Suppose You Are Asked to Do a Sensitivity Analysis of a Project

question 32

Multiple Choice

Suppose you are asked to do a sensitivity analysis of a project when an economy is in recession, what assumptions do you need to make to evaluate the project?

• A)Market share is low, variable costs are high, product price is high.
• B)Market share is low, fixed costs are high, product price is low.
• C)Market share is high, variable costs are high, product price is low.
• D)Market share is low, variable costs are high, product price is low.
• E)Market share is low, variable costs are low, product price is low.

---

Definitions:

Shares

Units of ownership interest in a corporation or financial asset, providing a portion of the ownership to the shareholder.

Geometric Average

The average rate of return for a set of values calculated by multiplying them together and then taking the nth root (where n is the total number of values).

Arithmetic Average

A calculated central value of a set of numbers by adding all numbers and dividing by the count of numbers.

Probability Ranges

A statistical measure that estimates the range within which the value of a variable or outcome will fall, given a certain level of confidence.