Which One of the Following Statements Concerning Sensitivity Analysis Is

question 103

Multiple Choice

Which one of the following statements concerning sensitivity analysis is correct?

• A) A project that has positive internal rates of return under the base, best, and worst case scenarios is a project that will produce a positive net present value under all three of those conditions.
• B) When measuring the sensitivity of the sales price, the estimated variable cost per unit used in the analysis should be changed in direct proportion to the change in the estimated level of sales.
• C) The most common approach to sensitivity analysis is to simultaneously vary sales in an upward direction as the estimated costs are varied in a downward direction to estimate the most optimistic outcome that can be reasonably expected.
• D) Sensitivity analysis on the sales quantity generally indicates that the net present value of a project is inversely related to the quantity of units produced and sold.
• E) The amount of forecast risk in any one variable can be ascertained using sensitivity analysis.

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