economy within a specific period.

Average Total Cost

The total cost of production divided by the total quantity produced.