Sensitivity Analysis Evaluates Projects By

question 10

Multiple Choice

Sensitivity analysis evaluates projects by:

• A)forecasting changes in interest rates that would increase financing costs.
• B)recording profitability changes while changing one variable at a time.
• C)insuring that the project sponsor has proper incentives.
• D)testing for interrelated variables.

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Definitions:

Ordinary Annuity

A series of equal payments made at the end of consecutive periods over a fixed length of time.

Equal Payments

Regular payment amounts made or received over a period, typically in the context of loans, leases, or annuities, where each payment is of the same value.

Compounded Semiannually

Compounded Semiannually refers to the process of applying interest to an initial amount of money (principal) twice a year, where the amount of interest is added to the principal at each compounding period.

Interest Rate

The percentage of a loan or savings amount that is charged as interest to the borrower or paid to the investor, typically expressed on an annual basis.