In Completing a Sensitivity Analysis for a Capital Budgeting Project

question 23

Multiple Choice

In completing a sensitivity analysis for a capital budgeting project, which of the following would typically be varied?
I. Discount rate
II. Future cash flows
III. Future accrual-basis revenues and expenses

• A) I and III only
• B) II and III only
• C) I and II only
• D) I, II, and III

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Definitions:

Capital Structure

The composition of a company's liabilities and shareholders' equity, which could include debt, common equity, preferred equity, among other securities, used to finance its operations and growth.

Divestitures

The process of selling off subsidiary business interests or investments as a strategic move for a company.

Proxy Solicitation

The process of gathering votes from shareholders to vote on corporate matters when they cannot attend the shareholder meeting in person.

Tender Offer

An offer made by an investor or acquiring company to purchase shares from the shareholders of a company at a specific price for a certain period.