Monte Carlo Simulation

question 25

Multiple Choice

Monte Carlo simulation

• A) Can be useful for estimating a project's stand-alone risk.
• B) Is capable of using probability distributions for variables as input data instead of a single numerical estimate for each variable.
• C) Produces both an expected NPV (or IRR) and a measure of the riskiness of the NPV or IRR.
• D) All of the answers above.
• E) Only answers a and b are correct.

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Definitions:

Flexible Budget

A budget designed to respond and adapt to changes in the level of operations or volume.

Plane Operating Costs

Expenses associated with operating an aircraft, including fuel, maintenance, crew salaries, and depreciation.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular account or category.

Supply Costs

Expenses incurred in acquiring the goods or services needed to run a business, including raw materials, parts, and utilities.