Sensitivity Analysis Is a Procedure That Can Be Used in the Capital

question 40

Multiple Choice

Sensitivity analysis is a procedure that can be used in the capital budgeting process to indicate how sensitive the ____ is to changes in a particular variable.

• A) probability
• B) return distribution
• C) net present value
• D) standard deviation

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Definitions:

Capital Inputs

The physical assets, financial resources, and human capital used in the production of goods and services.

Optimal Use

The most efficient, effective, or desirable utilization of resources or goods to achieve the best outcome or return.

Interest Rate

The percentage of a loan charged as cost to the borrower for the use of the money.

Capital Projects

Long-term investments made by companies or governments to create, improve, or maintain physical assets.