Sensitivity Analysis Is a Technique in Which

question 36

Multiple Choice

Sensitivity analysis is a technique in which:

• A)all key input variables are changed to their most likely values to compute a project's net present value (NPV).
• B)all of the input variables are set at their most reasonably expected values to computes a project's internal rate of return (IRR).
• C)the values of key input variables are changed to observe the resulting changes in a project's net present value (NPV) and its internal rate of return (IRR).
• D)a "bad" set and "good" set of financial circumstances are compared with a most likely, or base case, situation.
• E)key input variables are set at their worst reasonably forecasted values to compute a project's net present value (NPV).

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Definitions:

Microeconomist

A specialist in microeconomics, which deals with the economic behavior of individuals, households, and firms, and how decisions are made on the allocation of resources.

Macroeconomist

An economist who specializes in macroeconomics, studying aggregated indicators and the behavior of the economy as a whole, including inflation, unemployment, and economic growth.

Normative Statement

A statement that reflects an opinion, value judgment, or what ought to be, rather than what is empirically verifiable.

Positive Statement

An objective statement based on facts that can be tested and validated, used in contrast to normative statements which express opinions or what ought to be.