The Amount of Variability of a Financial Output Caused by Different

question 5

Multiple Choice

The amount of variability of a financial output caused by different inputs can be investigated using:

• A) the NPV function
• B) a histogram of the NPV
• C) a tornado graph of NPV
• D) the value at risk (VAR)
• E) all of these choices

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Definitions:

Fixed Costs

Costs that do not change with the level of output or activity, including salaries, rent, and insurance.

Activity Level

A measure of the amount of work or production a business undertakes, which can affect costs and efficiencies.

Total Cost Line

A graphical representation of how total costs change with changes in the level of activity or production volume.

Per Unit Cost

The cost associated with a single unit of product or service, calculated by dividing total costs by the number of units produced.