If Sensitivity Analysis Indicates None of the Individual Variables Will

question 50

Multiple Choice

If sensitivity analysis indicates none of the individual variables will cause a negative NPV under pessimistic conditions, then the:

• A)project is assured to be successful.
• B)project's discount rate should be reduced.
• C)economic forecasts are possibly overly optimistic.
• D)interaction of the variables should be considered.

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Definitions:

Monetary Stimulus

Economic policy measures undertaken by central banks to increase the money supply and lower interest rates, aimed at boosting economic activity.

High Inflation

A situation where the general level of prices for goods and services rises rapidly over a period of time, eroding purchasing power.

Recession

A period of economic decline across the market, often recognized by a decrease in GDP for two consecutive quarters.

Regulatory Capture

A situation where regulatory agencies are dominated by the industries they are charged with regulating, often leading to decisions that benefit the industry rather than the public interest.