In a Simulation Analysis, a Model Is Simulated on a Computer

question 60

Multiple Choice

In a simulation analysis, a model is simulated on a computer program and run through several iterations. The results of these iterations are used to _____.

• A) plot a required rate of return value profile
• B) compute a mean and a standard deviation of returns
• C) provide the decision maker with a measure of beta risk
• D) plot the coefficient of variation of the annual net cash flows

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Definitions:

Subjective Approach

An approach to making decisions or assessments that relies on individual preferences, emotions, or thoughts, instead of objective data or proof.

WACC

Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital is proportionately weighted, representing the average cost of funding from all sources.

Pure Play

A company that focuses on a specific industry or product segment without diversification into other areas.

Capital Structure

The combination of borrowing and ownership funds that a business employs to finance its activities and expansion.