A Project Requires an Initial Investment of $150

question 13

Multiple Choice

A project requires an initial investment of $150. Your research generates the following estimates of revenues and costs (there are no taxes) :

The cost of capital equals 10 percent. Assume that the cash flows occur in perpetuity. Conduct a sensitivity analysis of the project's NPV to variations in costs. (Answers appear in order: [Pessimistic, Most Likely, Optimistic].)

• A)+50, −100, +400
• B)−50, +300, +500
• C)−100, +150, +350
• D)+100, +150, +200

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Definitions:

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A relationship or connection between two or more variables, where changes in one variable might be related to changes in another.

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