Which of the Following Is the Purpose of Providing a Sensitivity

question 97

Multiple Choice

Which of the following is the purpose of providing a sensitivity analysis?

• A)To determine which variable is most critical to the success or failure of a project.
• B)To develop a probability distribution for a project.
• C)To evaluate the worst-case scenarios.
• D)To examine all possible outcomes of a project.

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Definitions:

Variable Cost

A cost that varies with the level of output or sales, such as materials and labor costs.

Monthly Interest Rate

The percentage of interest charged on a monthly basis on loans or credited to deposit accounts.

Credit

A financial arrangement where a borrower receives something of value now and agrees to repay the lender at a later date, generally with interest.

Effective Annual Interest Rate

The interest rate on a loan or financial product restated from the nominal rate as an annual rate that takes into account compounding over a given period.