Using a Computer Model to Repeatedly Vary the Combination of Project

question 103

Multiple Choice

Using a computer model to repeatedly vary the combination of project variables in order to compare NPVs is called:

• A)scenario analysis.
• B)sensitivity analysis.
• C)NPV break-even analysis.
• D)simulation analysis.

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Definitions:

One-Tail Test

A type of statistical hypothesis test where the rejection area is located on just one side of the sampling distribution.

Two-Tail

Pertains to a type of statistical test that assesses the possibility of an effect being in two opposite directions, not favoring either tail of the distribution.

P-Value

A measure in statistical hypothesis testing representing the probability of obtaining test results at least as extreme as the results actually observed, assuming that the null hypothesis is correct.

Level Of Significance

The threshold at which a null hypothesis is rejected in statistical testing, often denoted by alpha (α), representing the probability of making a Type I error.