The Difference Between Scenario Analysis and Sensitivity Analysis Is

question 72

Multiple Choice

The difference between scenario analysis and sensitivity analysis is

• A) only sensitivity analysis allows us to change our estimated inputs of our net present value (NPV) analysis.
• B) scenario analysis considers the effect on net present value (NPV) of changing multiple project parameters.
• C) only scenario analysis breaks the net present value (NPV) calculation into its component assumptions.
• D) scenario analysis is based upon the internal rate of return (IRR) and sensitivity analysis is based upon net present value (NPV).

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Definitions:

Profitable

refers to a financial state where income exceeds expenses, leading to a positive net outcome.

Discounted Future Profits

The present value of the expected future earnings of a company, discounted at an appropriate rate to account for risk and time.

Antitrust Enforcement

The regulation and actions taken by the government to prevent monopolies and promote competition in the marketplace.

Vertical Relationships

Interactions and agreements between businesses at different stages of the production process, like suppliers and retailers.