In a Sensitivity Graph That Examines the Present Worth of a Project

question 20

Multiple Choice

In a sensitivity graph that examines the present worth of a project, the slope of a line shows

• A)how sensitive a project's benefit-cost ratio is to changes in its inputs: the steeper, the more sensitive.
• B)how sensitive a project's PW is to changes in its inputs: the steeper, the more sensitive.
• C)how sensitive a project's benefit-cost ratio is to changes in its inputs: the flatter, the more sensitive.
• D)how sensitive a project's PW is to changes in its inputs: the flatter, the more sensitive.
• E)how sensitive the project's IRR is to changes in its inputs: the flatter, the more sensitive.

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Definitions:

Correlation Coefficient

A numerical measure of the linear correlation between two variables, ranging from -1 to 1.

Riskless Portfolio

A theorized portfolio of investments that has a guaranteed return, with no risk of financial loss.

Risky Stocks

Shares in companies with high volatility and potential for substantial gains or losses.

Scatter Plot

A graphical representation of the relationship between two variables using dots to represent the value of each.